AMD revenue forecast disappoints on weak console demand

(Reuters) - Advanced Micro Devices Inc's AMD.O first-quarter revenue estimate came in largely below analysts' estimates due to waning demand from gaming console makers, even as its data center and PC chips business tracked a recovery in the chip industry.

FILE PHOTO: Lisa Su, president and CEO of AMD, gives a keynote address during the 2019 CES in Las Vegas, Nevada, U.S., January 9, 2019. REUTERS/Steve Marcus

Shares of the company fell 4% in extended trading on Tuesday. The stock has surged over 150% in the last 12 months, making it the top gainer on both the S&P 500 Index .SPX and the Philadelphia Semiconductor Index .SOX during the period.

The console business has been under pressure as inventory is drawn down ahead of Microsoft Corp MSFT.O and Sony Corp 6758.T launching their new gaming consoles in the second half of this year.

Fourth-quarter sales in its enterprise, embedded and semi-custom segment, which also houses chips used in consoles, rose 7% to $465 million, but missed FactSet estimates of $603.8 million.

“The secular decline in the game console semi-custom chip (SoC) should have been expected. I think investors wanted to see a steeper growth profile from its datacenter, CPU business to offset the near-term gaming SoC decline,” said KinNgai Chan at Summit Insights Group LLC.

Sales at AMD’s computing and graphics segment, which includes graphic chip sales to data centers, surged 69% to $1.66 billion in the fourth quarter, beating analysts’ estimate of $1.5 billion, according to market research firm FactSet.

Data center demand also powered strong results and forecast from bigger rival Intel Corp INTC.O last week, which reinforced chip industry turnaround expectations triggered by Micron Inc MU.O and Texas Instruments TXN.O.

AMD projected first-quarter revenue to be about $1.8 billion plus or minus $50 million, compared to analysts’ average estimate of $1.86 billion, according to IBES data from Refinitiv.

Revenue jumped 50% to $2.13 billion in the fourth quarter, beating analysts’ estimates of $2.11 billion.

The company said it expects 2020 revenue growth of about 28% to 30% year-over-year, while analysts were expecting 27%.

Excluding items, the company earned 32 cents per share, beating estimates of 31 cents.

Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila