What Can We Expect From AMD’s Q4’16 Earnings?

by Trefis Team
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AMD (NYSE:AMD) is set to report its Q4 2016 earnings on January 31st. Going by the company’s guidance for the quarter, AMD’s revenues in Q4’16 likely increased by approximately 12 percent year over year, which in dollar terms translates to a revenue of $1.07 billion. The launch of Polaris GPUs in Q2 must have driven the company’s growth in Q4 as well. However, AMD’s revenues have likely declined on a sequential basis because of a seasonally strong third quarter. In Q3, major game console companies build up their inventory for the holiday season. In addition, the company’s gross margins likely improved in Q4, after its gross margins declined to 5% in Q3, as a result of a $340 million charge with respect to a five-year amendment of its wafer supply agreement with Global Foundries. However, AMD’s bottom-line is likely to remain negative.

Recent Deals And The Launch of Zen Processors And Vega GPUs To Drive Growth For AMD In 2017

The company’s stock rallied by approximately 300% in 2016, as a result of its strong performance in the year. The strong momentum around AMD’s stock can continue in the near term, as it launches new products. The company is likely to launch the Ryzen desktop processors towards the end of February. Going by the initial performance reviews, AMD stands a chance to gain some market share from Intel in the desktop processor market with its Ryzen processors. The company’s growth should also be driven by the launch of Vega GPUs, which is expected to hit the market in the first half of 2017.

Other factors that can propel the growth for AMD are some of the recent deals it clinched in the data center market. In 2016, the company announced a collaboration with Alibaba for deployment of its Raedon PRO server GPUs. This should help AMD compete with Nvidia in this market. Furthermore, AMD also bagged a deal with Google to supply its FirePro S9300 x2 GPU in the latter’s cloud platform. This deal is quite significant for AMD, as most of the big players in the cloud storage market currently use Nvidia’s GPUs. It should also be noted that design wins in the data-center market should be margin accretive for the company, and could help improve its bottom-line going forward.

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