AMD To Retain Its Growth Momentum In 2017: Q1’17 Earnings Preview

AMD is set to report its Q1 2017 earnings on May 1st. 2016 was a stellar year for the company as it saw its stock price nearly quadruple, from around $3 in January 2016 to over $10 towards the end of December. AMD reported a 7% increase in revenue and a more than 20% rise in its operating profit and net profit, as it made considerable progress on its strategy to improve its business by gaining share in the graphics and PC markets, growing its semi-custom business, and expanding into the data center market. While the company is yet to regain profitability, we expect its bottom line to improve further this year as AMD continues to gain share in the PC, gaming, and data center markets.

For Q1’17, AMD expects its top line to grow by 18% year-on-year. The company plans to introduce several new leadership products and remain focused on further improving its financial and operational performance. Below are key factors that are expected to drive the company’s growth in Q1 2017 and beyond.

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Ryzen Could Help AMD Gain In The Desktop Processor Market

AMD launched the Ryzen processors based on the Zen-Core Architecture last month. The company introduced around 17 “extreme performance” pre-built PCs built on the Ryzen desktop processor at the CES 2017. Given that the high-end and the enthusiast segments of the PC market are still growing, AMD stands a chance to benefit by catering to these segments of the PC market with its Ryzen processors. Additionally, the company is likely to see a renewed interest for its processors in the desktop and notebook processor market as the Zen core architecture is a major redesign by the company since the long-standing Bulldozer architecture and is based on 14 nm FinFet process, as compared to the Bulldozer architecture which started on 32nm. Ryzen could help AMD gain some share from Intel in the desktop processor market, though on its Q1 2017 earnings call Intel denied seeing any increased competition from the former in this space.

Increasing Competitiveness In The Data Center Market

Last year, AMD clinched a deal with Google to make the Raedon GPU technology available for the latter’s cloud platform. In addition, AMD also bagged a deal with Chinese company Alibaba to supply Radeon Pro chips for its servers. These deals are quite significant for AMD, as most of the big players in the cloud storage market currently use Nvidia’s GPUs. Furthermore, AMD is set to release its Naples server CPU in Q2’17, which is based on the Zen architecture and is comparable to current high-end server processors by Intel. With the surge in the smart and connected devices, the data center market is expected to see strong growth for the next few years. AMD stands a chance to benefit from this growth with its upgraded offering for the server processor market. Design wins in the high margin data-center market can be margin accretive for the company, and could help improve its bottom-line going forward.

Vega To Further Boost AMD’s GPU Growth Momentum

AMD revealed preliminary details about its upcoming Vega GPUs at the CES 2017. The company claims that its Vega GPUs will address most data and visually-intensive workloads, as it features some of the advanced features such as the memory subsystem, next-generation geometry pipeline, new compute engine, and a new pixel engine. AMD’s Polaris architecture was able to significantly boost its revenues and one can expect to see strong demand for Vega as well. AMD plans to start shipping GPUs based on the Vega architecture from Q2’17.

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