New Product Launches Across The Portfolio To Help Sustain AMD’s Growth Momentum: Q1’17 Earnings Review

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Advanced Micro Devices

AMD (NASDAQ:AMD) reported its Q1 2017 earnings on May 1st. Continuing its growth momentum from 2016, the company reported an 18% y-o-y increase in its top line and lowered its net loss from $109 million in Q1 2017 to $73 million in Q1 2016. Despite meeting its guidance and analyst expectation as well as guiding slightly higher than expected Q2 2017 figures, AMD’s stock price declined by nearly 7% in after hours trading yesterday.

AMD’s stock price has risen by more than 250% in one year on the hopes that the new product launches will help the company increase its market share and profitability. While AMD did see increasing traction owing to the Ryzen CPU launch in March, perhaps the growth came in lower than what was accounted for in the stock price. Additionally, Intel has moved up the release date of some of its upcoming products in the PC and server market, which will cut down the time that AMD gets to push its products in the market before the competition from Intel intensifies.

Nevertheless, 2017 started on a stellar note for AMD which delivered strong double digit revenue growth and margin expansion based on solid product execution and strong market and customer reception to its new products. The company is confident of continuing the revenue and margin expansion in 2017 driven by the upcoming launch of Naples server CPU, Vega GPUs, Radeon Instinct Accelerators, and the rest of the Ryzen lineup for the the mainstream desktop and premium notebook markets.

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Note: We are in the process of updating our model for AMD for the Q1 2017 earnings.

See our complete analysis for AMD

amd q1'17e.

Expanding Ryzen Products To Help Improve Gross Margin

Q1 2017 was AMD’s fourth straight quarter of double-digit percentage year-on-year revenue growth, driven by strong demand for Ryzen CPUs and improved GPU sales. Even the 1% sequential decline was better than normal seasonality as significant growth in desktop processor sales driven by the first month of Ryzen CPU sales largely offset seasonal declines in GPU and notebook APU sales.

AMD claims that Ryzen gross margins are substantially better than the legacy portfolio, and as the company rolls out more products from the Ryzen family, it can help improve profitability further. AMD launched premium Ryzen 7 processors in March this year and the enthusiast-class Ryzen 5 processors in early April. It claims to have seated more than 300 software developers to support their work optimizing for Ryzen CPUs and have already seen double-digit performance gains across a number of top-tier gaming titles. A number of Ryzen-powered systems are expected to roll-out from major OEMs later this quarter. Additionally, AMD will extend the product line into the mainstream desktop and premium notebook markets with the launches of Ryzen 3 CPUs and Ryzen mobile APUs in the second half of the year.

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