What To Expect From AMD’s Computing & Graphics Segment In The Near Term?

AMD’s (NYSE:AMD) Computing & Graphics segment accounts for 67% of the company’s value, according to Trefis estimates. The segment generated revenues of $4.13 billion in 2018, accounting for 64% of the company’s total revenues, and a growth of 39% over the prior year. This can be attributed to a continued uptick in its Ryzen sales, as the company continues to increase its market share in PCs and notebooks. In fact, AMD has managed to gain close to 5% market share (y-o-y) in both desktops and notebooks as of Q1 2019. This can partly be attributed to a shortage of Intel chips, and AMD addressing newer markets and products. You can view our interactive dashboard analysis on ~ What’s Driving Our $23 Price Estimate For AMD? ~ for more details on the expected performance of the company. In addition, you can see more of our data for information technology companies here.

AMD’s Computing & Graphics segment includes revenue from sales of microprocessors and graphics processors for desktops and notebooks. The company’s Ryzen processors are gaining popularity due to their  competitive power at a relatively lower cost. This trend will likely continue in the near term, and drive the earnings growth for AMD. Intel decided to prioritize high-end markets, including its server business, and ensure adequate supply of chips to these divisions over low-end CPUs, where AMD has managed to increase its share. AMD itself isn’t doing bad with its EPYC processors for servers, and it saw a 1.9% jump in market share to 2.9% as of Q1 2019.

The PC shipments were down 4.6% to 58.5 million units in Q1 2019. While some of this can be attributed to a shortage of chips, the overall PC market has mostly been declining over the last 5 years. It will be interesting to see how much can AMD benefit from the current chip shortage issue with Intel. Note that the segment revenues grew at a CAGR of 32.8% over the last 3 years. However, the growth rate will likely slow in the near term. Owing to the above factors, the segment revenues could grow by 8% to $4.45 billion in 2019, in our view. The growth will also be led by better pricing. Given the demand for Ryzen, the company has managed to increase its average selling prices, and this trend could continue in the near term.

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