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Advanced Micro Devices had mixed results versus expectations for the second quarter ended June 30, but it is predicting solid growth in the third quarter.
The chip maker reported earnings today. Its non-GAAP revenue was $1.02 billion, up 9 percent from $942 million. Analysts expected $957 million. Net loss per share was 5 cents, compared to a loss of 17 cents a share a year ago. Analysts had predicted a loss of 8 cents a share. But help is on the way: sales of chips for game consoles. In the third quarter, AMD expects revenues to grow 18 percent in the third quarter, thanks to growth in semi-custom chip sales. Game consoles are a big part of the semi-custom chip business, and Microsoft is ramping up a new slimmer version of its Xbox One game console (the Xbox One S) for the fall season.
The AMD division that includes semi-custom chips grew 59 percent to $592 million compared to the first quarter and 5 percent compared to the same quarter a year ago. AMD’s graphics chips for PCs had a stronger quarter in Q2, but the microprocessor sales were weaker.
“In the second quarter we accomplished a significant milestone as we returned to non-GAAP operating profitability based on solid execution and strong demand for our semi-custom and graphics products,” said president and CEO Lisa Su in a statement. “Based on the strength of our semi-custom products and demand for our latest Radeon RX GPUs and 7th Generation A-Series APUs, we are well positioned to drive growth and market share gains in the second half of the year.”
In the fall, Su said in an analyst call that current-generation game consoles will ramp sales in the coming two quarters with the holiday sales season. A peak in sales will happen on a seasonal basis in the third quarter.
“The new business will layer in the third quarter but I don’t expect that to change the pattern,” Su said.
In the third quarter, AMD will also launch the next chips in the Radeon RX graphics chip family, which is based on a new chip manufacturing process. AMD will have three semi-custom account wins that will account for $1.5 billion over the next three years.
Patrick Moorhead, analyst at Moor Insights & Strategy, said in an email, “Game consoles drove a monster, 59 percent sequential revenue increase as expected, but I’m really excited on both Microsoft and Sony’s new strategy to provide ‘kickers’ to make consoles more competitive versus PCs. I’m becoming much more bullish on gaming consoles due to the makers’ shift and believe this could bode well for AMD. There is a direct correlation between console competitiveness, the number of design changes, and AMD profits and revenues.”
One starts this fall (presumably the Xbox One S slimmer console). Microsoft’s new game console, code-named Scorpio, will debut in 2017. And a third one will — presumably the chip for the Nintendo NX — will debut sometime later as well. Nintendo has said the NX will debut in 2017, and it has used AMD chips in the past, so most observers believe AMD has that business as well.
Su said in the call, “Our strong second quarter graphics performance was capped by the launch of our new Polaris-based Radeon RX 480 GPUs at the end of June which helped contribute to our highest desktop channel GPU shipments since the fourth quarter of 2014.”
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