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Advanced Micro Devices reported a net profit in the third quarter, thanks to the strength of its Ryzen and Epyc series processors that launched earlier this year.

But AMD’s shares fell 11 percent in after-hours trading as the Sunnyvale, California-based chip design company warned that it would have lower revenues in the fourth quarter. Still, the operating profit was AMD’s first in three years.

The company reported an adjusted 10 cents a share on revenue of $1.64 billion (with revenue up 26 percent from a year ago). Analysts were expecting 8 cents a share on revenue of $1.51 billion in the quarter.

“We made significant progress in Q3,” said Lisa Su, CEO of AMD, in a conference call with analysts, citing Ryzen processors hitting as much as 40 percent to 50 percent market share in strategic etailer channels.

AMD has refreshed its processors this year with a new architecture, dubbed Zen, which can generate 52 percent more performance per clock cycle than its previous generation. This has resulted in the most competitive chips in a decade for AMD as it competes with archrival Intel. AMD’s Threadripper series of Ryzen chips are contending for the performance crown against Intel’s fastest chips, and AMD is selling Threadripper chips at a considerable discount compared to Intel’s high-end processors.

Dell, Lenovo, and HP — and all major commercial PC makers — have adopted the Ryzen processors, Su said, and AMD’s computing and graphics revenue was up 74 percent from a year ago.

AMD also introduced its Radeon RX Vega series of graphics processing units (GPUs), in competition with Nvidia’s GPUs. Su said AMD saw strong performance in both gaming and blockchain markets. The latter means that the popularity of cryptocurrency mining is driving graphics chip demand.

AMD’s revenue was up 34 percent from the previous second quarter, driven by enterprise-embedded and semi-custom chips (which means video game processors, for the most part). A year ago, AMD lost $406 million, or 50 cents a share, in the third quarter of 2016.

Above: Ryzen Mobile will be the brains of laptops in the second half of 2017.

Image Credit: AMD

Average selling prices per chip were up significantly, thanks to this year’s sales of Ryzen processors. GPU ASPs were also up significantly. Threadripper processors are now available from more than 90 retailers, with marquee PC makers such as Alienware.

But AMD said that in the fourth quarter it expects sequential revenues to decline 15 percent from the previous third quarter. That would still result in revenues that are up 26 percent from the fourth quarter of 2016, however. Su said she expect to see some leveling off of cryptocurrency demand for GPUs and added that Q4 is also seasonally weaker for the semi-custom business.

Su also said that semi-custom chips would remain seasonally strong as Sony sells its PlayStation 4 Pro and Microsoft launches its Xbox One X game console. Big cloud providers like Tencent and Baidu are adopting AMD’s Epyc-based data center products. AMD said it also closed a patent-licensing agreement in the third quarter.

“AMD had a tremendous Q3, driven by Ryzen desktops and Radeon graphics. Ryzen likely drove market share based on its strong value proposition, and graphics were driven by the demand for GPU-driven crypto-currency mining,” said analysts Patrick Moorhead at Moor Insights & Strategy. “As expected, Q3 was a big quarter for game consoles, and so was the Q4 decline. This is very seasonal.”

He added, “I’m looking forward to see what AMD can do in the next six months with the new Zen and Vega-based Raven Ridge notebook parts and Epyc driving some revenue. Finally, I’m not concerned with the Q4 revenue forecast decline, as this is seasonal.”

Su said the company’s goal is to become one of the premier long-term growth companies in the tech industry. She noted that Atari is adopting an AMD chip for its upcoming Ataribox game console and said there is a new large original equipment maker (OEM) ramping up in Q4.

Su said that Ryzen should continue to ramp in the first half of 2018.

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