AMD shares jump on record growth in data center revenue


© Reuters. AMD shares jump on record growth in data center revenue

Shariq Khan and Vibhuti Sharma

NEW YORK (Reuters) – Chip maker Advanced Micro Devices Corp. (NYSE: C) today announced record quarterly growth in data center sales and projected fiscal year 2019 revenue growth above Wall Street expectations, raising its stock by 10%.

Investors were preparing for weak AMD results after warnings from a number of other chip makers about a slowdown in China triggered by a trade dispute with the United States.

Larger rivals Nvidia Corp and Intel Corp (NASDAQ 🙂 both signaled stagnant growth in data center sales, a segment where AMD is starting to stick to the back of its server chips.

AMD said it expects revenue in 2019 to grow by a high digit while analysts are aiming for growth of about 6 percent.

The company said that despite short-term graphical hurdles and revenue that fell short of analysts' estimates for the fourth quarter and current quarter, it is betting on its latest graphics chips and data center to boost growth for the year.

Stifel analyst Kevin Cassidy said AMD's results were not as bad as he feared, especially compared to Nvidia's.

Nvidia cut its fourth quarter revenue estimate by half a billion dollars because of weak demand for its gaming chips in China and lower than expected data center sales.

AMD's fourth quarter gross margin rose to 38 percent from 34 percent a year earlier. The company also said it expects gross margins adjusted to more than 41 percent by 2019, its highest level in almost eight years.

"The more resilient gross margin outlook provides some comfort for investors," said Kinngai Chan of Summit Insights Group LLC.

"AMD is well positioned to continue to gain market share from Intel in the high-margin server market, especially in 2H19."

Sales in the AMD computing and graphics segment, which includes sales of graphics chips for data centers, rose more than 8.5 percent to $ 986 million, surpassing the analyst's average estimate of $ 939 million, according to FactSet .

The chip maker expects revenue for the current quarter to be $ 1.25 billion, plus or minus $ 50 million, down 24 percent from last year. Analysts had expected revenue of $ 1.47 billion, according to Refinitiv's IBES data.

Its quarterly revenue of $ 1.42 billion also lost expectations of $ 1.45 billion. Excluding items, AMD made a profit of 8 cents per share, in line with analysts' estimates.

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