AMD's earnings top estimates as graphics chip demand surges

[BENGALURU] AMD's fourth-quarter earnings and revenue handily topped Wall Street forecasts on Tuesday, as the chipmaker sold more graphics processors used in data centres and computers.

Sunnyvale, California-based AMD said sales in its graphics and computing business rose 60 per cent year-over-year to US$958 million in the quarter ended Dec 30.

About a third of the quarter-over-quarter growth in the unit's revenue was a result of demand from cryptocurrency miners. The rest came from sales of graphics processing units, or GPUs, that are used in computers, servers and gaming consoles.

AMD, like rival Nvidia, is benefiting from the recent boom in cryptocurrencies, as its GPUs provide the high computing ability required for cryptocurrency mining.

Bitcoin, the most popular cryptocurrency, rose more than 1,300 per cent in 2017, but has slipped some 25 per cent this year amid fears of a bubble.

For the quarter ending March, AMD forecast revenue of about US$1.55 billion, give or take US$50 million.

The forecast was driven mainly by demand for AMD's Ryzen processors, EPYC products and GPUs, said chief financial officer Devinder Kumar.

AMD's fourth-quarter revenue rose 33.3 per cent to US$1.48 billion, exceeding analysts' average estimate of US$1.41 billion, according to Thomson Reuters I/B/E/S.

The company reported net income of US$61 million, compared to a loss of US$51 million a year earlier. Results also reflected an US$18 million one-time tax credit related to new US tax laws.

Excluding one-time items, AMD earned 8 US cents per share, topping analysts' estimates of 5 cents.

The company's shares were roughly flat in after-hours trading following an initial 6 per cent selloff.

Investors may have been reacting initially to AMD's gross margin results and forecast, Summit Redstone Partners analyst Kinngai Chan said.

AMD expects first-quarter adjusted gross margins of about 36 per cent. It recorded gross profit margins of 35 per cent for the fourth quarter.

In a cautionary statement accompanying results, AMD said its efforts to fix critical security flaws in its chips may be costly or even ineffective.

Two chip flaws, dubbed "Spectre" and "Meltdown" could let hackers steal sensitive data from nearly every modern computing device containing chips from AMD, Intel or ARM Holdings, researchers said earlier this month.

Still, AMD did not expect any "unusual" expenses related to the flaws, chief executive Lisa Su said.

The chipmaker was deploying operating system patches to customers to address the issue, Su added.

"Longer term, we have included changes in our future processor cores starting with our Zen 2 design to further address potential Spectre-like exploits," she said.

REUTERS