AMD Sees Strong 2021 on Data Center, Gaming Chips Demand

AMD on Tuesday beat quarterly revenue estimates and forecast robust 2021 sales on strong demand for its chips used in PCs, data centers and gaming consoles from companies and customers adapting to remote working. The company has been prying away central processor market share from rival Intel Corp, whose manufacturing operations have stumbled in recent years while contract factories used by AMD such as Taiwan Semiconductor Manufacturing Co grabbed a lead in making faster chips.

The company also supplies chips for gaming consoles, which boosted its fourth-quarter sales as new devices from Microsoft and Sony debuted during the holiday season quarter. But the consoles were in persistently short supply at retail outlets because of a global chip shortage that affected AMD and other players.

The company projected first-quarter revenue to be about $3.2 billion, plus or minus $100 million, compared to analysts’ average estimate of $2.74 billion, according to Refinitiv. AMD forecast 2021 sales of $13.37 billion, above analysts’ estimates of $12.28 billion. The company’s shares, which had doubled last year, were down about 2% in extended trading.

Analysts pinned the decline to AMD’s gross margin forecast. AMD said it expects first-quarter and full-year gross margins of 46% and 47% respectively, which were in line with Wall Street estimates but “a little underwhelming” given AMD’s booming revenue growth, Kinngai Chan of Summit Insights Group said.

In an interview with Reuters, AMD Chief Executive Su said the company’s margin outlook was higher that 2019 and 2020 and largely reflected how many server chips it expects to sell. She said that the company’s console chips tend to be below the 45% gross margin mark the company hit for the full year of 2020, while server chips tend to be above it.

“It’s how much server do we sell versus consoles,” she said. “Depending on the quarter, you’ll have a bit of mix change in the business, but overall we’re actually pleased with the margin progression.”

On a conference call with investors, Su also said that AMD thinks console chip sales will be above normal levels in the first quarter, when they typically decline after the holiday shopping season in many parts of the world. She said she expects the tightness of overall AMD chip supplies to ease somewhat in the second half of the year.

AMD’s fourth-quarter revenue rose to $3.24 billion, beating analysts’ estimate of $3.03 billion, according to IBES data from Refinitiv. Excluding items, the company earned 52 cents per share, topping estimates of 47 cents. Revenue in the computing and graphics unit, where it supplies processors and graphics chips for PCs, was $1.96 billion versus analysts’ estimates of $1.8 billion, according to data from FactSet.

In the company’s enterprise and semi-custom segment, which includes data center processor chips and gaming console chips, revenue was $1.28 billion, compared with analysts’ estimates of $1.24 billion. AMD’s graphics chips have also seen a surge in demand from cryptocurrency miners.

(As reported on Reuters.com)