AMD’s 1Q16 Earnings Bring Positive Surprises for Investors

What Do AMD's 1Q16 Earnings and Guidance Say about Its Future?

Semiconductor earnings highlights

Recently, Intel (INTC) and Qualcomm (QCOM) reported strong earnings for the March 2016 quarter but weak guidance for the June 2016 quarter, owing to the slowdown in the PC (personal computer) and smartphone markets.

Intel’s revenue rose on a YoY (year-over-year) basis but fell on a quarter-over-quarter basis. Qualcomm reported falls on both a YoY and quarter-over-quarter basis. Similarly, Advanced Micro Devices (AMD) reported falls on both a YoY and quarter-over-quarter basis but posted strong guidance that topped analysts’ estimates.

Good news for AMD

AMD’s 1Q16 earnings and 2Q16 guidance beat analysts’ estimates. It posted a positive outlook for both 2Q16 and 2H16, owing to new product launches and design wins. The company’s 1Q16 earnings call brought some positive surprises for AMD investors.

• AMD announced a licensing joint venture with China (FXI). The country will inject $293 million into the cash-strapped company.

• The company announced that it would launch its much-awaited Polaris GPU (graphics processing unit) in 2Q16. The Polaris GPU will compete with NVIDIA’s (NVDA) Pascal GPU.

• The company announced that its three semi-custom processors have secured design wins for new consoles. These wins have the potential to earn revenue of $1.5 billion in three years.

• The company guided that it would return to profits in 2H16 on a non-GAAP (generally accepted accounting principles) basis.

AMD continues to report losses

However, analysts are cautious, as AMD is still reporting losses. They are adopting a wait-and-watch approach to see if the news generates positive earnings as anticipated amid weak PC sales, macroeconomic headwinds, and strong competition from cash-rich rivals Intel and NVIDIA.

In this series, we’ll explore the impact of all of the above factors on AMD’s earnings and guidance.

Continue to Next Part

Browse this series on Market Realist:

• Part 2 - Why Did AMD’s Stock Jump More Than 50% in a Day?

• Part 3 - AMD’s 1Q16 Earnings Beat Analysts’ Estimates despite Falls

• Part 4 - AMD’s Computing and Graphics Unit Hit by Weakness in PC Sales