Advanced Micro Devices Inc. has been a battleground stock as it has made an effort to diversify beyond personal computers and be a true competitor to larger rivals like Intel Corp. and Nvidia Corp.
Investors on the bear side of that battleground are now getting blown away.
AMD AMD, -0.86% reported its best quarterly profit in more than seven years Wednesday afternoon, despite an expected decline in revenue from cryptocurrency mining, which has been cited by many as a major reason for the gains of the past year. While AMD’s graphic cards sales have been boosted by miners buying its cards, similar to Nvidia NVDA, +1.27% , the chip maker’s efforts to boost its high-performance PC and server offerings seem to be making up for any decline there and justifying the work of Chief Executive Lisa Su.
The full earnings story: AMD stock rises after best earnings in seven years
Overall, AMD reported net income of $116 million, or 11 cents a share, up from a loss of $42 million a year ago, and the largest GAAP profit total for the company since the March 2011 quarter. After adjusting for stock-based compensation and other effects, profit grew to 14 cents a share. Sales came in at $1.76 billion, up more than 50% from the year before and 7% from the previous quarter, and the highest quarterly total since 2008.
That performance should tell you that this time is different, and investors seemed to agree, sending shares up about 5% in after-hours trading. AMD has long been the sad-sack stepsister to Intel INTC, +0.48% , appearing to have plans that would make it a more competitive rival before failing and falling back repeatedly in the previous decades. This time, AMD appears to be actually coming through in its quest, as Intel struggles with process and products and Nvidia’s sudden rise in data-center chips leaves enough room for a challenger.
The company’s computing and graphics segment grew by 64% in the quarter, Su said in Wednesday’s conference call, despite blockchain-related sales falling from about 10% of AMD’s revenue to 6%. That gap was made up by the performance of AMD’s year-old Epyc line of server GPUs, which grew by 50% in both units and revenue from the previous quarter, the Radeon line of graphics cards and Ryzen PC chips.
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“AMD is showing that its Ryzen and Epyc processor families, as well as the Radeon graphics group, can be competitive and take market share,” said Ryan Shrout, principal analyst for Shrout Research and an occasional MarketWatch contributor.
That ability to challenge Intel and Nvidia was not a given when Su set out on the path to make a bigger challenge in gaming and servers, but AMD’s performance this year shows that it has happened. Now, the company must continue to execute to take advantage of the position in which it has placed itself.
“It is important for AMD’s future that it executes flawlessly on the overall 7nm line to take advantage of potential market opportunities Intel and Nvidia currently dominate,” Moor Insights and Strategy principal analyst Patrick Moorhead told MarketWatch on Wednesday, referring to manufacturing processes that are at the core of making chips.
If this was the AMD of old, it would be hard to trust that the company would be able to execute. With the numbers Su has been able to present this year, it is much easier to believe.
AMD shares have gained 56.1% so far this year before the post-earnings gains. The S&P 500 index SPX, +0.91% has increased 6.5% and the PHLX Semiconductor Index SOX, +0.49% has added 7.5% in the same period.
