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Earnings Results: AMD stock slides as outlook falls below Wall Street view

Advanced Micro Devices Inc. shares declined in the extended session Tuesday after the chip maker’s outlook fell below Wall Street estimates and data-center sales did not come in as well as expected. Read More...

Advanced Micro Devices Inc. shares declined in the extended session Tuesday after the chip maker’s outlook fell below Wall Street estimates and sales in the segment that includes data-center chips did not come in as well as expected.

AMD AMD, +2.58%  shares declined 2% after hours, following a 2.6% rise in the regular session to close at $50.53, after the company said it expects revenue of $1.75 billion to $1.85 billion for the first quarter, while analysts had forecast revenue of $1.86 billion.

Fourth-quarter revenue rose to $2.13 billion from $1.42 billion in the year-ago period, while analysts surveyed by FactSet had forecast revenue of $2.11 billion.

The sequential decline in revenue going into the first quarter “is driven primarily by negligible semi-custom revenue which continues to soften in advance of the ramp of next-generation products, in addition to seasonality,” AMD said in a statement.

While the company topped Wall Street estimates for the quarter, sales of data-center and gaming console chips fell short of what analysts were expecting. That follows better-than-expected data-center sales from larger rival Intel Corp. INTC, +2.47%  last week.

AMD reported sales of $465 million from its enterprise embedded and semi-custom segment, which includes the company’s Epyc line of data-center chips, while analysts had expected sales to rise 39% to $603.8 million.

Much of that miss was attributed to soft gaming-console sales, which are lumped together in the segment with Epyc sales, Patrick Moorhead, principal analyst at Moor Insights & Strategy, told MarketWatch. AMD did not quantify how much data-center sales versus gaming-console sales figured into the numbers.

“Game-console sales dropped like a rock and had nothing to do with Epyc,” Moorhead said, pointing out AMD’s “strong Epyc” sales, which he believes more than doubled over the year-ago period. “Unfortunately, the numbers are combined.”

In AMD’s largest segment, computing and graphics chips, the company reported sales of $1.66 billion, while analysts expected a 52% rise in sales to $1.5 billion, according to FactSet.

Read: Chip stocks catch brunt of tech decline, but coronavirus could benefit U.S. memory makers

The company reported fourth-quarter net income of $170 million, or 15 cents a share, compared with $38 million, or 4 cents a share, in the year-ago period. Adjusted earnings were 32 cents a share, while analysts had forecast earnings of 31 cents a share.

Read: For chip companies, stocks soared as sales slumped in 2019 — what does that mean for 2020?

“2019 marked a significant milestone in our multi-year journey as we successfully launched and ramped the strongest product portfolio in our 50-year history,” said Lisa Su, AMD’s president and chief executive, in a statement. “We delivered significant margin expansion and increased profitability as we gained market share with our Ryzen and Epyc processors.”

For the year, AMD reported net income of $341 million, or 30 cents a share, compared with $337 million, or 32 cents a share, in the prior year. Adjusted earnings were 64 cents a share, while analysts had forecast earnings of 62 cents a share. Annual revenue rose to $6.73 billion, compared with the Street’s forecast of $6.71 billion, up from $6.48 billion in 2018.

Over the past 12 months, AMD shares have rallied 149%. In comparison, the S&P 500 index SPX, +1.01% has gained 24%, the tech-heavy Nasdaq Composite Index COMP, +1.43%   has grown 31% and the PHLX Semiconductor Index SOX, +2.40% has increased 51%.

Of the 38 analysts who cover AMD, 15 have buy or overweight ratings, 20 have hold ratings and three have sell or underweight ratings, with an average price target of $43.30.

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