Why Advanced Micro Devices, Inc. (NASDAQ: AMD) stock is getting hammered

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Advanced Micro Devices, Inc. (NASDAQ: AMD) stock lost over 7.3% on 29th January, 2020 (As of 1 pm GMT-5; Source: Google finance) as the firm gave subdued outlook for the current quarter. The weakness in the revenue outlook going forward is linked to gaming-console chip sales, which have been subdued compared to console makers Sony Corp. and Microsoft Corp. rolling out new PlayStations and Xboxes later in the year. As per the company, the sequential decline in revenue in the first quarter is on the back of negligible semi-custom revenue which continues to soften in advance of the ramp of next-generation products, in addition to seasonality.

The company has reported fourth-quarter net income of $170 million, compared with $38 million in the year-ago period. Further, for the year, AMD has reported net income of $341 million, compared with $337 million,  in the prior year. The adjusted earnings were 64 cents a share, while analysts had forecast earnings of 62 cents a share. The company’s annual revenue grew to $6.73 billion, compared with the Street’s forecast of $6.71 billion, up from $6.48 billion in 2018.

AMD in the fourth quarter of FY 19 has reported the adjusted earnings per share of 32 cents, beating the analysts’ estimates for the adjusted earnings per share of 31 cents, according to FactSet. The company had reported the adjusted revenue growth of 50 percent to $2.13 billion in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $2.11 billion. AMD has 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 the analysts had expected sales to rise 39% to $603.8 million. In AMD’s largest segment, computing and graphics chips, the company has reported 69% rise in sales to $1.66 billion, while analysts expected a 52% rise in sales to $1.5 billion, according to FactSet. Ryzen processor adoption had accelerated sharply in 2019, which helped to drive significant double-digit percentage increases in client processor annual unit shipments, ASPs and revenue.

The company expects revenue to  be in the range of $1.75 billion to $1.85 billion for the first quarter while the analysts surveyed by FactSet had forecast revenue of $1.86 billion. The company also expects revenue growth to be of about 28% to 30% for the full year, which is roughly in line with analyst estimates.

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