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

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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.

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 chips fell short of what analysts were expecting, a doubly disappointing outcome given better-than-expected data-center sales from larger rival Intel Corp. INTC, +2.47%  last week.

AMD reported sales of enterprise embedded and semi-custom segment, which include AMD’s Epyc line of data-center chips, came in at $465 million, while analysts had expected sales to rise 39% to $603.8 million.

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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