Advanced Micro Devices (NASDAQ:AMD) beat analyst estimates when it last reported quarterly results in July, with that performance driven by its Ryzen CPUs (central processing units), and GPU (graphics processing unit) demand from cryptocurrency miners. AMD will try to provide an encore performance on Tuesday, when it reports its third-quarter results after the market close.

Ryzen and cryptocurrency-related demand will continue to act as tailwinds, and the launch of high-end Vega graphics cards in August will provide another source of growth. The stock has more than doubled over the past year on the expectation that these new products would push revenue and profits through the roof. AMD now needs to deliver.

The AMD logo on a chip

Image source: AMD.

What analysts are expecting

The average analyst estimate for third-quarter revenue sits at $1.51 billion, a 15.3% increase compared to the third quarter of 2016. That's in line with AMD's own guidance, which calls for a 15% year-over-year increase.

AMD boosted its full-year revenue guidance after its strong second-quarter report. The company expects revenue to grow by a percentage in the mid- to high teens, up from previous guidance calling for a low-teens percentage increase. Analysts expect 18.3% growth.

The average estimate for third-quarter non-GAAP (generally accepted accounting principles) earnings per share is $0.08, up from $0.03 in the prior-year period. AMD doesn't provide earnings guidance, but a double-digit increase in revenue should drive the bottom line higher. GAAP earnings may also turn positive if AMD matches or beats expectations. That would be a change from the second quarter, when even estimate-beating revenue growth wasn't enough to prevent a small net loss.

For the full year, analysts see non-GAAP EPS of $0.10, with that number rising to $0.33 in 2018. AMD's 2020 target for non-GAAP EPS is $0.75.

Ryzen, Vega, and cryptocurrency

The full lineup of AMD's Ryzen PC CPUs has now launched. High-end Ryzen 7 chips came in March, followed by mid-range Ryzen 5 chips in April and low-end Ryzen 3 chips in July. AMD also released Threadripper, a line of ultra-high-end chips, in August.

The selling point of Ryzen is a high core count relative to comparable processors from Intel (NASDAQ:INTC). The trade-off is that Intel's chips retain a significant advantage when it comes to single-core performance. Intel recently launched its new Coffee Lake line of desktop CPUs, bumping up the core count to six on the high-end i7 and mid-range i5 models. Ryzen's core-count advantage is no longer as strong, but AMD is still more competitive than it's been in years.

Ryzen may not drive massive market-share gains, but given AMD's position in the PC CPU market a year ago, even modest gains will drive revenue higher. The launch of high-end Vega graphics cards in August will also help the cause, although Vega doesn't seem likely to topple NVIDIA's (NASDAQ:NVDA) dominance. AMD's RX Vega 64 and RX Vega 56 provide similar performance to comparable NVIDIA cards, but they do so by using far more power. The other issue: Those NVIDIA cards have been on the market for over a year. AMD is still playing catch-up.

Demand from cryptocurrency miners, who use graphics cards to perform the compute-intensive work required to extract new coins, may offset Vega's shortcomings. Both AMD and NVIDIA are benefiting from cryptocurrency-related demand, thanks to the explosion in cryptocurrency prices this year. I doubt this demand will last, but it will provide a nice revenue boost for AMD while it does.

Given that AMD was not competitive in either the PC CPU market or the high-end GPU market last year, it should be no surprise that Ryzen and Vega are driving revenue growth. Once AMD laps these launches next year, will this revenue growth continue? Neither product is a clear-cut home run, and neither Intel nor NVIDIA will let market share slip away without a fight.

AMD stock is priced for near-perfection, trading for close to 19 times what the company hopes to earn in 2020. If AMD shows any sign that it's falling short of that target, in its third-quarter report or in the next couple of years, the stock could be in for quite the reversal.

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