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AMD Set to Report Q2 Earnings. Investors Will Be Looking Ahead.

By Harsh Chauhan - Jul 23, 2019 at 11:01AM

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The market is expecting a strong third-quarter outlook from Advanced Micro Devices.

Advanced Micro Devices ( AMD -5.85% ) has delivered a market-shattering performance this year that not many would have expected in the aftermath of last year's cryptocurrency mining debacle.

AMD is scheduled to report second-quarter earnings on July 30, giving investors a closer look at how things are going, and the results are not going to be pretty.  The company has already warned of a 13% year-over-year revenue drop thanks to an oversupplied graphics card market, negligible cryptocurrency-related revenue, and a decline in sales of semi-custom chips that are used in gaming consoles.

But that's not what the market is focused on.

A man standing in front of a chalkboard on which question marks are drawn.

Image Source: Getty Images.

The massive rise in AMD stock this year has a lot to do with the company's potential to gain market share in the graphics cards, data center, and PC CPU verticals. The market expects the company to deliver results sooner rather than later and analysts expect its third-quarter revenue to jump nearly 19% year over year.

AMD has an upper hand against its key rivals

AMD and NVIDIA ( NVDA -3.80% ) are locked in an intense battle for graphics card market share, with the former looking to regain some of the ground that it has lost of late.

NVIDIA took the game to AMD with its "Super" line of GPUs (graphics processing units), which reportedly deliver a nice bump in performance over the regular RTX cards for a small increase in price. The move made NVIDIA's GPUs a better value proposition as compared to AMD's. For instance, the 15% bump in the performance of the Super RTX 2080 that costs $699 makes it a better bet against AMD's Radeon VII.

That's because the Radeon VII is priced identically to the Super RTX 2080, but the AMD offering was comparable to the lower-performing non-Super version. However, AMD has fired another salvo at NVIDIA by reducing the price of its GPUs.

But then, AMD could gain the upper hand in the latter half of the year as its Navi GPUs hit the market. The company's latest RX 5700 and RX 5700 XT GPUs are priced at just $349 and $399, respectively, and they are already making a name for themselves for delivering efficiency and power on a budget.

That's not surprising, as the Navi GPUs are based on a 7-nanometer manufacturing process that NVIDIA is yet to tap. NVIDIA will reportedly move to the 7nm process in 2020, but it runs the risk of losing market share to fast, efficient, and competitively priced graphics cards in the meantime. So, Wall Street expects AMD to deliver a sound third-quarter outlook.

And there's one more area in which AMD is expected to make further inroads -- the CPU market. AMD has made solid progress against Intel in the CPU space, and it could sustain that momentum thanks to its third-generation Ryzen chips.

Third-party reviews reveal that the new Ryzen chips can beat Intel in certain tasks, and they also undercut Chipzilla's offerings on the price front.

The stage is set for AMD to deliver an impressive third-quarter outlook, and if it does, expect the stock to receive a nice shot in the arm.

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
AMD
$149.11 (-5.85%) $-9.26
NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$314.35 (-3.80%) $-12.41

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