Advanced Micro Devices, Inc. (NASDAQ: AMD) reported a slump in its revenue in Q2. Management also alerted of the company’s top-line growth to be in mid-single-digit for the year. AMD stock was quick to be sold at the signs of distress amidst other chip stocks. But, this distress is not something that would last long and is just a short-term hitch.
Can AMD Stock Price Come Back Stronger?
The revenue decline was over 13% annually and operating margins have shriveled by 4%. This bust can be credited to the inventory of graphics card channel that stood oversupplied due to the failure of crypto-currency. The company’s expected revenue for Q3 is $1.8 billion at the mid-point of its guidance range. Even though this figure is an increase (9%) as compared to the previous year’s figure, it fails to live up to Wall Street’s expectation of $1.94 billion.
The sagging to-line growth is due to the slow demand of the company’s semi-custom chips, as claimed by AMD’s CFO Devinder Kumar. Due to the upcoming launch of next-generation hardware next year by both Sony and Microsoft, the demand for gaming consoles has gone down currently as more and more game enthusiasts are holding off buying the gaming console.
This has largely affected AMD stock price due to the simple reason that the semi-custom chips that the company manufactures are actually used by Sony and Microsoft for their gaming consoles. Due to the fall in current demand, Sony announced a cut in its fiscal 2020’s sale forecast for PlayStation 4, thereby reducing the order of the semi-custom chips. However, with the launch of next-generation gaming hardware, business for AMD is likely to rapidly pace up again.
Moreover, the company is also making successful strides in its other segments like the Ryzen processors becoming a catalyst for AMD in the CPU space. The launch of AMD’s latest 7-nanometer Ryzen CPUs with their superior performance and lower power consumption would likely gain more market share for the company. Rome, AMD’s new server processor, has also started being shipped and would make its space in the server market. Also, the revenue from AMD’s GPU has also increased in double-digit percentage.
Keeping all these in mind, the slump in Q2’s revenue of the company does seem like a minor bump in the bright road of the company’s future.