Both AMD’s results and its third-quarter outlook, released yesterday afternoon, were disappointing. AMD’s revenue of $1.44 billion was in line with analyst estimates and represents a 24% increase from the same quarter last year and a 3% increase from the first quarter. AMD earned 2 cents a share, short of analyst expectations of 3 cents. Gross margin was 40%, down from 35% last quarter. Sales in the computing solutions declined 20% from a year ago. Intel (INTL) revenues in the PC processor division rose 6.2%, suggesting that AMD is losing its market share to Intel. The company forecast third quarter revenues from $1.43-$1.51 billion, while analysts estimated an average of $1.57 billion.
"The second quarter capped off a solid first half of the year for AMD with strong revenue growth and improved financial performance," CEO Rory Read said in a statement. "Our transformation strategy is on track and we expect to deliver full year non-GAAP profitability and year-over-year revenue growth. We continue to strengthen our business model and shape AMD into a more agile company offering differentiated solutions for a diverse set of markets."
Bank of America analyst Vivek Arya downgraded the stock to “underperform” from “neutral” and lowered the price target to $4 from $4.50. “While management has done a good job of strengthening the balance sheet and winning critical business with major console customers,” Arya wrote, “we believe the legacy PC/graphics market continues to be a material headwind.”