AMD Gives Bullish Forecast, Boosted by Server Chip Sales

(Bloomberg) — Advanced Micro Devices Inc. gave strong forecasts, suggesting the company is winning orders from larger rival Intel Corp. in the lucrative market for server chips. AMD shares jumped more than 9% in extended trading.Third-quarter revenue will be about $2.55 billion, Santa Clara, California-based AMD said Tuesday in a statement. That compares with the average analyst estimate of $2.3 billion, according to data compiled by Bloomberg.

The company also raised its full-year sales forecast, and second-quarter results beat Wall Street expectations on sales of Epyc server chips and Ryzen PC processors.After decades of lagging way behind Intel, AMD has been catching up in recent years, helped by advances made by its factory partner, Taiwan Semiconductor Manufacturing Co. Meanwhile, Intel is in crisis after saying its new production process is a year behind schedule. That’s hammered Intel shares, while AMD stock has surged on hope its chips will perform better than Intel’s.

Under Chief Executive Officer Lisa Su, AMD has revamped its products and come surging back from what analysts had said was the brink of insolvency. Investors now want the company to justify its soaring valuation by growing to become more than just an afterthought to computer makers.

On Tuesday, AMD said it sees 2020 revenue rising about 32%, driven by strength in PC, gaming and data center products. Wall Street expected the company’s sales to climb 25% this year to $8.4 billion. Either way, that is still about half what Intel books in one quarter.

AMD has said it is targeting double-digit market share in servers by the middle of this year. That would be up from less than 1% before introducing new products in 2017. Server computers are the backbone of corporate networks and the data centers that run the internet. Server chips can sell for thousands of dollars each.

AMD reported second-quarter net income of $157 million, or 13 cents a share, compared with $35 million, or 3 cents, in the same period a year earlier. Revenue rose 26% to $1.93 billion. Profit, excluding certain items, was 18 cents. Analysts estimated profit of 16 cents on sales of $1.86 billion.

(Updates with AMD shares in first paragraph.)

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