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AMD's Strong Guidance Points to Share Gains and More Could Be On the Way

Three months ago, AMD Inc. (AMD) fell sharply after providing second-quarter and full-year guidance that at the time felt conservative. A couple weeks after that, shares took another tumble in the wake of AMD's analyst day, partly due to disappointment over a cautious 2020 EPS forecast.

The CPU/GPU maker's strong Q2 results and Q3 guidance, along with its full-year guidance hike, certainly point to rosier business conditions than what AMD's prior forecasts suggested. And depending on how upcoming product launches go, things could look better still by year's end.

After the bell on Tuesday, AMD reported Q2 revenue of $1.22 billion (up 19% annually) and adjusted EPS of $0.02, beating consensus analyst estimates of $1.16 billion and $0.00. It also guided for Q3 revenue to be up 23% sequentially, plus or minus 3%. At the midpoint, this implies revenue of $1.5 billion, up 15% annually and above a $1.39 billion consensus.

In addition, AMD says it now expects full-year revenue to be up by a mid-to-high teens percentage, better than a prior (conservative) outlook for low-double digit growth. This is in spite of the fact that AMD forecasts its large semi-custom business, which mostly involves PlayStation 4 and Xbox One processor sales, will be down relative to 2016 due to a mature console cycle. For now, the company is still forecasting a full-year gross margin of 34%, up from 2016's 31%.

Shares rose 10.8% in after-hours trading to $15.64, slightly taking out a 52-week high of $15.55 (set in late February) along the way. GPU archrival Nvidia Corp. (NVDA) OEMs, budget-conscious gamers and (notably) cryptocurrency miners clearly have much to do with the company's recent top-line performance. Though Nvidia's Pascal-architecture GPUs still dominate the high-end gaming segment, AMD's GPU sales are said to have risen by a "strong double-digit percentage" annually, with both units and average selling prices (ASPs) rising.

Apple Inc.'s (AAPL) June launch of new iMac and MacBook Pro models sporting Polaris GPUs is certainly helping. So is torrid demand from Ethereum miners:...