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What to Expect From AMD's Q2 Results

Shares of Advanced Micro Devices (NASDAQ: AMD) have made a recovery after getting clobbered after the company's first-quarter report at the beginning of May, working their way back to slightly above where they were before that quarterly report was released. Potential market share gains against Intel and NVIDIA  have improved investor confidence.

However, AMD's momentum will be put to the test when the company releases its fiscal second-quarter results on July  25, as investors will be looking for stronger second-half guidance. But will AMD deliver, or should investors prepare themselves for some surprises? Let's find out.

Image Source: AMD 

The expectations

Analysts expect AMD's second-quarter revenue  to climb 12.5% year-over-year to $1.16 billion, which is in line with the company's own expectations. The GPU specialist hasn't given a bottom-line estimate, though analysts expect  it to achieve break-even as compared to a loss of $0.05 per share in the year-ago quarter.

If AMD has indeed gained market share the way market watchers say, it is quite likely that AMD will be able to at least meet these estimates. A recent estimate by PassMark put AMD's market share in the CPU space at 23.4%. By comparison, the company's share was relatively lower at 17.5% in the year-ago period. If that estimate is true, it means the newly launched Ryzen CPUs are making a dent in this market.

Meanwhile, GPU rival NVIDIA is feeling the heat from AMD and is estimated to have lost 4.2 percentage points of GPU market share during the first quarter of the year, and AMD hasn't even launched its Vega GPUs yet.

AMD has been able to rapidly reduce its losses in recent quarters. The company's non-GAAP (adjusted) operating loss dropped  to just $6 million during the first quarter of 2017 as compared to a loss of $55 million in the year-ago period. The lower net loss was driven by 2-percentage-point growth in the gross margin to 34%, setting AMD on the way to hitting the break-even point given the projected revenue growth.

What about the outlook?

AMD is capable of providing an impressive third-quarter outlook as more of its products have hit the market in recent months. For instance, AMD recently launched  its Ryzen PRO CPUs for the commercial desktop market, while it is set to release Ryzen mobile chips by the end of the year.

Additionally, the company is now targeting the mid-tier CPU market with the Ryzen 3 chips, which are expected to go on sale toward the end of July. The good news for AMD investors is that it is going after Intel in this market segment as well by pricing  the Ryzen chips aggressively. Once AMD is out with its complete product lineup, it should be able to capture a bigger share of the CPU market.

Meanwhile, AMD can gain more ground in GPUs once it launches its Vega graphics cards. In fact, the company has already landed a major client in the form of Apple, which will be using  the Radeon Pro Vega GPU in the iMac Pro to power virtual reality applications.

Furthermore, AMD is likely to come out with its new  GPUs later this month, just in time for the seasonally strong back end of the year. AMD has all the ingredients to deliver a robust outlook this time around.

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Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple and Nvidia. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.