Advanced Micro Devices (AMD) is getting hit hard after reporting in-line first quarter results. While revenue guidance for the second quarter was strong, the gross margin outlook was soft.
AMD reported a small net loss for the first quarter with revenue up 18% year-over-year to $984 million, in-line with estimates. The Computing and Graphics segment revenue decline was better than seasonal due to the initial sales from high performance Ryzen desktop processors. There was a lot of hype around the new Ryzen CPUs that were finally on par with Intel's high end chips, but at a much lower price.
AMD called for second quarter revenue up 14-20% quarter-over quarter versus estimates for ~14% growth. However, AMD also called for gross margin to fall to 33% from 34% in the first quarter.
There wasn't much room for error in a stock that was up ~20% year-to-date and nearly 400% since the beginning of 2016.
AMD also called for low double digit revenue growth for the year and reaffirmed guidance to improve non-GAAP gross margin and achieve non-GAAP profitability.
AMD competes with Intel (INTC) on CPUs and NVIDIA (NVDA) on GPUs. AMD is #2 in both markets.
Valuation was also quite demanding. EVen after today's decline, the stock's enterprise value is ~38x EBITDA estimates for 2017.