Advanced Micro Devices (AMD 15.37, +1.26) has jumped 8.8% in pre-market after beating second quarter expectations and boosting its guidance.
Over the past 18 months, AMD has enjoyed a sharp rally, which has lifted shares from the $5.00 area to a 9.5-year high near $15.00. That rally has taken place alongside an even sharper advance by NVIDIA (NVDA 167.49, +2.14), who is a runaway leader in the GPU (graphics processing unit) arena. Both names have benefitted from growing interest in cryptocurrencies, which has contributed to demand for latest generation GPUs for use with mining (solving strings of complex equations in exchange for bitcoins, etc.) cryptocurrencies.
In absolute terms, peak potential performance of AMD's GPUs has struggled to keep pace with NVIDIA, but AMD's GPUs are often seen as a better value proposition due to lower overall prices. To be fair, AMD has narrowed the performance gap in recent years.
For the second quarter, AMD reported above-consensus earnings of $0.02 per share on a 19.0% year-over-year increase in revenue to $1.22 billion, which was also ahead of expectations.
The increase in revenue was driven by higher sales in the Computing and Graphics segment, which spiked 51.0% to $659 million. Gross margin improved by 200 basis points to 33.0% thanks to a richer product mix and a higher share of revenue from the Computing and Graphics segment.
In addition, this was the first full quarter of Ryzen processor sales. AMD's latest CPU series is a competitor to processors made by Intel (INTC 34.68, +0.01).
Client average selling price increased year-over-year due to sales of the Ryzen line. Furthermore, average selling prices of GPUs also increased when compared to 2016.
Enterprise, Embedded and Semi-Custom revenue declined 5.0% to $563 million due to lower semi-custom System-on-Chip sales.
Looking ahead, AMD expects that third quarter revenue will be between $1.47 billion and $1.54 billion, which is ahead of market expectations. Adjusted gross margin is expected around 34.0%. For the full year, the company now expects that revenue will increase in mid to high teens, up from previous guidance for low double-digit growth.