AMD’s Sales Forecast Misses on Tepid Game-Console Chip Demand

AMD gave a disappointing third-quarter sales forecast, indicating lower-than-expected orders for game-console chips from Microsoft and Sony, according to Bloomberg.

Revenue in the current period will be about $1.8 billion, AMD said in a statement. That missed the average of analysts’ projections of $1.94 billion, according to a survey by Bloomberg. The company also pared its forecast for annual revenue, and shares tumbled in extended trading.

CEO Lisa Su is trying to remake her company into more than just a purveyor of cut-price alternatives to Intel’s PC chips. While sales of PC-related products are improving, the company said revenue is taking a hit because demand from game-console makers is falling short of its original forecasts this year. In the second quarter, revenue in the division that includes server processors and custom chips for consoles declined 12%, AMD said.

The company’s second-quarter net income fell to $35 million, or 3 cents a share, compared with $116 million, or 11 cents, a year earlier. Excluding certain items, profit in the recent period was 8 cents, matching analyst predictions. Revenue in the period was $1.53 billion, 13% lower than a year earlier but topping analysts’ average projection of $1.52 billion.

Gross margin, or the percentage of sales remaining after deducting the cost of production, widened to 41% in the second quarter, in line with the average analyst estimate. A year earlier, that measure of profitability came in at 37%.

AMD said it now expects full-year revenue to gain at a percentage in the mid-single digits, compared with an earlier prediction for annual sales to rise in the high single digits. Analysts had projected an annual sales increase of about 6%. At the same time, the company slightly raised its forecast for gross margin for all of 2019, to 42%.