AMD -7.6% AH; guidance above consensus, margins expected to drop again

|By:, SA News Editor

AMD is guiding for Q4 revenue to be up 5% Q/Q (+/- 3%); the midpoint is above a consensus for 3.4% growth. But gross margin is expected to fall another 100 bps Q/Q to 35%, after dropping 300 bps in Q3 to 36% (in-line with guidance, but aided by a 100 bps boost from an inventory sale). In July, margin concerns led AMD to sell off following its Q2 report.

CPU division sales -6% Q/Q and -15% Y/Y to $790M, thanks to PC industry weakness and share loss. The division had op. income of $22M. Intel's PC CPU division sales rose 4% Q/Q and fell 3% Y/Y in Q3.

Graphics & Visual Solutions (inc. GPUs and consoles) sales soared 110% Q/Q and 96% Y/Y thanks to the console ramps. Division op. income totaled $79M.

CPU ASP was flat Q/Q and down Y/Y. GPU ASP was down Q/Q and Y/Y. Semi-custom and embedded sales (inc. consoles) made up 30% of revenue.

Thanks to job cuts, R&D spend -12% Y/Y to $288M. MG&A -18% to $155M.

AMD was free cash flow positive in Q3, and expects to be so again in Q4. Cash/investments stood at $1.2B at the end of Q3, and debt at $2.05B.

CC at 5:30PM ET. Q3 results, PR, CFO comments, slides