(Reuters) – Advanced Micro Devices Inc’s <AMD.O> first-quarter revenue estimate came in largely below analysts’ estimates due to waning demand from gaming console makers, even as its data center and PC chips business tracked a recovery in the chip industry.
Shares of the company fell 4% in extended trading on Tuesday. The stock has surged over 150% in the last 12 months, making it the top gainer on both the S&P 500 Index <.SPX> and the Philadelphia Semiconductor Index <.SOX> during the period.
The console business has been under pressure as inventory is drawn down ahead of Microsoft Corp <MSFT.O> and Sony Corp <6758.T> launching their new gaming consoles in the second half of this year.
Fourth-quarter sales in its enterprise, embedded and semi-custom segment, which also houses chips used in consoles, rose 7% to $465 million, but missed FactSet estimates of $603.8 million.
“The secular decline in the game console semi-custom chip (SoC) should have been expected. I think investors wanted to see a steeper growth profile from its datacenter, CPU business to offset the near-term gaming SoC decline,” said KinNgai Chan at Summit Insights Group LLC.
Sales at AMD’s computing and graphics segment, which includes graphic chip sales to data centers, surged 69% to $1.66 billion in the fourth quarter, beating analysts’ estimate of $1.5 billion, according to market research firm FactSet.
Data center demand also powered strong results and forecast from bigger rival Intel Corp <INTC.O> last week, which reinforced chip industry turnaround expectations triggered by Micron Inc <MU.O> and Texas Instruments <TXN.O>.
AMD projected first-quarter revenue to be about $1.8 billion plus or minus $50 million, compared to analysts’ average estimate of $1.86 billion, according to IBES data from Refinitiv.
Revenue jumped 50% to $2.13 billion in the fourth quarter, beating analysts’ estimates of $2.11 billion.
The company said it expects 2020 revenue growth of about 28% to 30% year-over-year, while analysts were expecting 27%.
Excluding items, the company earned 32 cents per share, beating estimates of 31 cents.
(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)