AMD Processor Powered Hewlett Packard Servers Set Record

Advanced Micro Devices Inc. (NASDAQ:AMD) recently announced that Hewlett Packard Enterprise’s (NYSE:HPE) new ProLiant DL385 Gen10 server, which is powered by AMD’s EPYC processor has set new records across SPECrate2017_fp_base and SPECfp_rate2006.

Notably, HPE Cloudline CL3150 server already uses EPYC processors. Enriched with 8-core to 32-core designing, eight channels of memory and support for high-speed I/O with 128 lanes of PCIe 3, AMD EPYC processors are well poised to cater to memory bandwidth requirement of this typical HPE server.

We believe this to be a positive for AMD’s top line, which increased 26% year over year and 34% sequentially to $1.64 billion in third-quarter 2017. The quarterly revenue figure was also the highest since 2011.

The ramp up of the company’s EPYC datacenter processors sale to cloud and OEM customers boosted server revenues during the quarter. Companies like Tencent and JD.com are planning to deploy the company’s EPYC processors. Moreover, Baidu and Microsoft (NASDAQ:MSFT) also announced plans of deploying EPYC based products in their hyperscale environment, which is another positive for AMD.

Growth Drivers

AMD primarily has two reportable segments — Enterprise, Embedded and Semi-Custom (focusing on adjacent high-growth opportunities) and Computing and Graphics (focused on the traditional PC market).

The Enterprise, Embedded and Semi-Custom segment saw a 46% sequential increase, primarily driven by semi-custom revenues. The trend is expected to continue in the holiday season.

AMD’s Radeon graphics and Ryzen desktop processors backed Computing and Graphics segment’s third-quarter revenues that increased 74% from the year-ago quarter. Solid demand for the expanded Ryzen processor family in the desktop market was another tailwind. Notably, the availability of Ryzen Threadripper processors has enabled AMD to re-enter the high end desktop market.

The company’s release of Vega-based GPUs and increasing demand for its Polaris products in both gaming and blockchain industries were positives for the top line as well. Additionally, better performance of the recently launched Radeon RX Vega family of GPUs aimed at gaming enthusiasts is anticipated to be beneficial for the company.

Notably, the company entered into a partnership with Baidu during the quarter to focus on “optimizing” software for AMD’s Radeon Instinct GPUs at Baidu datacenters. Moreover, Amazon (NASDAQ:AMZN) Web Services announced that it is powering Amazon AppStream 2.0 with AMD Radeon Pro technology, aimed at driving cloud delivery of virtual applications.

We believe these launches and partnerships will drive the company’s top line, thereby providing AMD with a competitive edge against peers like Intel (NASDAQ:INTC) and NVIDIA (NASDAQ:NVDA).

Zacks Rank

AMD has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks' Hidden Trades

While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?

Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.

Click here for Zacks' secret trade>>