AMD Stock Price Nosedives As Channel Graphics Sales Slow Down

AMD's stock price sunk more than 20 percent in after-hours trading Wednesday after the company missed Wall Street's expectations for third-quarter revenue by $50 million, which was in part the result of lower graphics card sales in the channel.

The Santa Clara, Calif.-based company said the lower graphics revenue was "driven by high channel inventory" while the average selling price for GPUs also decreased. The company also said blockchain-related GPU sales in Q3 were negligible.

At the same time, AMD CEO Lisa Su said the company saw accelerated adoption of its Ryzen client and EPYC server CPUs, which helped push gross margin to 40 percent, a 4 percent increase from the same period last year. The company's Q3 revenue also grew 4 percent to $1.65 billion.

[Related: AMD CTO: 'We Went All In' On 7nm CPUs]

“Client and server processor sales increased significantly although graphics channel sales were lower in the quarter," AMD CEO Lisa Su said in a statement. "Looking forward, we believe we are well positioned for further market share gains as we continue making significant progress towards our long-term financial targets."

The company touted multiple customer wins in the data center with EPYC, including deals with Microsoft, Dropbox and Oracle.

Patrick Moorhead, an analyst with Moor Insights & Strategy, said he wasn't surprised about the company's lower graphics sales and doesn't expect any major changes until the company launches its next-generation 7-nanometer Navi GPU, which he said will especially help AMD in the enterprise.

"I was a bit surprised not to see bigger upsides in processor volumes based on Intel's reset, but I think this is just conservatism," Moorhead added. "In my discussions with PC and server OEMs, I am seeing increased interest in AMD's roadmap."

AMD's net earnings were 13 cents per share, beating Wall Street expectations by 1 cent. AMD’s stock price fell to $17.64 on Wednesday in after-hours trading.

In an interview with CRN earlier this year, AMD CTO Mark Papermaster reiterated the company's confidence in its 7nm plans, how it was able to leapfrog over the "incremental step" of 10nm and laid out the company's plans to take more market share in the server and desktop markets.

"That's what AMD has always been about — innovation — but now it's got a razor's edge to fight against larger competitors that have been dominating the industry," he said.