Ian King (Bloomberg) -- Advanced Micro Devices Inc. Chief Executive Officer Lisa Su predicted the company will achieve revenue growth of 20% over the next four years and become more profitable as it reaches that goal.
Gross margin, or the percentage of sales remaining after deducting the cost of production, will rise to more than 50%, she said. Su spoke at an investor event Thursday at the chipmaker’s Santa Clara, California, headquarters.
AMD maintained its near-term revenue forecast of $1.8 billion, plus or minus $50 million, for the first three months of its fiscal year. While results may be at the lower end of that range and demand from consumers in China has weakened, orders elsewhere are in line with expectations, helped by demand for data center chips, Su said. The company also stuck by its prediction that sales will increase 28% to 30% in 2020.
Su is talking to investors who want revenue growth and earnings to justify the faith they’ve shown by bidding up AMD’s stock since she took the top job in 2015. During her time in charge, AMD has taken on the world’s biggest chipmaker, Intel Corp., in its main markets armed with only a fraction of the resources. Now, like other chipmakers, it’s confronting disruptions to supply and demand caused by the coronavirus outbreak.
“We’re a much stronger company than we were five years ago,” Su said. “The opportunities are larger.”
AMD’s stock rose 6% in extended trading. The shares, which traded at $2.87 at the end of 2015, closed at $48.11 Thursday in New York and have doubled in the past 12 months. AMD was the best performer on the S&P 500 Index in 2019.
Su said the computer industry’s supply chain is rapidly recovering to typical levels of activity. AMD’s suppliers in China, Taiwan and Malaysia are almost back to full output, the CEO added. Other technology companies have scrapped guidance or lowered forecasts for the current period.
AMD has targeted double-digit market share in servers by the middle of this year, trying to reclaim a meaningful position in that lucrative market after dropping to less than 1%. Server computers are the backbone of corporate networks and the giant data centers that run the internet. Chips that power them can cost more than $10,000 each.
While manufacturing difficulties at Intel have made it vulnerable to a reinvigorated range of offerings from AMD, any shifts in the market have yet to cause the bigger company discomfort. Intel’s server chip unit grew 19% in the fourth quarter and revenue from cloud-service providers, which offer computing power and storage via the web, surged 48%. Intel’s data center business gets more revenue in a quarter than AMD generates in year.
Both companies have benefited from strong demand for personal computers. Global PC shipments rose 2.3% in the fourth quarter from a year earlier as companies upgraded to a new version of Microsoft Corp.’s Windows operating system, according to research firm Gartner Inc. AMD has an even greater ability to cash in on the trend as it’s also the second-largest maker of chips used in computer graphics cards.