AMD(NASDAQ:AMD) is scheduled to announce Q1 earnings results after market closes on Tuesday,May 3.
Latest Results
AMD reported Q4 non-GAAP EPS of $0.92 per share, up from $0.52 per share a year ago, and above the Capital IQ-compiled consensus estimate of $0.76 per share.
Total revenue for the period increased by 49% to $4.83 billion from $3.24 billion, beating the estimated $4.52 billion.
Q1 Guidance
For Q1, the company forecasts revenue to be approximately $5.0 billion, plus or minus $100 million, above the consensus estimate of $4.33 billion.
For FY22, revenue is expected to increase 31% YoY to $21.5 billion, beating the estimates compiled by Capital IQ of $19.26 billion.
2 Most Important Things to Watch
1. Xilinx Acquisition Is Expected to Be Accretive to AMD's Growth
AMD announced the completion of its acquisition of Xilinx in an all-stock transaction on Feb 14th. The acquisition, originally announced on October 27, 2020, creates the industry’s high-performance and adaptive computing leader with significantly expanded scale and the strongest portfolio of leadership computing, graphics and adaptive SoC products. AMD expects the acquisition to be accretive to non-GAAP margins, non-GAAP EPS and free cash flow generation in the first year.
“The acquisition of Xilinx brings together a highly complementary set of products, customers and markets combined with differentiated IP and world-class talent to create the industry’s high-performance and adaptive computing leader,” said AMD President and CEO Dr. Lisa Su. “Xilinx offers industry-leading FPGAs, adaptive SoCs, AI engines and software expertise that enable AMD to offer the strongest portfolio of high-performance and adaptive computing solutions in the industry and capture a larger share of the approximately $135 billion market opportunity we see across cloud, edge and intelligent devices.”
2. The Pensando AcquisitionMayBolster AMD’s Data Center Business
The global data center market is a lucrative one, and it’s growing. A recent report pegged the value at $215.8 billion for 2021, with projections it will grow to $288.3 billion by 2027. That’s a CAGR of 4.95%.
AMD has made big strides in capturing PC market share through several generations of Ryzen processors. AMD processors are in more desktop PCs and laptops than ever before. The company is also making inroads in the data center market with its EPYC server chips. However, it hasn’t yet had the same degree of success there. It has been good — AMD reported data center revenue doubled in 2021 thanks to strong EPYC sales — but the company senses opportunity to do even better.
Pensando is a popular distributed services platform. Pensando solutions include chips and software used to route information within computer system networks. The scalable solutions offload some of the workload from the server CPUs, making processes faster and more efficient. The company has a deep list of well-known enterprise clients.
Adding Pensando technology to AMD’s EPYC servers makes the case for data centers to switch to AMD even more compelling. As AMD CEO Lisa Su said in the announcement: “Today, with our acquisition of Pensando, we add a leading distributed services platform to our high-performance CPU, GPU, FPGA and adaptive SoC portfolio. The Pensando team brings world-class expertise and a proven track record of innovation at the chip, software and platform level which expands our ability to offer leadership solutions for our cloud, enterprise and edge customers.”
Analyst Opinions
Raymond James analyst Chris Caso upgraded it to Strong Buy from Outperform with a $160 price target. As Caso became more concerned about cycle risks, given the potential for slowing consumer demand and elevated inventory levels at customers, he favored those semi companies with strong secular drivers, more muted cyclical exposure, and attractive valuations. Caso had strong confidence regarding AMD’s position and share gains in the data center market. He saw the technology gap between AMD and Intel widen when Genoa came out in 4Q21. With INTC’s roadmap not showing parity with AMD until at least the end of 2024, he saw continued share gains for AMD in the data center are likely inevitable, and tight supply conditions encouraged customers to commit to AMD to ensure supply.
Deutsche Bank analyst Ross Seymore maintained a “Hold” rating and offered a $115 price target. Seymore noted that the purgatory stage of the semiconductor cycle appears to be in full effect heading into the first-quarter earnings reports. And fundamentally, Seymore expects revenue and earnings strength to persist with semiconductor demand exceeding supply. But despite these positive fundamentals, Seymore believes recent investor concerns of a cyclical slowdown or correction are likely to persist as supply loosens and demand potentially softens.
Truist analyst William Stein maintained a “Hold” rating and offered a $111 price target. Stein adjusted the ratings as part of a broader research note on semiconductors. And Stein cited hard evidence of a sudden negative shift in demand signals from a wide range of compute, consumer, and communications OEMs – which drives his 2023 models to contemplate negative growth and lower earnings multiples for the industry. Plus Stein pointed out that while it is challenging to justify any downgrades, his conviction on Semis is now lower overall.
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