Advanced Micro Devices, Inc. (NASDAQ:AMD) reported second-quarter results Tuesday that exceeded estimates, as its business segments — with the exception of gaming — reported sequential revenue growth. The company noted strong demand for its server and PC processors and hinted at a strong AI revenue pipeline when its AI-specific chip launches in the fourth quarter.
AMD’s Q2 Headline Numbers: For the second quarter that ended June 30, 2023, AMD reported non-GAAP earnings per share of 58 cents, ahead of the consensus estimate of 52 cents per share.
The bottom-line number was down 44.76% from the year-ago quarter’s $1.05 per share and 3.33% lower than the first quarter’s 60 cents per share.
The Santa Clara, California-based company’s revenue fell 17.56% year-over-year but rose 0.94% sequentially to $5.36 billion. The Street had modeled sales of $4.81 billion and the company previously guided to revenue of $5.3 billion plus or minus $300 million.
Rosenblatt’s Hans Mosesmann was bracing for an in-line quarter.
Rival Intel Corp. (NASDAQ:INTC) reported last week with an unexpected profit and better-than-expected revenue. The company also guided above the consensus.
AMD’s non-GAAP gross margin came in at 50%, flat with the previous quarter and in line with the guidance. The metric, however, contracted from the year-ago quarter’s 54%.
Commenting on the results, CEO Lisa Su said: “We delivered strong results in the second quarter as fourth-gen EPYC and Ryzen 7000 processors ramped significantly.”
How AMD’s Business Segments Fared: Revenue from Data Center, which comprise GPUs and CPUs for servers and data processing units and SoC products for data centers, improved sequentially. The Embedded segment’s revenue increased both sequentially and year-over-year.
AMD had guided to sequential growth both for its Data Center and Embedded segments, while it expected modest declines in Gaming and Client segments.
AMD Looks Ahead: AMD forecast third-quarter revenue of $5.7 billion, plus or minus $300 million, and a non-GAAP gross margin of about 51%.
For the running quarter, the Street models non-GAAP EPS of 66 cents, almost flat with the year ago’s 67 cents. Revenue is estimated at $5.82 billion, down 6% year-over-year.
AMD’s Su said the company is seeing strong AI engagements ahead of the MI300X launch.
“Our AI engagements increased by more than seven times in the quarter as multiple customers initiated or expanded programs supporting future deployments of Instinct accelerators at scale,” she said.
Ahead of the quarterly results, Raymond James analyst Srini Pajjuri said he is cautious regarding the outlook for the third quarter, given cautious comments from Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Nokia Oyj (NYS: NOK) and Ericsson (NASDAQ:ERIC).
“We expect any weakness to be temporary and see an acceleration starting in 4Q driven by broadening Genoa/Bergamo CPU ramps, cyclical PC recovery, and El Capitan supercomputer,” he said.
The analyst also expressed optimism regarding AMD’s generative AI GPU MI300X launch in the fourth quarter. He expects it to be used for internal inferencing workloads at hyperscalers.
“Longer term, we see no reason why AMD can’t capture 10%-20% share of the inferencing market, which could mean multi-billion dollar revenues with accretive margins,” Pajjuri said.
CFO Jean Hu said third-quarter Data Center and Client segment revenues will likely grow by a double-digit percentage sequentially, thanks to strong demand for EPYC and Ryzen processors. She expects Gaming and Embedded segment to see declines.
AMD Stock: The chipmaker’s stock has run higher this year, in line with the positive sentiment seen toward tech stocks. AMD is up about 81.6% so far this year compared to the 54.3% advance by the iShares Semiconductor ETF (NASDAQ:SOXX).
The Invesco QQQ Trust (NASDAQ:QQQ) has a year-to-date gain of 44.2%.
The average analysts’ price target, based on data compiled by TipRanks, is $136.36, suggesting roughly 19% upside from current levels.
In after-hours trading, AMD stock rallied 4.31% to $122.67.
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