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What to Look For From AMD

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Key Takeaways

  • Analysts estimate EPS of $0.91 vs. $0.52 in Q1 FY 2021.
  • Revenue expected to rise at a strong pace YOY in the Enterprise, Embedded and Semi-Custom segment.
  • Companywide revenue is also expected to grow, but at a slower pace than the segment above.

Advanced Micro Devices Inc. (AMD), known as AMD, has seen rapid growth in demand for its semiconductors throughout the COVID-19 pandemic and during the ongoing global chip shortage. To bolster its growth, AMD now is strengthening its product offerings for the fast-growing data-center market. The company announced in April plans to buy Pensando Systems Inc., a provider of networking and security services, for $1.9 billion, which could give AMD a competitive edge in the data center arena. The deal is expected to close in Q2 2022.

Investors will watch closely for how AMD plans continue its strong growth, including its plans for Pensando, when the company reports earnings on May 3, 2022 for Q1 FY 2022. Analysts predict that AMD’s earnings per share (EPS) will grow substantially year-over-year (YOY), though at the slowest pace in over a year. Revenue is also expected to see robust, though slightly slower, growth.

Investors will also be focusing on AMD’s revenue from its Enterprise, Embedded and Semi-Custom segment, one of the company’s two primary business segments. The segment—which includes server and embedded processors rather than processors for desktops and laptops—has been growing rapidly over the past year and a half. Analysts expect this rapid growth to continue, though at the second-slowest rate in the last six quarters.

AMD shares have slightly outpaced the broader market in the last year. AMD shares lagged behind the market in May 2021, then staged a sharp advance through the end of November. The stock continued to outperform the market for the following five months even though AMD shares steadily drifted downward. As of May 1, 2022, AMD has given up roughly all of the gains made in that rally last year. The company’s stock has provided 1-year trailing total returns of 1.9%, slightly better than the S&P 500.

Source: TradingView.

AMD Earnings History

AMD has a strong record of EPS growth in recent years, having reported YOY declines in only two of the last 16 quarters. But EPS growth accelerated amid the pandemic. In FY 2019, the year before the pandemic, AMD’s EPS rose 41.2%. By contrast, in FY 2020, the first year of the pandemic, EPS growth doubled, rising 102.3%. And it doubled again in FY 2021, rising 117.9%. In the past year, though, EPS growth has slowed on a quarterly basis from 187.1% in Q1 FY 2021 to 77.9% in Q4 of that year. Now, analysts estimate that this rate will continue to slow to 74.1% YOY in Q1 FY 2022.

AMD’s revenue growth also has been consistent in recent years, with just two quarters of YOY declines in the last four years. As with earnings, the company’s revenue growth sped up sharply during the pandemic, from 4.0% in the pre-pandemic year of FY 2019 to 45.1% and 68.3% in FY 2020 and FY 2021 respectively. Revenue growth, though, has slowed sharply in recent quarters, from 92.9% in Q1 FY 2021 to 48.8% in Q4 Fy 2021. Analysts estimate that revenue will rise 51.0% in Q1 FY 20222, which would be faster than Q4, but much slower than the same quarter a year earlier.

AMD Key Stats
 Estimate for Q1 FY 2022Q1 FY 2021Q1 FY 2020
Earnings Per Share ($)$0.91$0.52$0.18
Revenue ($B)$5.2$3.4$1.8
Enterprise, Embedded and Semi-Custom Revenue ($B)$2.3$1.3$0.3

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focused on the amount of revenue generated by AMD’s Enterprise, Embedded and Semi-Custom segment. The segment encompasses server and embedded processors, semi-custom System-on-Chip (SoC) products, development services, and game console technology. It does not include AMD’s desktop and notebook microprocessors, which are included in the company’s Computing and Graphics segment. The Enterprise, Embedded and Semi-Custom segment is the smaller of the company’s two main segments, but it is growing at a rapid clip and could ultimately overtake the Computing and Graphics segment as the company’s primary revenue generator. In FY 2020, Enterprise, Embedded and Semi-Custom revenue was 34.1% of AMD’s total revenue, while in FY 2021 it was 43.2%. This segment covers areas of AMD’s business that have suffered recent shortages due to rising demand, such as cars, as well as areas that could see rising growth, such as game consoles.

AMD’s Enterprise, Embedded and Semi-Custom business has grown dramatically in recent years after a slow start. In Q1 FY 2019, revenue for the segment was $0.4 billion. It declined slightly to $0.3 billion in Q1 FY 2020, during the early months of the pandemic. Then it nearly quadrupled YOY to $1.3 billion in Q1 FY 2021. Analysts predict a slower but still impressive pace of growth in Q1 FY 2022, as revenue in this segment could climb to $2.3 billion.

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