AMD Q2 Report Looms As Nvidia Rival Struggles With Key Headwinds: Will 'Overcorrected' Stock Vindicate Itself?

Advanced Micro Devices, Inc.’s AMD quarterly report assumes importance as it will likely give a foretaste of how artificial intelligence-related spending panned out during the quarter. The Santa Clara, California-based chipmaker is due to announce its results after the market close Tuesday.

Key Q2 Expectations: AMD, which is playing catch-up with Nvidia, is widely expected to report second-quarter earnings of $0.68 per share, according to data available on Benzinga Pro. This is up from $0.58 cents per share reported for the year-ago quarter and the $0.62 per share earned in the first quarter of this year.

The earnings estimate has remained fairly stable over the past month. In the past four quarters, AMD reported upside earnings surprises for three quarters and in-line results for a quarter.

Analysts, on average, estimate revenue of $5.724 billion compared to the year-ago’s $5.36 billion and first quarter’s $5.47 billion.

AMD had guided to second-quarter revenue of $5.7 billion plus or minus $300 million and a non-GAAP gross margin of about 53%.

Rival Intel Corp. INTC is scheduled to report its quarterly results on Thursday.

See Also: Best Semiconductor Stocks

What Sell-Side Models: Ahead of the quarterly results, analysts are largely upbeat:

• KeyBanc Capital Market’s John Vinh expects AMD to post higher results and guidance on improving traditional server results and a strong ramp to MI300X, offset by weak Embedded results. The analyst has an Overweight rating and a $220 price target for AMD.
• Barclays’ Tom O’Malley said AMD has over-corrected. “AMD had round-tripped all performance gains on the year as investors look to be more selective with AI exposures and align with more cyclical/SMID-cap names,” he said. The Barclays analyst said MI300 revenue estimate for the year is currently at $5 billion, which he thinks is achievable even amid the negative Microsoft data points coming out of the supply chain. O’Malley, however, sees an impact from weaker PC, Xilinx and Gaming segments. “Even at this price it’s hard to see the stock working on earnings,” he said.
• Rosenblatt’s Hans Mosesmann calls for an in-line second-quarter print and a slight upside to third-quarter guidance, underpinned by AI momentum, share gains in general purpose x86 CPUs, seasonal PC/gaming and stabilizing embedded Xilinx market segment.

AMD’s Businesses: The company operates under four heads, namely the Client business, comprising primarily PC processor revenue, the Data Center business, which derives revenue from the sales of server processors and AI accelerators, Gaming, comprising gaming processors and semi-custom products, and the Embedded segment, which caters to commercial and industrial customers.

The Client’s business is exposed to the PC market, which grew at 3% year-over-year in the second quarter, according to IDC. China was a sore spot and the quarter’s growth benefited from easier comparisons, it added.

Looking Ahead: AMD’s fundamentals are expected to be on an upward trajectory in the near term. The consensus estimate for the third quarter calls for over 34% earnings per share growth to 94 cents and 14% top-line growth to $6.61 billion. The company is expected to report full-year earnings per share of $3.49 and revenue of $25.57 billion, marking increases of roughly 32% and 13%, respectively.

AMD Stock: The chipmaker’s stock has been a laggard, having fallen about 5.2% for the year-to-date period. The iShares Semiconductor ETF SOXX and the SPDR S&P 500 ETF Trust SPY have rallied over 19% and 15%, respectively, during the same period.

In premarket trading on Tuesday, AMD shares rose 0.45% to $140.38, according to Benzinga Pro data.

Read Next:

• AMD Q2 Earnings Preview: Microsoft Impact, Data Center Guidance On Watch, Analyst Warns Of ‘Substantial Downside Risk’

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