AMD's Products and Results Light Everyone Up

Last week, Advanced Micro Devices AMD delivered the results of yet another strong quarter. On October 26^th, its shares closed at a fourth record high as AMD reported both of its top line and bottom line soared, as well as improved its outlook. In a nutshell, AMD's results show it is one of those companies that benefitted from a surge in electronics sales as its central processors and graphics processors power PCs, servers, and game consoles, all of which are being sought after more than ever since COVID-19 took the world's population hostage.

Third Quarter Figures

For the quarter that ended on October 2^nd, AMD made a net income of $893 million, 75 cents a share or 73 cents a share once adjusted for stock-based compensation and other factors. Gross margin expanded from 44% in last year's comparable quarter to 48% because customers are buying more expensive processors.

The Santa Clara, California-based company revenue rose from $2.8 billion in the last year's comparable quarter to $4.31 billion. Altogether, results topped FactSet's estimations for adjusted earnings of 66 cents a share on revenue of $4.11 billion.

Sales from enterprise, embedded and semi-custom chips, the unit that includes data-center and gaming-console revenue, rose 69% to $1.91 billion, also exceeding $1.78 billion that analysts were expecting.  The segment that sells server chip and console chip sales also grew faster compared to its rival Intel Corp.'s INTC who reported its data-center sales rose merely 10%. By the looks of it, Intel's smaller rival succeeded where Intel disappointed. But the size gap is slowly closing too as at Friday's close, AMD's market cap of $145.34 billion equated to nearly 73% of Intel's $200.66 billion.

AMD's computing and graphics segment which benefited immensely from the pandemic over the past year and half saw its revenue expand 44% YoY as it amounted to $2.4 billion, exceeding analyst expectations of $2.33 billion.

Strong Demand for AMD's Products

AMD is in the process of increasing market share of the server pie as giants like Microsoft MSFT and Alphabet's Google GOOGGOOGL need its chips to run their cloud services. CEO Lisa Su said in a statement that data center sales doubled YoY and now  makes a "mid-20s" part of overall revenue.

Meanwhile, game consoles, like Sony Group Corporation SONY Playstation 5 and Microsoft's new Xbox models are hard to find as they sell out quickly due to strong demand. Consequently, AMD's graphics and central processors are just as hard to find in stores.

Fourth Quarter Guidance

As for the undergoing fourth-quarter, AMD is forecasting 39% annual growth. Revenue is expected in the range between $4.4 billion to $4.6 billion, exceeding FactSet estimates of $4.25 billion. Gross margin is expected at 49.5%.

Su also said AMD's acquisition of Xilinx Inc. XLNX was making "good progress" in securing regulatory approvals, and she expects the $35 billion deal to close by the end of the year. When announced last October, this acquisition was presented as giving the company more firepower to compete with Intel in the data center chip market.

A Strong Annual Outlook

Besides, record quarterly sales, AMD boosted its annual forecast yet again, as it has in every quarterly earnings report so far this year. It now projects sales to grow about 65% year as opposed to 60%  growth from the previous guidance which translates to approximately$16.1 billion whereas FactSet analysts forecasted revenue of $15.52 billion.

A Bright Way Ahead

The PC market has slowed from its unforeseen pace a year ago when the world's population needed to work and learn from home, but AMD's chips are still being sold at higher average prices as customers focus on improving performance for which they need more powerful processors. Su expects the chip shortage to become less severe next year but AMD is doing a great job in keeping its costs under control and increasing its profitability while achieving record sales. Therefore, no wonder the company's CEO is feeling very well as the chip maker is doing great.

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