AMD To Announce Q4 Results On Tuesday Amid Challenging Times For Semiconductor Industry: What Investors Should Expect

Advanced Micro Devices Inc. AMD is scheduled to report its fourth-quarter results on Tuesday after market close. An earnings conference call will follow at 5 p.m. EST.

Q4 Expectations: Analysts, on average, expect the Santa Clara, California-based chipmaker to report earnings per share, or EPS, of $0.67 and revenue of $5.5 billion, according to Benzinga Pro data.

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The company's guidance calls for revenue of $5.5 billion, plus or minus $300 million.

This compares to $0.92 in EPS and $4.83 billion in revenue reported for the year-ago period. The preceding quarter’s numbers were at $0.67 and $5.57 billion, respectively.

Source: AMD

The fourth-quarter consensus EPS estimate has dropped from the $0.79 forecast at the start of the quarter.

Rival Intel Corp. INTC reported last week non-GAAP EPS of $0.10, half as much as the Street forecast. Revenue came in at $14 billion, down 28% year-over-year and missing the consensus estimate of $14.45 billion.

Margin Profile: AMD guided to a fourth-quarter non-GAAP gross margin of 51%. This represents a one percentage point increase from the third quarter number of 50% and flat with the year-ago levels.

Source: AMD

Revenue By Businesses: AMD said in early November — at the time of its third-quarter earnings release — that it expects fourth-quarter Embedded and Data Center revenues to grow both sequentially and year-over-year.

AMD’s Client segment business slumped 40% year-over-year in the third quarter, with CEO Dr. Lisa Su blaming the predicament on th softening PC market and substantial inventory reduction actions across the PC supply chain.

The fourth quarter could be worse. Canalys' quarterly PC shipment data released earlier this month showed that global PC shipments fell 28.7% to 65.44 million units, marking a low point for the year.

Bernstein analyst Stacy Rasgon recently downgraded the stock from Outperform to Market Perform, premising the action on deterioration in the PC environment.

The performance of the Data Center business, therefore, assumes importance for the company to turn in a fairly in-line performance. It is to be noted here that Intel mentioned macro weakness across all data center segments.

Susquehanna analyst Christopher Ronald is of the view AMD may not have been immune to an enterprise slowdown. Nevertheless, the performance gap of AMD's Genoa processors over Intel’s Sapphire Rapids may have allowed it to overcome a softer macro backdrop, he added. The analyst reiterated a Positive rating on AMD shares and upped the price target from $80 to $88.

In the third quarter, AMD’s Data Center and Gaming businesses contributed roughly 29% each to the total revenue. Embedded Systems and Client businesses accounted for about 23% and 18%, respectively. The bulk of the operating profit came from the Embedded Systems and Data Center businesses.

Forward Outlook: Wall Street’s outlook for the first quarter is muted. The company is widely expected to report EPS of $0.68 and revenue of $5.48 billion for the quarter.

After an estimated 43.1% revenue growth in 2022, analysts expect the chipmaker’s revenue growth to slow notably to 5.20% in 2023.

Intel, last week, issued below-consensus EPS and revenue forecasts for the first quarter.

Price Action: AMD shares fell about 55% in 2022, moving in a range of $54.57 (Oct. 13, 2022)-$152.42 (Jan. 4, 2022). Since the start of 2023, the stock has charted a recovery course along with the broader market. Notwithstanding Monday’s market-wide sell-off, the stock is up 8.8% for the year-to-date period. On Monday, the stock closed at $72.45.

The average analysts’ 12-month price target for AMD shares is $90.43, according to data compiled by TipRanks. This suggests a scope for roughly a 25% upside.

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