AMD Q2 Earnings Preview: Analysts Expect Transitional Quarter Leading To AI-Powered Q4 Recovery

Zinger Key Points

AMD shares have rallied 77% year-to-date, outperforming its semiconductor peers and the QQQ.
Analysts are guarded regarding the near term, although in the long-term they expect the company to benefit from AI exposure.
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Advanced Micro Devices, Inc. AMD, which is playing catchup with peer Nvidia Corp. NVDA in the AI game, is scheduled to report its second-quarter results Tuesday after the market close.

Key AMD Metrics: Analysts, on average, expect AMD to report earnings per share of 52 cents for the second quarter, down notably from the year-ago's $1.05 per share. Expectations have toned down considerably from the 62 cents per share that was forecast at the start of the quarter.

The chipmaker has beat bottom-line expectations in three of the past four quarters.

The consensus revenue expectation for the quarter is $4.81 billion, down 26.50% year-over-year and 11% lower than in the previous.

In early May, AMD guided second-quarter revenue to $5.3 billion, plus or minus $300 million.

In a recent note, Rosenblatt Securities analyst Hans Mosesmann said that he expects AMD to report in-line second-quarter results. He sees the quarter as a transition period leading into a second half with multiple growth drivers.

Rival Intel Corp. INTC reported last week an unexpected profit and better-than-expected revenue. The company also guided above the consensus. The outperformance was partly helped by a more modest year-over-year PC market decline.

Among segments, the client computing and data center and AI groups saw sequential growth. On the other hand, networking and edge group revenue fell from the prior-year period and the previous quarter. Oppenheimer analyst Rick Schafer attributed the weakness to "sluggish China" and weak telco spending.

See Also: Best Semiconductor Stocks

Margin Expectations: AMD guided to a second-quarter non-GAAP gross margin of 50%, flat with the first quarter.

Looking Ahead: 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 $5.28 billion, down 6%.

Raymond James analyst Srini Pajjuri is cautious regarding the outlook for the third quarter, given cautious comments from Taiwan Semiconductor Manufacturing Company Limited TSM, Nokia Oyj NOK, and Ericsson 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, slated for 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.

AMD Stock: The chipmaker's stock has run up this year, in line with the positive sentiment seen toward tech stocks. AMD is up about 77% this year compared to the 54.4% advance by the iShares Semiconductor ETF SOXX.

The Invesco QQQ Trust QQQ has a year-to-date gain of 44.5%.