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

Shares of semiconductor company Advanced Micro Devices Inc AMD have underperformed other chip peers and the broader market in 2024. Could the trend be reversed when the company reports second-quarter financial results Tuesday after the market close?

Earnings Estimates: Analysts expect AMD to report second-quarter revenue of $5.72 billion, according to data from Benzinga Pro.

The company reported revenue of $5.36 billion in the comparable quarter last year. AMD has beaten analyst revenue estimates in five straight quarters.

Guidance from the company calls for second-quarter revenue in a range of $5.4 billion to $6.0 billion.

Analysts estimate AMD will report second-quarter earnings per share of 68 cents compared to 58 cents per share in last year's second quarter. The company has beaten analysts' earnings per share estimates in four of the past five quarters with one quarter making the estimate.

Read Also: AMD Stock Turns Negative Year-to-Date, CEO Lisa Su Meets With Tesla: What Investors Should Know

What Analysts Are Saying: AMD shares have reset, but further downside could come after the second quarter report, Cantor Fitzgerald analyst C.J. Muse warned in a new investor note.

The analyst said one of the key items to watch in the second-quarter results and commentary will be order cuts from Microsoft and its impact on MI300 revenue guidance.

"If AMD is unable to raise the guide, we see further downside risk for shares," Muse said.

Muse reiterated an Overweight rating on AMD and price target of $200.

The analyst said prior guidance was $4 billion with a move to $5 billion being a potential positive for shares. Microsoft cutting orders for MI300 could prove "demand destruction" is affecting the ramp-up and could cause "substantial downside risk."

"Elsewhere, look for any update on what the market opportunity could look like into 2025."

The second quarter could see Data Center and MI300 strength, but weakness in the PC and console markets remain a concern, the analyst added.

"We note that shares have pulled back significantly over the past couple of weeks, from a peak of ~$185 in mid-July, and a move we believe makes entry significantly more attractive if MI300 concerns are overblown."

Here's a look at other analyst ratings for AMD and their price targets in the month of July:

Susquehanna: Maintained Positive rating and $200 price target

TD Cowen: Maintained Buy rating and raised the price target from $200 to $210

Citigroup: Maintained Buy rating and raised the price target from $176 to $210

Wells Fargo: Maintained Overweight rating and raised the price target from $190 to $205

KeyBanc: Maintained Overweight rating and lowered the price target from $230 to $220

Key Items to Watch: As mentioned by Muse above, the company's guidance will prove to be one of the most important items for analysts and investors to watch when AMD reports second-quarter financial results on Tuesday.

The company's Data Center segment has seen impressive growth and commentary on the guidance of this segment could provide a boost to shares.

With many semiconductor stocks getting a boost from artificial intelligence-related opportunities over the last year, investors and analysts will want to hear more about future revenue opportunities for AI.

AMD stock has lagged semiconductor peers and the overall markets.

AMD shares are now down 4.8% year-to-date in 2024, after falling last week. Compare that to the year-to-date gain of +126.3% for Nvidia and a year-to-date gain of 13.0% for the Invesco QQQ Trust, which tracks the major technology stocks.

AMD Price Action: AMD shares trade at $141.84 on Monday versus a 52-week trading range of $93.12 to $227.30.

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