Shares of Advanced Micro Devices Inc. (AMD) saw a surge in after-hours trading on Tuesday as the chip maker exceeded Wall Street expectations with its second-quarter results.
Financial Highlights
- Net Income: AMD reported a net income of $27 million, or 2 cents per share, for the second quarter. This is compared to $447 million, or 27 cents per share, in the same period last year.
- Adjusted Earnings: After adjusting for stock-based compensation and other one-time items, AMD reported earnings of 58 cents per share, down from $1.05 per share last year.
- Revenue: Second-quarter revenue for AMD fell to $5.36 billion from $6.55 billion in the previous year.
- Gross Margins: Gross margins also declined to 50% from 54% in the second quarter of last year.
Analyst Expectations
According to analysts surveyed by FactSet, the expected adjusted earnings for the second quarter were 57 cents per share on revenue of $5.32 billion. AMD’s actual results slightly beat these estimates.
Focus on AI and Data-Center Products
Last quarter, AMD emphasized its focus on AI and data-center products for the second half of the year. However, the company acknowledged that it will also need a rebound in the PC market to improve its gross margins.
Revenue Breakdown
- Data-Center Revenue: AMD experienced an 11% decline in data-center revenue to $1.3 billion, slightly below the expected $1.37 billion.
- PC Sales: PC sales also saw a decline of 54% to $998 million, but still surpassed analysts’ expectations of $843.3 million.
- Gaming Sales: Gaming sales dipped 4% to $1.6 billion, meeting the Street estimate.
- Embedded Sales: Embedded sales, on the other hand, rose 16% to $1.5 billion, slightly higher than the expected $1.49 billion.
These strong results for AMD come amid comparisons between the current hype around AI and past trends in the tech industry. Analysts are questioning whether AMD will face a similar fate as Sun Microsystems during the dot-com boom.
Overall, AMD’s Q2 results highlight its resilience in the face of challenges and its ability to adapt to changing market conditions.
AMD Sees Strong Growth in AI Engagements and Expects Revenue Boost in Third Quarter
Lisa Su, the Chair and Chief Executive of AMD, announced that their AI engagements have significantly increased by more than seven times in the quarter. This growth has been driven by multiple customers who have either initiated or expanded programs to support future deployments of Instinct accelerators at scale, Su stated in a recent statement. The company has made remarkable progress in meeting key hardware and software milestones, aiming to meet the growing customer demand for their data center AI solutions. AMD remains on track to launch and ramp up production of MI300 accelerators by the fourth quarter.
Jean Hu, AMD’s Chief Financial Officer, expects the company’s Data Center and Client segment revenues to each grow by a double-digit percentage sequentially in the third quarter. This growth will be primarily driven by the increasing demand for EPYC and Ryzen processors. However, it is important to note that this growth will be partially offset by declines in the Gaming and Embedded segment.
For the third quarter, AMD has forecasted revenue ranging from $5.4 billion to $6 billion with adjusted gross margins of approximately 51%.
According to analysts, AMD is expected to report adjusted third-quarter earnings of 73 cents per share. They also anticipate a 4.6% increase in revenue, reaching $5.82 billion. Data-center sales are forecasted to rise by 7.3% to $1.73 billion compared to the previous year, while PC sales are expected to increase by 2.6% to $1.05 billion.
Year to date, AMD has seen a significant surge in its shares, with an impressive gain of 81.6%. In comparison, other prominent indices like the PHLX Semiconductor Index (+52.4%), the S&P 500 index (+19.2%), and the tech-heavy Nasdaq Composite (+36.5%) have also seen notable increases.