AMD stock slips as revenue forecast drops below Street consensus

AMD stock slips as revenue forecast drops below Street consensus

Shares of Advanced Micro Devices Inc. fell in Tuesday’s extended session after the chipmaker’s revenue forecast fell below Wall Street consensus after posting record sales, beating Street expectations and reporting a huge increase in data center sales.

“Taking a step back, while there has been additional weakness in the PC market in recent months, we believe we are very well positioned to navigate the current environment based on the strength of our portfolio of existing products and upcoming product launches,” Lisa Su, AMD’s chief executive, told analysts on a conference call.

“Despite the current macro environment, we are seeing continued growth in the second half of the year, highlighted by our shipments of next-generation 5-nanometer products and supported by our diversified business model,” Su told analysts. .

AMD forecasts revenue of $6.5 billion to $6.9 billion for the third quarter and has restated its revenue forecast of $26 billion to $26.6 billion for the year.

Analysts polled by FactSet estimated revenue at $6.84 billion for the third quarter and $26.21 billion for the year. The company also backed its gross margin forecast at 54% for the year. In February, AMD forecast gross margins of 51% for 2022 and revenues of around $21.5 billion. At that time, Wall Street analysts had a consensus of $19.29 billion in revenue.

Su told analysts on the call that the outlook for the third quarter implies data center sales will lead revenue growth, with PC sales falling in the mid-teens. In the fourth quarter, Su said the momentum is expected to remain, but AMD will launch its new 5nm products in this quarter.

Nanometers, or “nm”, refer to the size of each transistor that goes on a computer chip, with the general rule being that smaller transistors are faster and more efficient in terms of power usage. While AMD is moving to its 5nm chip, Intel has struggled to release its 7nm chip.

Shares fell around 7% after hours, after rising 2.6% to end the regular session at $99.29.

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AMDA®,
+2.59%
reported second-quarter net income of $447 million, or 27 cents per share, compared with $710 million, or 58 cents per share, a year ago. Adjusted earnings, which exclude stock-based compensation expense and other items, were $1.05 per share, down from 63 cents per share a year ago.

The company posted record revenue for an eighth straight quarter: Revenue jumped 70% to a record $6.55 billion, from $3.85 billion a year ago.

Analysts polled by FactSet had forecast $1.03 per share on revenue of $6.53 billion, based on AMD’s forecast of $6.3 billion to $6.7 billion.

AMD announced sales based on new product categories, including allocating its data center revenue for the first time. Data center revenue jumped to $1.49 billion from $813 million last year, an 83% gain.

Last week, Intel Corp. INTC,
-2.57%
announced dismal results and cut its outlook for the year, recording a 16% decline in data center sales to $4.6 billion and forecasting slower data center sales growth than the overall market . In other words, while Intel lost about $900 million in data center sales, AMD recouped an additional $673 million in data center sales.

Customer sales increased 24% to $2.15 billion from $1.73 billion a year ago; game sales increased 32% to $1.66 billion from $1.26 billion; and integrated sales jumped to $1.26 billion from $54 million in the year-ago quarter, before the company acquired Xilinx in February.

When acquiring Xilinx, AMD integrated what is known as a Field Programmable Gate Array, or FPGA, chips that can be configured by a customer or designer after manufacture. These chips are used as accelerators in data centers to increase computing power and improve energy efficiency in existing physical spaces.

Adjusted gross margins were 54% for the second quarter, compared to 48% a year ago and in the first quarter. Meanwhile, rival Intel reported gross margins of 44.8% for the second quarter, and now expects 49% for the year, down from the 52% to 53% previously forecast by the company’s chief financial officer. Intel, David Zinsner, or “comfortably above 50%” promised by CEO Pat Gelsinger.

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In June, AMD said at its analyst day that it expects average annual revenue growth of around 20% over the next three to four years.

Over the past 12 months, AMD stock is down 8%. Over the same period, the PHLX Semiconductor Index SOX,
-0.12%
fell 11%, the S&P 500 SPX index,
-0.67%
fell 6%, and the tech-heavy Nasdaq COMP composite index
-0.16%
decreased by 15%.

Elsewhere in the chip space this earnings season, Texas Instruments Inc.’s TXN,
-0.88%
earnings and outlook exceeded Wall Street estimates at the time, while Qualcomm Inc.’s QCOM,
-0.27%
Prospects have not been up to snuff due to weakening handset sales.

Chip Industry Supplier Lam Research Corp. LRCX,
-0.03%
beat Wall Street estimates for the quarter and forecast an outlook that was mostly above consensus, while rival KLA Corp. KLAC,
-0.76%
released an outlook range that was partly below Wall Street estimates at the time. Prior to this, ASML Holding NV ASML,
-2.17%
lowered its revenue forecast for the year after the company said fast orders would push revenue recognition from those sales into next year.

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