AMD Profit Will Probably Decline for First Time in 3 Years

Key Takeaways

  • Analysts estimate adjusted EPS of $0.71 vs. $0.73 in Q3 FY 2021.
  • Income is anticipated to develop on the slowest tempo in additional than two years.
  • Information middle income is anticipated to develop at its slowest quarterly charge in practically three years.

Superior Micro Units, Inc. (AMD), the sixth-largest U.S. semiconductor firm by market worth, will most likely submit its first revenue decline in additional than three years as income slows due to a world stoop in PC gross sales and chip stock correction.

AMD will most likely say adjusted earnings per share (EPS) excluding sure objects dropped 3% to $0.71, the primary decline in 13 quarters. Income is anticipated to elevated 32% to $5.7 billion, the slowest tempo in additional than two years, in keeping with a median estimate from Seen Alpha. Analysts’ income quantity is in keeping with AMD’s preliminary announcement in early October that third-quarter income can be $1.1 billion decrease than its earlier forecast of $6.8 billion.

AMD and different semiconductor makers are grappling with slumping PC gross sales, provide chain disruptions and an industrywide stock correction. These tendencies have been amplified by rising inflation and recession fears, that are additional slowing demand. To make sure, the trade will get assist from the U.S. Chips and Science Act of 2022, which can funnel over $50 billion to U.S. semiconductor firms to shift manufacturing from Asia to the U.S. These funds, although, aren’t more likely to instantly offset the drop in PC demand.

A key metric of AMD’s success is knowledge middle income, together with gross sales to giant knowledge facilities, cloud companies operators, and comparable companies which have seen demand skyrocket in recent times. Analysts anticipate $1.6 billion in knowledge middle income, the very best stage in additional than six years, although it can rise at barely a 3rd of the tempo of the prior-year quarter.

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AMD shares have fallen 49% within the final yr relative to a drop of 15% for the S&P 500.

Supply: TradingView.

AMD Earnings Historical past

AMD’s adjusted EPS surged early within the pandemic, greater than doubling year-over-year for 5 out of six quarters via the second quarter of 2021. The tempo of progress slowed throughout the next 4 quarters. On this yr’s second interval, revenue rose 66%, the slowest progress charge in seven quarters.

AMD posted income good points in every of the final 12 quarters via the second interval of this yr, when it reported a 70% enhance to $6.6 billion.

AMD Key Stats
  Estimate for Q3 FY 2022 Q3 FY 2021 Q3 FY 2020
Adjusted Earnings Per Share ($) 0.71 0.73 0.41
Income ($B) 5.7 4.3 2.8
Information Heart Income ($B) 1.6 1.1 0.5

Supply: Seen Alpha

The Key Metric

AMD’s knowledge middle section consists of server CPUs, knowledge middle GPUs, Pensando and Xilinx knowledge middle merchandise. Information middle income is a key metric for AMD as a result of it has change into a big portion of the corporate’s whole income and represents an growth past conventional PC graphics processing unit markets. AMD’s knowledge middle enterprise has grown together with total demand for cloud and knowledge middle companies throughout industries within the final a number of years. Starting on this yr’s second quarter, knowledge middle operations have been separated out from AMD’s previous Enterprise, Embedded, and Semi-Customized section.

AMD’s knowledge middle income was retroactively adjusted following the division of firm segments earlier this yr. It doubled throughout every quarter in 2021 and the primary quarter of 2022. Information middle income within the second interval was the very best since late 2015, though it slowed by a few fifth in comparison with the prior-year interval.