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.

AMD
AMD,
+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.

Revenue hit a record $6.55 billion, up 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. 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.

“We achieved our eighth consecutive quarter of record revenue thanks to our strong execution and expanded product portfolio,” AMD Chief Executive Lisa Su said in a statement. “Each of our segments experienced significant year-over-year growth, driven by increased sales of our data centers and integrated products. We expect continued growth in the second half of the year, evidenced by our shipments of next-generation 5nm products and supported by our diversified business model.

Shares fell 4% after hours, after rising 2.6% to end the regular session at $99.29.

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 CFO. from Intel, David Zinsner, or “comfortably above 50%” promised by CEO Pat Gelsinger.

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AMD forecasts revenue of $6.5 billion to $6.9 billion for the third quarter and has revised its revenue forecast from $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. Back in February, AMD forecasts gross margins of 51% for 2022 and revenues of approximately $21.5 billion. At that time, Wall Street analysts had a consensus of $19.29 billion.

Last week, Intel Corp.
INTC,
-2.57%

reported dismal results and cut its outlook for the yearrecording a 16% drop in data center sales to $4.6 billion, and Gelsinger reminded analysts that he expects Intel data center sales to grow more slowly than the overall market.

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

Over the past 12 months, AMD stock is down 8%. During the same period, the PHLX Semiconductor Index
SOx,
-0.12%

fell 11%, the S&P 500 index
SPX,
-0.67%

fell 6%, and the tech-heavy Nasdaq composite index
COMP,
-0.16%

decreased by 15%.

Elsewhere in the chip space this earnings season, Texas Instruments Inc.
TXN,
-0.88%

earnings and outlook exceeded Wall Street estimates at the timewhile Qualcomm Inc.
QCOM,
-0.27%

prospects have fallen through 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 consensuswhile rival KLA Corp.
CLACK,
-0.76%

released a range of outlook partly below Wall Street estimates at the time. Before that, ASML Holding NV
ASML,
-2.17%

lowered its revenue forecast for the year after the company said quick orders would push revenue recognition from those sales into next year.

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