Advanced Micro Devices’ Q3 Results Beat, Q4 Forecasts Top Estimates


Advanced Micro Devices (AMD) has forecast better-than-expected revenue for the fourth quarter as the company’s third-quarter 2021 results surpassed consensus estimates. The chipmaker has also lifted year-over-year revenue growth expectations for 2021.

AMD reported third-quarter adjusted earnings of $0.73 per share, up 78% year-over-year and ahead of analysts’ expectations of $0.67 per share. Revenue surged 54% to $4.31 billion and surpassed the consensus estimate of $4.12 billion.

Markedly, data center sales more than doubled on a year-over-year basis, significantly ramping 3rd Gen EPYC processor shipments.

The Computing and Graphics segment’s revenue stood at $2.4 billion, up 44% year-over-year, driven by higher Ryzen, Radeon and AMD Instinct processor sales. Additionally, Enterprise, Embedded and Semi-Custom segment revenue jumped 69% to $1.9 billion on the back of higher EPYC processor and semi-custom product sales.

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Adjusted gross margin stood at 48%, up 440 basis points (bps) year-over-year. Additionally, adjusted operating margin came in at 24%, up 500 bps.

During the earnings call, the CEO of AMD, Dr. Lisa Su, said, “As we look overall at the business, I think the data center business has performed very well and we see strong demand there and we’re continuing to see that. And as well, the console business, overall gaming is also quite strong. And so, we see growth in servers and Semi-Custom as we go into the Fourth Quarter.” (See Advanced Micro Devices stock charts on TipRanks)

For the fourth-quarter of 2021, the company anticipates total revenue of $4.4 billion to $4.6 billion, which would represent year-over-year growth of 39%, driven by growth across all businesses. The consensus estimate for the same stands at $4.25 billion.

For 2021, AMD has lifted the year-over-year revenue growth expectations to 65% from the prior guidance of 60%.

Prior to the third-quarter results, Susquehanna analyst Christopher Rolland reiterated a Buy rating on the stock with a price target of  $130 (5.75% upside potential). Rolland expected the company to meet or beat Q3 results and maintain its fourth-quarter guidance.

The analyst said, “Given the slowing PC market, we do not expect management to raise their FY top-line guidance as they have done in numerous updates over the last year. Server revs/gains should continue to be the star of the show as our checks this quarter point to continued uptake for both Rome and Milan at hyperscalers, as well as an increasing interest in single-socket servers and systems with maximum memory configurations. This strength is also supported by the expanding Google Cloud collaboration and their use of EPYC processors in its N2D virtual machines (30%+ better price-performance on average).”

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 12 Buys, 2 Holds and 1 Sell. The average Advanced Micro Devices price target of $121.93 implies 0.81% downside potential. Shares have increased 55.8% over the past year.

Investors should always be aware of the risks involved in any stock they are researching. According to the new TipRanks’ Risk Factors tool, Advanced Micro Devices is at risk mainly from three factors: Finance and Corporate, Production and Ability to Sell, which account for 20% each of the total 45 risks identified for the stock. Within the Finance and Corporate risk category, AMD has nine risks, details of which can be found on the TipRanks website.

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