Advanced Micro (AMD), the multinational semiconductor company, is scheduled to release its second-quarter financial report after the stock market closes today. A conference call will follow the report at 5:00 pm Eastern Time to discuss the results in detail. The semiconductor industry keenly awaits this announcement, particularly given the projected decrease in both revenue and earnings per share (EPS).
Based on FactSet consensus data, adjusted EPS is expected to decrease by a significant 46% year-over-year to $0.57, indicating a potential reduction in profitability. Revenue projections paint a similar picture, with an anticipated 19% decline from the same period last year, amounting to $5.32 billion. In addition to the quarterly results, AMD’s revenue guidance for the subsequent quarter and the entire fiscal year will be closely observed by investors and market watchers.
Investor Conference Insights
During an investor conference held in early June, AMD representatives discussed their perception of a heterogeneous demand pattern within the broader data center market. According to AMD, there is notable inventory variation and a range of optimizations depending on the cloud provider. Contrarily, within the enterprise segment, macroeconomic worries are prevailing, stimulating increased cost optimization efforts.
Dissecting Q1 Results
In the first quarter, Data Center segment revenue remained stable at $1.3 billion year-over-year, driven by high cloud sales but offset by lower enterprise sales. EPYC CPU sales observed a robust double-digit percentage increase year-over-year, although it faced a sequential decline due to increased inventory levels with several Multi-Domain Controller (MDC) customers, shrinking the Total Addressable Market (TAM) for the quarter. Enterprise sales in Q1 decreased year-over-year and sequentially as end-customer demand softened due to near-term macroeconomic uncertainty.
On the other hand, the Client segment presented a different story, with Q1 revenue dropping a massive 65% year-over-year to $739 million. This was largely due to AMD shipping significantly below consumption in an effort to reduce downstream inventory. Despite the decline, AMD remains optimistic, considering Q1 as the trough for its Client processor business.
Gaming segment revenues also fell in Q1 by 6% year-over-year to $1.8 billion. This decline was caused by higher semi-custom revenue being offset by lower gaming graphic sales. On a brighter note, the Embedded segment revenue experienced a significant increase, achieving a record $1.6 billion, with strength seen across the majority of the Embedded markets.
AMD’s Track Record and Future Expectations
Historically, AMD has been consistent with its financial performance, missing expectations only once in the past five years. However, recent quarters have witnessed only small EPS beats.
In terms of Q2 segment guidance, AMD expects revenue from Client, Gaming, and the Data Center segments to decline, partially offset by growth in the Embedded segment. Sequentially, the company forecasts growth in the Client and Data Center segments, counterbalanced by slight declines in the Gaming and Embedded segments. Further, AMD anticipates a non-GAAP gross margin of approximately 50%.
In conclusion, this report will provide key insights into AMD’s business strategy and financial health during a critical period of global economic recovery and industry transformation.