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AMD expects second-quarter 2024 revenues to be $5.7 billion (+/-$300 million). At the mid-point of the revenue range, this represents year-over-year growth of approximately 6% and sequential growth of approximately 4%.
The Zacks Consensus Estimate for revenues is pegged at $5.71 billion, suggesting growth of 6.54% year over year. The consensus estimate for second-quarter earnings is pegged at 67 cents per share, up by a penny over the past 30 days.
AMD’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 2.01%, on average.
Advanced Micro Devices, Inc. Price and EPS Surprise
Let’s see how things are shaping up prior to this announcement.
Factors to Note
AMD’s near-term prospects suffer from weakness in the Embedded and Gaming segments.
For second-quarter 2024, the Embedded and the Gaming segment revenues are expected to decline by a significant double-digit percentage year over year. Sequentially, Embedded segment revenues are expected to be flat, while the Gaming segment revenues are expected to decline by a significant double-digit percentage.
The Zacks Consensus Estimate for second-quarter Embedded revenues is currently pegged at $845.89 million, indicating a 45.7% year-over-year decline. The consensus mark for Gaming is pegged at $657.24 million, suggesting a massive 165.4% decline.
However, AMD expects Data Center segment revenues to increase by a double-digit percentage, primarily driven by the data center GPU ramp on a sequential basis. Client segment revenues are expected to increase.
Year over year, AMD expects Data Center and Client segment revenues to be up significantly, driven by the strong product portfolio.
The chipmaker has been benefiting from portfolio strength and an expanding partner base. Its fourth-Gen EPYC processor has been regularly deployed by hyperscalers to power their internal workloads and public instances.
Exiting first-quarter 2024, AMD had more than 900 public cloud instances available, with Amazon (AMZN - Free Report) , Google and Microsoft (MSFT - Free Report) increasing their usage of fourth-gen EPYC processor offerings with new instances and regional deployments.
Microsoft, Meta Platforms, Oracle and other cloud providers announced further MI300X deployments in the reported quarter.
The Zacks Consensus Estimate for second-quarter Data Center revenues is currently pegged at $2.78 billion, indicating a massive 110.4% year-over-year jump. The consensus mark for Client is pegged at $1.42 billion, suggesting 42.7% year-over-year growth.
AMD is suffering from stiff competition from NVIDIA (NVDA - Free Report) . Both stocks have been the darlings of investors, driven by the massive proliferation of AI that has created a strong demand for GPU chips required to power AI models.
However, NVIDIA’s strategy to release new AI chip models annually instead of its previous two-year update timeline intensifies competition for AMD.
AMD Shares Underperform Sector, S&P 500
AMD shares have lost 6.2%, underperforming the Zacks Computer & Technology sector’s gain of 18.7% and the S&P 500’s 14.1%.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
AMD stock is not so cheap, as the Value Style Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, AMD is trading at 7.74X, higher than the Zacks Computer & Technology sector’s 5.08X and the Zacks IT Services industry’s 6.74X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
AMD’s Expanding Data Center Footprint Aids Prospect
AMD’s long-term prospects are bright, given robust spending on AI chips.
Gartner expects revenues from AI semiconductors to hit $71.25 billion in 2024, up 33% over 2023. For 2025, revenues are expected to reach $91.96 billion, up roughly 29% over the 2024 estimate. More importantly, in 2024, AI chips’ revenues from compute electronics are projected to be $33.4 billion, which will account for 47% of total AI semiconductors revenue.
This bodes well for AMD as its portfolio expansion initiatives are making it well-positioned in the data center market as well as in the growing AI-enabled consumer PC market over the long haul.
New offerings like the Instinct MI325X accelerator are helping to expand AMD’s footprint in the data center market. AMD has launched the Ryzen AI 300 Series, the third generation of AMD AI-enabled mobile processors, and Ryzen 9000 Series processors for laptop and desktop PCs.
The recently announced Silo AI acquisition expands AMD’s AI ecosystem. The company has been on an acquisition spree to strengthen its AI ecosystem. In the past 12 months, it has spent $125 million on a dozen of acquisitions. Nod.ai and Mipsology are some other notable acquisitions in the recent past.
Conclusion
AMD’s second-quarter 2024 results are likely to suffer from the weakness in the Embedded and Gaming segments amid stiff competition from NVIDIA despite its strong position in the datacenter market. Modest growth prospects and stretched valuation make the stock a risky bet.
AMD currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. However, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image: Bigstock
AMD Stock Before Q2 Earnings Report: To Buy or Not to Buy?
Advanced Micro Devices (AMD - Free Report) is set to release its second-quarter 2024 results on Jul 30.
AMD expects second-quarter 2024 revenues to be $5.7 billion (+/-$300 million). At the mid-point of the revenue range, this represents year-over-year growth of approximately 6% and sequential growth of approximately 4%.
The Zacks Consensus Estimate for revenues is pegged at $5.71 billion, suggesting growth of 6.54% year over year. The consensus estimate for second-quarter earnings is pegged at 67 cents per share, up by a penny over the past 30 days.
AMD’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 2.01%, on average.
Advanced Micro Devices, Inc. Price and EPS Surprise
Advanced Micro Devices, Inc. price-eps-surprise | Advanced Micro Devices, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
Factors to Note
AMD’s near-term prospects suffer from weakness in the Embedded and Gaming segments.
For second-quarter 2024, the Embedded and the Gaming segment revenues are expected to decline by a significant double-digit percentage year over year. Sequentially, Embedded segment revenues are expected to be flat, while the Gaming segment revenues are expected to decline by a significant double-digit percentage.
The Zacks Consensus Estimate for second-quarter Embedded revenues is currently pegged at $845.89 million, indicating a 45.7% year-over-year decline. The consensus mark for Gaming is pegged at $657.24 million, suggesting a massive 165.4% decline.
However, AMD expects Data Center segment revenues to increase by a double-digit percentage, primarily driven by the data center GPU ramp on a sequential basis. Client segment revenues are expected to increase.
Year over year, AMD expects Data Center and Client segment revenues to be up significantly, driven by the strong product portfolio.
The chipmaker has been benefiting from portfolio strength and an expanding partner base. Its fourth-Gen EPYC processor has been regularly deployed by hyperscalers to power their internal workloads and public instances.
Exiting first-quarter 2024, AMD had more than 900 public cloud instances available, with Amazon (AMZN - Free Report) , Google and Microsoft (MSFT - Free Report) increasing their usage of fourth-gen EPYC processor offerings with new instances and regional deployments.
Microsoft, Meta Platforms, Oracle and other cloud providers announced further MI300X deployments in the reported quarter.
The Zacks Consensus Estimate for second-quarter Data Center revenues is currently pegged at $2.78 billion, indicating a massive 110.4% year-over-year jump. The consensus mark for Client is pegged at $1.42 billion, suggesting 42.7% year-over-year growth.
AMD is suffering from stiff competition from NVIDIA (NVDA - Free Report) . Both stocks have been the darlings of investors, driven by the massive proliferation of AI that has created a strong demand for GPU chips required to power AI models.
However, NVIDIA’s strategy to release new AI chip models annually instead of its previous two-year update timeline intensifies competition for AMD.
AMD Shares Underperform Sector, S&P 500
AMD shares have lost 6.2%, underperforming the Zacks Computer & Technology sector’s gain of 18.7% and the S&P 500’s 14.1%.
Year-to-Date Performance Chart
AMD stock is not so cheap, as the Value Style Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, AMD is trading at 7.74X, higher than the Zacks Computer & Technology sector’s 5.08X and the Zacks IT Services industry’s 6.74X.
Price/Sales Ratio (F12M)
AMD’s Expanding Data Center Footprint Aids Prospect
AMD’s long-term prospects are bright, given robust spending on AI chips.
Gartner expects revenues from AI semiconductors to hit $71.25 billion in 2024, up 33% over 2023. For 2025, revenues are expected to reach $91.96 billion, up roughly 29% over the 2024 estimate. More importantly, in 2024, AI chips’ revenues from compute electronics are projected to be $33.4 billion, which will account for 47% of total AI semiconductors revenue.
This bodes well for AMD as its portfolio expansion initiatives are making it well-positioned in the data center market as well as in the growing AI-enabled consumer PC market over the long haul.
New offerings like the Instinct MI325X accelerator are helping to expand AMD’s footprint in the data center market. AMD has launched the Ryzen AI 300 Series, the third generation of AMD AI-enabled mobile processors, and Ryzen 9000 Series processors for laptop and desktop PCs.
The recently announced Silo AI acquisition expands AMD’s AI ecosystem. The company has been on an acquisition spree to strengthen its AI ecosystem. In the past 12 months, it has spent $125 million on a dozen of acquisitions. Nod.ai and Mipsology are some other notable acquisitions in the recent past.
Conclusion
AMD’s second-quarter 2024 results are likely to suffer from the weakness in the Embedded and Gaming segments amid stiff competition from NVIDIA despite its strong position in the datacenter market. Modest growth prospects and stretched valuation make the stock a risky bet.
AMD currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. However, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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