AMD is one my favourite companies and its bull run this year has helped me made good profits by selling PUTS and CALLS using the Wheel Strategy as well as the LEAPS strategy. In this article, I am sharing with you AMD’s latest earnings results and why it will be a dominant player in the years to come.
AMD reported third-quarter earnings after the bell on Tuesday, with earnings and revenue beating analyst expectations and a strong forecast for the fourth quarter.
Here’s how the chipmaker did against Refinitiv consensus estimates for 3Q earnings results:
EPS: $0.73, adjusted, versus $0.67 expected, up 16% year-over-year.
Revenue: $4.31 billion, versus $4.12 billion expected, up 54% year-over-year
AMD said it expected $4.5 billion in sales in the fourth quarter, ahead of analyst expectations of about $4.25 billion in sales in the quarter. AMD is forecasting 39% annual growth in the fourth quarter.
AMD is one of the companies that has benefitted the most from the surge in electronics sales over the past 18 months as its central processors and graphics processors power PCs, servers and game consoles. Those sales are logged in AMD’s computing and graphics segment, which reported $2.4 billion in revenue, up 44% year-over-year.
The PC market has slowed from its torrid pace a year ago when people around the world still needed computers to work or learn from home, but AMD said its chips were selling at higher average prices as customers opt for more powerful processors.
AMD reports server chip and console chip sales in its Embedded, Enterprise, and Semi-custom segment. AMD reported $1.9 billion in sales in this important category, up 69% year-over-year driven by Epyc server chips, and higher “semi-custom” sales, which are the semiconductors it sells to game console makers.
AMD is in the process of taking market share in the server market behind its Epyc processors, as giants like Microsoft and Google buy its chips to run their cloud services. AMD CEO Lisa Su said in a statement that data center sales doubled year-over-year and now represents “mid-20s” of overall AMD revenue.
Meanwhile, game consoles, like Sony’s Playstation 5 and new Microsoft Xbox models, remain in high demand and hard to find as they sell out quickly. Likewise, AMD’s graphics and central processors are hard to find in stock and in stores.
“Semi-custom revenue grew sequentially and year-over-year as demand for the latest Microsoft and Sony consoles remains very strong,” Lisa Su said on a call with analysts on Tuesday. “We expect semi-custom revenue to increase sequentially in the fourth quarter as we further ramp supply to address the ongoing game console demand.”
AMD is a fabless chip company. It designs the technology inside its semiconductors and outsources manufacturing to foundry partners like TSMC and GlobalFoundries. In September, AMD CEO Su said she expects the chip shortage to become less severe in 2022.
AMD continues to keep its costs under control and increase its profitability. It said its gross margin was 48%, up from 44% in the same period last year because customers are buying more expensive processors. It forecast gross margins at 49.5% in the fourth quarter. AMD’s net income for the quarter was $893 million.
Last October, AMD announced its plans to buy Xilinix in a deal worth $35 billion that would give the company more firepower to compete with Intel in the data center chip market. AMD said the deal was still on track to close by the end of 2021 and the company is making “good progress” to securing regulatory approvals.
AMD said it repurchased $750 million in shares during the quarter. AMD stock is up over 30% year to date.