Will AI Ignite AMD's Stock? Q1 Earnings To Test Investor Confidence Today

Chipmaker Advanced Micro Devices, Inc. AMD is scheduled to report its first-quarter results Tuesday after the market closes. The company’s exposure to artificial intelligence technology makes its earnings a significant report to keep an eye on to confirm whether the momentum is alive and kicking.

Key Q1 Metrics – What To Expect: Santa Clara, California-based AMD is widely expected to report a modest year-over-year increase in first-quarter earnings and revenue.

Rosenblatt analyst Hans Mosesmann said he expects an in-line print, with a bias to the upside. His optimism is predicated on likely strength in MI300 AI accelerator sales and EPYC experience gains in CPUs. “This growth helps offset the usual seasonal weakness in PCs, as well as the ongoing weakness in FPGAs and consoles,” he said.

Data released by Gartner showed that worldwide PC shipments fell a steep 30% year-over-year to 55.2 million units in the first quarter, with the weakness blamed on oversupply, continued low PC demand amid economic uncertainties, and a lack of purchase motivation. This marked the second quarter, shipments fell year-over-year,

Rival Intel reported last week a slight miss on first-quarter revenue and below-consensus guidance for the second quarter. The stock slumped over 9% in earnings reaction.

See Also: Best Artificial Intelligence Stocks

AMD’s Segmental Performance: AMD's four main business segments are the Client business, comprising primarily PC processor revenue, the Data Center business, which derives revenue from server processor sales, Gaming, comprising gaming processors and semi-custom products, and the Embedded segment, which caters to commercial and industrial customers.

The guidance issued in late January is as follows:

• Data Center segment: flattish revenue, with a seasonal decline in server sales offset by a strong Data Center GPU ramp
• Client, Embedded and Gaming segment: sequential decline in sales, with semi-custom revenue likely declining by a significant double-digit percentage

Wedbush analyst Matt Bryson said in a note, for AMD, first-quarter results and the second-quarter guidance were less important than management commentary regarding AI sales expectations.

The analyst sees higher-than-expected server compute business, thanks to improving end markets and market share gains. This can outweigh any PC headwinds or a more modest Xilinx recovery, he said.

Investors were looking for MI300 revenues well above management’s $3.5-billion outlook, and the $3.75 billion Wedbush had modeled. “Given our current limited insight into management’s likely guide we are uncertain as to how the stock will react to earnings,” he said.

Wedbush continues to see AMD as best positioned to carve out a second source position vis-a-vis Nvidia.

AMD Forward Outlook: For the second quarter, the consensus estimates call for earnings of 65 cents per share and revenue of $5.32 billion.

The consensus estimates for the fiscal year 2024 are at $3.40 and $24.13 billion, respectively.

AMD Price Action: In premarket trading on Tuesday, AMD shares were up 0.86% at $161.57, according to Benzinga Pro data. The stock hit an all-time closing high of $211.38 on March 7 but has since then slipped back from the peak. For the year-to-date period, the stock has added 8.68% compared to Nvidia’s 77.22% jump and the iShares Semiconductor ETF’s SOXX 13.92% gain.

Analysts are optimistic of the company rising strongly over the next year. The average analysts’ price target, according to TipRanks, is $203.96, suggesting over 27% upside from current levels.

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