6 Advanced Micro Devices Analysts React To Earnings Beat, Guidance Miss, Market Share Gains

Advanced Micro Devices, Inc. AMD shares traded lower by 4.3% on Wednesday after the semiconductor giant reported better-than-expected second-quarter numbers but disappointed Wall Street with its third-quarter guidance.

AMD reported second-quarter adjusted EPS of $1.05 on revenue of $6.55 billion. Both numbers exceeded consensus analyst estimates of $1.30 and $6.53 billion, respectively. Revenue was up 70% from a year ago.

AMD reports 83% sales growth in its data center business. Client segment revenue, which includes PC and laptop chips, was up 25% to $2.2 billion in the quarter.

Looking ahead, AMD guided for a range of between $6.5 billion and $6.9 billion in third-quarter revenue, the midpoint of which is slightly below the $6.83 billion Wall Street had expected.

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Market Share Gains: Bank of America analyst Vivek Arya said AMD's quarter was noisy, but it remains a top stock pick given its generational market share gain opportunity.

"We keep our CY23/24 EPS generally steady at $4.65/$5.86 given our more conservative macro views, but note we still expect AMD’s sales to grow ~10% YoY in CY23 against a contracting semi industry (with potential to grow 20% YoY if share gains accelerate)," Arya wrote.

Raymond James analyst Melissa Fairbanks said AMD is gaining market share in all the right places.

"Net, we continue to believe share dynamics and an improving mix will allow AMD to grow despite a weakening macro, with a strong new product pipeline and deep customer engagements helping to drive toward the long-term target model," Fairbanks wrote.

KeyBanc analyst John Vinh said ongoing server share gains and new product ramps should be catalysts in the second half of the year.

"Despite concerns on macro headwinds, AMD indicated cloud demand remains strong into 2023, with good visibility and new instances/workloads scheduled to ramp," Vinh wrote.

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Second-Half Catalysts: BMO Capital markets analyst Ambrish Srivastava said AMD may have disappointed with its third-quarter guidance, but the company reassured investors by reiterating its full-year guidance.

"The company's confidence for the full year appears to be clearly led by its ability to continue to grow its server business," Srivastava wrote.

Mizuho analyst Vijay Rakesh reported strong gross margins and has a stable full-year outlook.

"This is despite investor concerns of a broader macro slowdown with PC-Gaming already softer and Data Center spending potentially next to soften," Rakesh said.

Rosenblatt Securities analyst Hans Mosesmann said AMD has a strong setup moving into the second half of 2022.

"On potential weakness on macro-PC issues today we would back up the truck as a planetary alignment never seen in Silicon Valley is approaching the x86 world," Mosesmann wrote.

Ratings And Price Targets:

• Bank of America has a Buy rating and a $120 target.
• BMO Capital has an Outperform rating and a $115 target.
• Mizuho has a Buy rating and a $140 target.
• Raymond James has a Strong Buy rating and a $130 target.
• Rosenblatt Securities has a Buy rating and a $200 target.
• KeyBanc has an Overweight rating and a $130 target.