Advanced Micro Devices, Inc. (NASDAQ: AMD) has announced encouraging results for the second quarter of 2022. Despite the company’s solid results, its stock declined nearly 6.9% in Tuesday’s extended trading session. AMD’s weak third-quarter 2022 projections must have shaken investors’ confidence in the stock.
Q2 Earnings in Details
In the quarter, the semiconductor company’s adjusted earnings rose to $1.05 per share from 63 cents per share in the year-ago quarter. The metric also surpassed estimates of $1.03 per share.
AMD’s revenues for the reported quarter came in at $6.55 billion, up 70% from the year-ago period. The figure easily surpassed the consensus estimate of $6.53 billion.
Segment-wise, the Data Center segment, which includes server CPUs, data center GPUs, Pensando, and Xilinx data center products, witnessed an 83% year-over-year rise in revenues to $1.5 billion. Solid uptake of EPYC server processors provided support to the segment.
Revenues of the Client segment, which comprises desktop and notebook PC processors, and chipsets, jumped 25% year-over-year to $2.2 billion. The strong performance of the Ryzen mobile processor drove the upside.
The Gaming segment, which includes discrete graphics processors and semi-custom game console products, saw a 32% year-over-year surge in revenues to $1.7 billion. Strength in the sales of semi-custom products within the segment was partially offset by a fall in gaming graphics revenue.
Meanwhile, revenues of the Embedded segment surged a whopping 2,228% year-over-year in the June quarter, driven by stong demand for embedded products of AMD and Xilinx, and the addition of Xilinx embedded revenue.
The adjusted gross margin rose 6 percentage points year-over-year to 54% in the second quarter of 2022. Rising revenues from the Data Center and Embedded segments provided support. Further, AMD repurchased its common stock worth $920 million during the quarter.
AMD’s Projections for Q3 & 2022
In the third quarter of 2022, the semiconductor company expects a nearly 55% year-over-year rise in revenues to $6.7 billion, plus or minus $200 million. The upside in revenues is expected to be driven by growth in the Data Center and Embedded segments. Analysts estimate the metric to come in at $6.82 billion in the September quarter.
Further, the company has reiterated its revenue guidance for the full year 2022. It anticipates full-year revenues of $26.3 billion, plus or minus $300 million, up nearly 60% over the prior year, largely due to strength in the Data Center and Embedded segments. The Street anticipated the company to post revenues of $26.18 billion.
Is AMD’s Gain, Intel’s Pain?
AMD has emerged as a dominant player in the chips industry. The company has shown its confidence in other markets by reiterating the 2022 revenue guidance amid the weakening personal computer (PC) market.
Citing the sluggish PC market as a concern, Intel Corporation (INTC) has slashed its full-year guidance. It also posted disappointing earnings results for the second quarter.
With a market cap of $156.83 billion, AMD has recently surpassed Intel’s market cap, which currently stands at $147.24 billion. While AMD has been growing rapidly in the highly lucrative server market, Intel is struggling to launch its latest chips.
AMD has been strategically using the market opportunities as its new generation of chips are being vastly used in PCs and servers, and dominating the data-center central-processing-unit market.
AMD Stock Has over 27% Upside Potential
Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 18 Buys and eight Holds. Advanced Micro Devices’ average price forecast of $126.91 signals that the stock may surge nearly 27.8% from current levels.
Even after losing 16.4% so far this year, AMD stock scores a ‘Perfect 10’ on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform the market. Also, financial bloggers are 88% Bullish on AMD, compared to the sector average of 66%.
Further, TipRanks data shows that hedge funds are Very Positive about the company, as they bought 9.3 million shares of AMD stock in the last quarter.
Concluding Remarks
AMD’s impressive second-quarter results were on the back of continued strength across all its business segments. Higher sales of the company’s data center and embedded products largely supported its upbeat top-line results. Apart from the organic growth, increasing synergies from the recently acquired Xilinx business instill optimism.
In brief, AMD’s strong underlying fundamentals, largely marked by its expanded product portfolio, could make it a hot stock among investors interested in the semiconductor space.
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