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AMD Q3 Earnings Beat, Top Line Aided by Solid Client Growth
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Advanced Micro Devices (AMD - Free Report) reported third-quarter 2023 non-GAAP earnings of 70 cents per share, beating the Zacks Consensus Estimate by 2.94% and climbing 4.5% year over year.
Revenues of $5.8 billion beat the Zacks Consensus Estimate by 1.65% and increased 4.2% year over year.
AMD shares were down roughly 1.6% in pre-market trading, given the unimpressive fourth-quarter guidance. The company expects weakness in the Gaming and Embedded segment to hurt revenues in the current quarter.
AMD shares have outperformed the Zacks Computer & Technology sector year to date. Shares have gained 52.1%, while the broader sector returned 30.3%.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Data Center revenues declined 0.7% year over year to $1.6 billion and accounted for 27.6% of total revenues. Sequentially, revenues increased 21%, driven by strong adoption of fourth-generation AMD EPYC CPUs.
Our model estimate for third-quarter Data Center revenues was pegged at $1.62 billion.
The Client segment revenues increased 42.2% year over year to $1.46 billion and accounted for 25.1% of total revenues. Higher Ryzen mobile processor sales drove top-line growth.
Revenues jumped 46% sequentially, driven by strong Ryzen 7000 Series CPU sales.
Our model estimate for third-quarter Client revenues was pegged at $1.24 billion.
The Gaming segment revenues decreased 7.7% year over year to $1.51 billion and accounted for 26% of total revenues. The decline was primarily attributed to lower semi-custom revenues.
Our model estimate for third-quarter Gaming revenues was pegged at $1.61 billion.
The Embedded segment revenues were $1.24 billion, down 4.6% year over year. The segment accounted for 21.4% of total revenues. The top line suffered from lower performance in the communications market.
Our model estimate for third-quarter Embedded revenues was pegged at $1.23 billion.
Operating Details
Non-GAAP gross margin expanded 120 basis points (bps) on a year-over-year basis to 51.1%, primarily due to lower client segment revenues.
Non-GAAP operating expenses increased 11.6% year over year to $1.7 billion.
Non-GAAP operating margin contracted 70 bps on a year-over-year basis to 22% in the third quarter.
Balance Sheet & Cash Flow
As of Sep 30, 2023, AMD had cash and cash equivalents (including marketable securities) of $5.79 billion compared with $6.29 billion as of Jul 1, 2023.
As of Sep 30, 2023, total debt was $2.47 billion, unchanged from the figure reported as of Jul 1, 2023.
Operating cash flow was reported at $421 million compared with $379 million in the second quarter of 2023.
Free cash flow was $297 million in the third quarter of 2023 compared with $254 million in the second quarter of 2023.
Guidance
AMD expects fourth-quarter 2023 revenues to be $6.1 billion (+/-$300 million), which indicates year-over-year growth of 9% and 5% sequentially at the mid-point.
It expects to witness year-over-year growth in the Data Center and Client segments by double-digit percentage. The Gaming segment is expected to decline due to the matured console cycle. Softness in the embedded market will likely hurt Embedded revenues.
Sequentially, Data Center segment revenues are expected to grow on a double-digit percentage, while Client is expected to increase. However, Gaming and Embedded segment revenues are expected to decline by a double-digit percentage.
Non-GAAP gross margin is anticipated to be roughly 51.5%. Non-GAAP operating expenses are expected to be approximately $1.74 billion.
Image: Bigstock
AMD Q3 Earnings Beat, Top Line Aided by Solid Client Growth
Advanced Micro Devices (AMD - Free Report) reported third-quarter 2023 non-GAAP earnings of 70 cents per share, beating the Zacks Consensus Estimate by 2.94% and climbing 4.5% year over year.
Revenues of $5.8 billion beat the Zacks Consensus Estimate by 1.65% and increased 4.2% year over year.
AMD shares were down roughly 1.6% in pre-market trading, given the unimpressive fourth-quarter guidance. The company expects weakness in the Gaming and Embedded segment to hurt revenues in the current quarter.
AMD shares have outperformed the Zacks Computer & Technology sector year to date. Shares have gained 52.1%, while the broader sector returned 30.3%.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Advanced Micro Devices, Inc. price-consensus-eps-surprise-chart | Advanced Micro Devices, Inc. Quote
Top-Line Details
Data Center revenues declined 0.7% year over year to $1.6 billion and accounted for 27.6% of total revenues. Sequentially, revenues increased 21%, driven by strong adoption of fourth-generation AMD EPYC CPUs.
Our model estimate for third-quarter Data Center revenues was pegged at $1.62 billion.
The Client segment revenues increased 42.2% year over year to $1.46 billion and accounted for 25.1% of total revenues. Higher Ryzen mobile processor sales drove top-line growth.
Revenues jumped 46% sequentially, driven by strong Ryzen 7000 Series CPU sales.
Our model estimate for third-quarter Client revenues was pegged at $1.24 billion.
The Gaming segment revenues decreased 7.7% year over year to $1.51 billion and accounted for 26% of total revenues. The decline was primarily attributed to lower semi-custom revenues.
Our model estimate for third-quarter Gaming revenues was pegged at $1.61 billion.
The Embedded segment revenues were $1.24 billion, down 4.6% year over year. The segment accounted for 21.4% of total revenues. The top line suffered from lower performance in the communications market.
Our model estimate for third-quarter Embedded revenues was pegged at $1.23 billion.
Operating Details
Non-GAAP gross margin expanded 120 basis points (bps) on a year-over-year basis to 51.1%, primarily due to lower client segment revenues.
Non-GAAP operating expenses increased 11.6% year over year to $1.7 billion.
Non-GAAP operating margin contracted 70 bps on a year-over-year basis to 22% in the third quarter.
Balance Sheet & Cash Flow
As of Sep 30, 2023, AMD had cash and cash equivalents (including marketable securities) of $5.79 billion compared with $6.29 billion as of Jul 1, 2023.
As of Sep 30, 2023, total debt was $2.47 billion, unchanged from the figure reported as of Jul 1, 2023.
Operating cash flow was reported at $421 million compared with $379 million in the second quarter of 2023.
Free cash flow was $297 million in the third quarter of 2023 compared with $254 million in the second quarter of 2023.
Guidance
AMD expects fourth-quarter 2023 revenues to be $6.1 billion (+/-$300 million), which indicates year-over-year growth of 9% and 5% sequentially at the mid-point.
It expects to witness year-over-year growth in the Data Center and Client segments by double-digit percentage. The Gaming segment is expected to decline due to the matured console cycle. Softness in the embedded market will likely hurt Embedded revenues.
Sequentially, Data Center segment revenues are expected to grow on a double-digit percentage, while Client is expected to increase. However, Gaming and Embedded segment revenues are expected to decline by a double-digit percentage.
Non-GAAP gross margin is anticipated to be roughly 51.5%. Non-GAAP operating expenses are expected to be approximately $1.74 billion.
Zacks Rank & Stocks to Consider
Currently, AMD has a Zacks Rank #3 (Hold).
eGain (EGAN - Free Report) , GoDaddy (GDDY - Free Report) and Itron (ITRI - Free Report) are some better-ranked stocks that investors can consider in the broader sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
eGain shares have declined 33.3% year to date. EGAN is set to report its first-quarter fiscal 2024 results on Nov 2.
GoDaddy shares have declined 2.1% year to date. GDDY is set to report its third-quarter 2023 results on Nov 2.
Itron shares have returned 13.1% year to date. ITRI is set to report its third-quarter 2023 results on Nov 2.