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AMD Gears Up for Q1 Earnings: Semi-Custom & EPYC in Focus

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Advanced Micro Devices (AMD - Free Report) is slated to report first-quarter 2021 results on Apr 27.

The ongoing momentum in EPYC processors and semi-custom products’ sales is likely to have contributed to AMD’s revenues in the to-be-reported quarter.

However, higher investments on product development and platform to retain its competitive stance against the likes of Intel (INTC - Free Report) and NVIDIA is likely to have affected profitability in the to-be-reported quarter.


Click here to know how the company’s overall Q1 performance is expected to be.

Continued Momentum Seen For EPYC Processors

Ongoing traction witnessed in uptake of EPYC processors is anticipated to have boosted AMD’s server revenues in the to-be-reported quarter.

The company is clinching new deal wins for its EPYC processors from data centers as well as among major enterprise, cloud and high-performance computing (HPC) companies. These processors have been witnessing adoption by leading cloud players including Amazon Web Services (“AWS”), Alphabet (GOOGL - Free Report) Google Cloud and Microsoft’s (MSFT - Free Report) Azure.

Further, Google also extended availability of its confidential computing Virtual Machines (VMs) powered by EPYC processors to nine regions.

In March 2021, AMD unveiled the third-generation AMD EPYC processors (codenamed Milan) to further its prospects in the server processor market.

Semi-custom revenues in the first quarter are anticipated to benefit from strong demand for Xbox Series X, Xbox Series S and PlayStation 5 gaming consoles.The latest generation hardware consoles were launched in November 2020.

Higher EPYC server processor together with solid traction in semi-custom product sales along with momentum in deals wins are expected to have contributed to Enterprise, Embedded and Semi-Custom revenues in the first quarter.

The Zacks Consensus Estimate for Enterprise, Embedded and Semi-Custom segment for the first quarter is pegged at $1.326 billion.  The projection suggests an increase of 281% from the prior-year quarter’s figure.

A Look at Computing and Graphics Segment Growth Drivers

The consensus mark for revenues in the Computing and Graphics segment for the first quarter is pegged at $1.885 billion, which indicates an increase of 31.1% on a year-over-year basis. Higher PC shipments in the first quarter, driven by increased demand is anticipated to have favored the segment’s performance.

Per Gartner report, PC sales were up 32% year over year to 69.9 million units during the December-end quarter.

Moreover, AMD is expected to have witnessed steady demand for Ryzen PRO processors in the first quarter due to extension of the work from home set up amid spike in infections and re-imposition of lockdowns across several parts of the world. These processors enhance remote work capabilities of the commercial notebooks and facilitate advanced computing performance to boost business productivity.

Ryzen PRO processors are also anticipated to have witnessed incremental adoption across leading OEMs in the first quarter. In January 2021, AMD unveiled a new class of mobile processors — AMD Ryzen 5000 Series — based on Zen 3 core architecture.

Further, in March 2021, AMD launched AMD Radeon RX 6700 XT graphics card, which is built on the company’s RDNA 2 gaming architecture. The graphics card is based on the 7 nanometer (nm) process technology and is aimed toward augmenting PC video gaming experiences.

AMD’s Data Center GPU sales are likely to have benefited from healthy demand for AMD Instinct MI100 accelerator.

Incremental adoption of new processors is likely to have driven Computing and Graphics revenues in the first quarter.

Shares of AMD, which carries a Zacks Rank #2 (Buy), have returned 46% in the past year compared with the industry’s surge of 75.7%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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