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Advanced Micro Devices (AMD) to Post Q3 Earnings: What to Expect?

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Advanced Micro Devices (AMD - Free Report) is set to release third-quarter 2021 results on Oct 26.

The company expects third-quarter 2021 revenues to be $4.1 billion (+/-$100 million), which indicates year-over-year growth of 46% and quarter-over-quarter improvement of 6%.

The year-over-year growth is expected to be driven by robust sales across all its businesses. The sequential increase is projected to be led by growth across data center and gaming verticals.

The Zacks Consensus Estimate for revenues is pegged at $4.12 billion, suggesting growth of 47.1% from the year-ago quarter’s reported figure.
 

 

The consensus estimate for third-quarter earnings is pegged at 66 cents per share, unchanged over the past 30 days. The figure indicates an improvement of 61% on a year-over-year basis.

Factors Likely to Have Influenced Q3 Earnings

AMD’s third-quarter results are expected to have benefited from strong demand for EPYC processors thanks to adoption by the likes of Microsoft (MSFT - Free Report) , Hewlett Packard Enterprise (HPE - Free Report) and Alphabet (GOOGL - Free Report) .

The company’s EPYC processors have been used in developing a number of high-performance computing systems. These include Microsoft Azure supercomputers for United Kingdom’s Met Office, The Perlmutter supercomputer and The Singapore National Supercomputing Centre supercomputer.

The U.S. Department of Energy’s Argonne National Laboratory has chosen AMD’s EPYC processors to power a new supercomputer called Polaris, which will prepare researchers for the forthcoming exascale supercomputer at Argonne, called Aurora.

Alphabet’s Google Cloud has also expanded its use of EPYC processors with the preview of N2D Virtual Machines (VMs), which deliver, on average, over 30% better price performance across a variety of workloads. The N2D VM is powered by AMD EPYC 7003 Series processors.

Last quarter, Google Cloud and AMD announced a new instance (T2D) based on Third-Gen EPYC processors. AMD’s second-gen EPYC processors are powering the new HPE Alletra 6000 storage solutions.

AMD is riding on higher sales of its Ryzen and Radeon processors, owing to increasing proliferation of AI and Machine Learning in industries like cloud gaming and the supercomputing domain.

The chipmaker is also likely to gain from steady momentum witnessed in the adoption of Ryzen, Radeon and semi-custom processors. These processors are being heavily utilized in the cloud, gaming, PC and data center verticals, driven by work-from-home and online-schooling trends due to the pandemic.

The growing clout of 7 nanometer (nm) products in the data center vertical, driven by the work-from-home and online-learning trends, is a key catalyst for this Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, component shortages and supply chain constraints have hurt PC shipments in the third quarter of 2021. AMD’s top-line growth is expected to have suffered from this trend in the going-to-be-reported quarter. Per IDC data, PC shipments in third-quarter 2021 improved 3.9% year over year to 86.7 million units, much slower than the growth figure in second-quarter 2021.