It has been about a month since the last earnings report for Advanced Micro Devices (AMD Quick QuoteAMD - Free Report) . Shares have lost about 3.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Advanced Micro due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

AMD Beats on Q4 Earnings & Revenues, Provides Solid '22 View

Advanced Micro Devices reported fourth-quarter 2021 non-GAAP earnings of 92 cents per share, which surpassed the Zacks Consensus Estimate by 22.67%. The bottom line soared 77% year over year and 26% sequentially.

Revenues of $4.83 billion outpaced the Zacks Consensus Estimate by 6.69% and surged 49% year over year. On a quarter-over-quarter basis, the top line increased 12%.

Robust performance by the Computing and Graphics, and Enterprise Embedded and Semi-Custom segments drove year-over-year improvement.

Top-Line Details

Computing and Graphics segment revenues of $2.6 billion increased 32% year over year and 8% sequentially. The upside can be attributed to higher Ryzen, Radeon and AMD Instinct processor sales.

Growth in client processor average selling price (“ASP”) was driven by a favorable mix of Ryzen processor sales. GPU ASP reported year-over-year growth in the reported quarter, driven by high-end Radeon graphics product sales.

During the reported quarter, AMD launched the Radeon RX 6600 graphics card, which is built on RDNA 2 architecture. The company also announced the Radeon PRO V620 GPU, built with the latest RDNA 2 architecture.

Enterprise, Embedded and Semi-Custom segment revenues of $2.2 billion were up 75% year over year and 17% sequentially. The year-over-year increase can be attributed to higher semi-custom product sales and EPYC processor revenues.

EPYC’s adoption rate continued to increase in the reported quarter. Leading cloud providers —  Amazon Web Services (AWS), Google Cloud, International Business Machines and Microsoft Azure —  expanded their AMD-powered offerings with more than 130 new public instances being launched in the reported quarter.

AWS introduced the new Amazon EC2 Hpc6a instances in the reported quarter. AWS also launched new general-purpose Amazon EC2 M6a instances.

Google Cloud launched multiple general-purpose and compute- and memory-intensive instances.

IBM Cloud launched new bare metal service offerings for demanding workloads and solutions while Microsoft Azure announced the latest generation of Dasv5 and Easv5 Azure Virtual Machines (VMs) and new confidential VMs, DCasv5 and ECasv5.

Operating Details

Non-GAAP gross margin expanded 560 basis points (bps) on a year-over-year basis and 190 bps sequentially, to 50%. The gross margin expansion was primarily driven by a richer mix of sales, particularly due to strong demand for Ryzen, Radeon and EPYC processors.

Non-GAAP operating expenses increased 40% year over year and 7% quarter over quarter to $1.10 billion.
 
Non-GAAP operating margin of 27% was significantly better than year-ago quarter’s 20% and the previous quarter’s 24%.

Segment-wise, Computing and Graphics operating income was $566 million, up 34.8% year over year and 10.3% sequentially.

Enterprise, Embedded and Semi-Custom operating income was $762 million, significantly higher than the year-ago quarter’s figure of $243 million. Sequentially, the figure increased 40.6%.

Balance Sheet & Cash Flow

As of Dec 25, 2021, AMD had cash and cash equivalents (including marketable securities) of $3.61 billion, unchanged from the figure as of Sep 25, 2021.

As of Dec 25, 2021, total debt (long-term plus short-term) was $313 million, unchanged from the figure as of Sep 25, 2021.

Operating cash flow was reported at $822 million compared with $849 million in third-quarter 2021.

Free cash flow was $736 million in the fourth quarter compared with $764 million in third-quarter 2021.

Acquisition Update

AMD received approval from the State Administration for Market Regulation of the People’s Republic of China for the acquisition of Xilinx.

AMD now anticipates that the Xilinx acquisition will close in the first quarter of 2022.

Guidance

AMD expects first-quarter 2022 revenues to be $5 billion (+/-$100 million), which indicates year-over-year growth of 45% and quarter-over-quarter improvement of 4%.

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 higher server and client processor revenues.

Non-GAAP gross margin is anticipated to be 50.5%.

For 2022, AMD expects revenues to increase 31% year over year to $21.5 billion. The Zacks Consensus Estimate for 2022 revenues is pegged at $19.23 billion, suggesting year-over-year growth of 19.24%.

AMD expects non-GAAP gross margin for 2022 to be 51%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 37.56% due to these changes.

VGM Scores

Currently, Advanced Micro has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Advanced Micro has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.