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AMD Q4 Earnings Beat, Data Center Growth Aids Top Line
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Advanced Micro Devices (AMD - Free Report) reported fourth-quarter 2022 non-GAAP earnings of 69 cents per share, beating the Zacks Consensus Estimate by 4.55% but declining 25% year over year.
Revenues of $5.60 billion beat the Zacks Consensus Estimate by 1.58% and increased 16% year over year.
Strong year-over-year growth benefited from higher Data Center and Embedded revenues as AMD continues to expand its presence across a broader set of markets and customers.
AMD shares have gained 3.5% in pre-market trading. Shares have lost 32.6% compared with the Zacks Computer & Technology sector’s decline of 22.5%.
Top-Line Details
AMD announced new reporting segments — Data Center, Client, Gaming and Embedded — beginning second-quarter 2022.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Data Center comprises server CPUs, data center GPUs, Pensando and Xilinx data center products. Revenues jumped 42.3% year over year to $1.66 billion and accounted for 29.6% of total revenues. The segment benefited from strong sales of EPYC server processors.
In cloud, sales to North American hyperscalers more than doubled year over year as these customers continued moving more of their internal workloads and external instances to EPYC processors.
At the end of the reported quarter, EPYC processors powered more than 600 publicly available instances globally, following the launches of the latest instances from Amazon Web Services and Microsoft.
In Enterprise, revenues declined year over year as demand slowed due to the challenging macroenvironment. In HPC, AMD-powered supercomputers on the latest Top 500 list increased 38% year over year.
AMD launched fourth-gen EPYC processors in the reported quarter that deliver up to two times faster performance in cloud, enterprise and HPC applications, and are up to 80% more energy efficient.
AMD witnessed record sales of its Xilinx data center and networking products in the reported quarter, led by strong demand from financial services companies for its newly launched Alveo X3 series boards, optimized for low latency trading.
Sales of AMD’s Pensando DPUs also ramped up significantly, driven by supply-chain improvements and continued demand.
The Client segment includes desktop and notebook PC processors, and chipsets. Revenues declined 50.6% year over year to $903 million and accounted for 16.1% of the total revenues. Client processor ASP was flat year over year.
The Gaming segment includes discrete graphics processors and semi-custom game console products. Revenues decreased 6.7% year over year to $1.64 billion and accounted for 29.4% of the total revenues.
The Embedded segment includes AMD and Xilinx embedded products. Revenues were $1.40 billion compared with the year-ago quarter’s $71 million. The segment accounted for 25% of the total revenues.
AMD benefited from strong demand for its products in aerospace and defense, industrial, and communications end-markets.
Operating Details
The non-GAAP gross margin expanded 80 basis points (bps) on a year-over-year basis to 51.1%. The gross margin expansion was primarily driven by higher Embedded segment revenues.
Non-GAAP operating expenses increased 45.2% year over year to $1.60 billion.
The non-GAAP operating margin of 22.5% contracted 500 bps on a year-over-year basis.
Balance Sheet & Cash Flow
As of Dec 31, 2022, AMD had cash and cash equivalents (including marketable securities) of $5.86 billion compared with $5.59 billion as of Sep 24, 2022.
As of Dec 31, 2022, total debt was $2.47 billion, unchanged from the figure reported as of Sep 24, 2022.
Operating cash flow was $567 million compared with $965 million in third-quarter 2022.
Free cash flow was $443 million in the fourth quarter compared with $842 million in third-quarter 2022.
Guidance
AMD expects first-quarter 2023 revenues to be $5.3 billion (+/-$300 million), which indicates a year-over-year decline of 10%.
AMD expects to witness growth in Embedded and Data Center segments, partially offset by a decline in the Client and Gaming segments.
Sequentially, Embedded segment revenues are expected to increase. Client and Gaming segment revenues are expected to decline, largely consistent with seasonality. Data Center segment revenues are expected to decline due to elevated levels of inventory with some cloud customers.
The non-GAAP gross margin is anticipated to be 50%. Non-GAAP operating expenses are expected to be $1.6 billion.
For 2023, AMD expects Embedded and Data Center revenues to grow year over year due to a strong portfolio. Moreover, it expects Client and the Gaming segment revenues to decline based on the current demand environment.
AMD expects the non-GAAP gross margin to be flat year over year in the first half and to expand in the second half of the year.
Image: Bigstock
AMD Q4 Earnings Beat, Data Center Growth Aids Top Line
Advanced Micro Devices (AMD - Free Report) reported fourth-quarter 2022 non-GAAP earnings of 69 cents per share, beating the Zacks Consensus Estimate by 4.55% but declining 25% year over year.
Revenues of $5.60 billion beat the Zacks Consensus Estimate by 1.58% and increased 16% year over year.
Strong year-over-year growth benefited from higher Data Center and Embedded revenues as AMD continues to expand its presence across a broader set of markets and customers.
AMD shares have gained 3.5% in pre-market trading. Shares have lost 32.6% compared with the Zacks Computer & Technology sector’s decline of 22.5%.
Top-Line Details
AMD announced new reporting segments — Data Center, Client, Gaming and Embedded — beginning second-quarter 2022.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Advanced Micro Devices, Inc. price-consensus-eps-surprise-chart | Advanced Micro Devices, Inc. Quote
Data Center comprises server CPUs, data center GPUs, Pensando and Xilinx data center products. Revenues jumped 42.3% year over year to $1.66 billion and accounted for 29.6% of total revenues. The segment benefited from strong sales of EPYC server processors.
In cloud, sales to North American hyperscalers more than doubled year over year as these customers continued moving more of their internal workloads and external instances to EPYC processors.
At the end of the reported quarter, EPYC processors powered more than 600 publicly available instances globally, following the launches of the latest instances from Amazon Web Services and Microsoft.
In Enterprise, revenues declined year over year as demand slowed due to the challenging macroenvironment. In HPC, AMD-powered supercomputers on the latest Top 500 list increased 38% year over year.
AMD launched fourth-gen EPYC processors in the reported quarter that deliver up to two times faster performance in cloud, enterprise and HPC applications, and are up to 80% more energy efficient.
AMD witnessed record sales of its Xilinx data center and networking products in the reported quarter, led by strong demand from financial services companies for its newly launched Alveo X3 series boards, optimized for low latency trading.
Sales of AMD’s Pensando DPUs also ramped up significantly, driven by supply-chain improvements and continued demand.
The Client segment includes desktop and notebook PC processors, and chipsets. Revenues declined 50.6% year over year to $903 million and accounted for 16.1% of the total revenues. Client processor ASP was flat year over year.
The Gaming segment includes discrete graphics processors and semi-custom game console products. Revenues decreased 6.7% year over year to $1.64 billion and accounted for 29.4% of the total revenues.
The Embedded segment includes AMD and Xilinx embedded products. Revenues were $1.40 billion compared with the year-ago quarter’s $71 million. The segment accounted for 25% of the total revenues.
AMD benefited from strong demand for its products in aerospace and defense, industrial, and communications end-markets.
Operating Details
The non-GAAP gross margin expanded 80 basis points (bps) on a year-over-year basis to 51.1%. The gross margin expansion was primarily driven by higher Embedded segment revenues.
Non-GAAP operating expenses increased 45.2% year over year to $1.60 billion.
The non-GAAP operating margin of 22.5% contracted 500 bps on a year-over-year basis.
Balance Sheet & Cash Flow
As of Dec 31, 2022, AMD had cash and cash equivalents (including marketable securities) of $5.86 billion compared with $5.59 billion as of Sep 24, 2022.
As of Dec 31, 2022, total debt was $2.47 billion, unchanged from the figure reported as of Sep 24, 2022.
Operating cash flow was $567 million compared with $965 million in third-quarter 2022.
Free cash flow was $443 million in the fourth quarter compared with $842 million in third-quarter 2022.
Guidance
AMD expects first-quarter 2023 revenues to be $5.3 billion (+/-$300 million), which indicates a year-over-year decline of 10%.
AMD expects to witness growth in Embedded and Data Center segments, partially offset by a decline in the Client and Gaming segments.
Sequentially, Embedded segment revenues are expected to increase. Client and Gaming segment revenues are expected to decline, largely consistent with seasonality. Data Center segment revenues are expected to decline due to elevated levels of inventory with some cloud customers.
The non-GAAP gross margin is anticipated to be 50%. Non-GAAP operating expenses are expected to be $1.6 billion.
For 2023, AMD expects Embedded and Data Center revenues to grow year over year due to a strong portfolio. Moreover, it expects Client and the Gaming segment revenues to decline based on the current demand environment.
AMD expects the non-GAAP gross margin to be flat year over year in the first half and to expand in the second half of the year.
Zacks Rank & Stocks to Consider
Currently, AMD has a Zacks Rank #4 (Sell).
Cambium Networks (CMBM - Free Report) , Amtech (ASYS - Free Report) and RingCentral (RNG - Free Report) are some better-ranked stocks that investors can consider in the broader sector. While Cambium sports a Zacks Rank #1 (Strong Buy), both Amtech and RingCentral carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cambium shares have declined 15.9% in the past year. CMBM is set to report its fourth-quarter 2022 results on Feb 16.
Amtech shares have gained 20.5% in the past year. ASYS is set to report its first-quarter fiscal 2023 results on Feb 8.
RingCentral shares have declined 77.5% in the past year. RNG is set to report its fourth-quarter 2022 results on Feb 15.