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AMD Q2 Earnings Beat, Revenues Hurt by Weak Data Center
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Advanced Micro Devices (AMD - Free Report) reported second-quarter 2023 non-GAAP earnings of 58 cents per share, beating the Zacks Consensus Estimate by 1.75% but declining 44.8% year over year.
Revenues of $5.36 billion beat the Zacks Consensus Estimate by 0.67% but decreased 18.2% year over year.
Top-Line Details
Data Center revenues declined 11.1% year over year to $1.32 billion and accounted for 24.7% of total revenues. The year-over-year decline was primarily attributed to lower third-generation EPYC processor sales due to soft enterprise demand and an elevated level of inventory at some customers.
Higher fourth-generation EPYC sales benefited data center revenues, which increased 1% sequentially.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
In the reported quarter, AMD launched 30 new instances, including multiple Genoa instances from Microsoft Azure, Amazon Web Services, Alibaba and Oracle.
The Client segment revenues declined 53.6% year over year to $998 million and accounted for 18.6% of total revenues. A weak PC market and significant inventory correction hurt the segment's revenues.
However, revenues increased 35% sequentially, driven by strong Ryzen 7000 Series CPU sales.
The Gaming segment revenues decreased 4.5% year over year to $1.58 billion and accounted for 29.5% of total revenues. The decline was primarily attributed to lower gaming graphics revenues.
The Embedded segment revenues were $1.46 billion, up 16.1% year over year. The segment accounted for 27.2% of total revenues. The top line benefited from strong sales in the industrial, vision and healthcare, automotive and test and emulation markets.
Operating Details
Non-GAAP gross margin contracted 430 basis points on a year-over-year basis to 49.7%, primarily due to lower client segment revenues.
Non-GAAP operating expenses increased 2.8% year over year to $1.61 billion.
Non-GAAP operating margin was 19.9% compared with 30.3% in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jul 1, 2023, AMD had cash and cash equivalents (including marketable securities) of $6.29 billion compared with $5.94 billion as of Mar 31, 2023.
As of Jul 1, 2023, total debt was $2.47 billion, unchanged from the figure reported as of Mar 31, 2023.
Operating cash flow was reported at $379 million compared with $486 million in the first quarter of 2023.
Free cash flow was $254 million in the second quarter of 2023 compared with $328 million in the first quarter of 2023.
Guidance
AMD expects third-quarter 2023 revenues to be $5.7 billion (+/-$300 million), which indicates year-over-year growth of 2.5% and 6.5% sequentially.
It expects to witness growth in Client segments, partially offset by a decline in the Gaming and Embedded segments.
Sequentially, Client and Data Center segment revenues are expected to grow on a double-digit basis. However, Gaming and Embedded segment revenues are expected to decline.
Non-GAAP gross margin is anticipated to be roughly 51%. Non-GAAP operating expenses are expected to be approximately $1.6 billion.
Image: Bigstock
AMD Q2 Earnings Beat, Revenues Hurt by Weak Data Center
Advanced Micro Devices (AMD - Free Report) reported second-quarter 2023 non-GAAP earnings of 58 cents per share, beating the Zacks Consensus Estimate by 1.75% but declining 44.8% year over year.
Revenues of $5.36 billion beat the Zacks Consensus Estimate by 0.67% but decreased 18.2% year over year.
Top-Line Details
Data Center revenues declined 11.1% year over year to $1.32 billion and accounted for 24.7% of total revenues. The year-over-year decline was primarily attributed to lower third-generation EPYC processor sales due to soft enterprise demand and an elevated level of inventory at some customers.
Higher fourth-generation EPYC sales benefited data center revenues, which increased 1% sequentially.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Advanced Micro Devices, Inc. price-consensus-eps-surprise-chart | Advanced Micro Devices, Inc. Quote
In the reported quarter, AMD launched 30 new instances, including multiple Genoa instances from Microsoft Azure, Amazon Web Services, Alibaba and Oracle.
The Client segment revenues declined 53.6% year over year to $998 million and accounted for 18.6% of total revenues. A weak PC market and significant inventory correction hurt the segment's revenues.
However, revenues increased 35% sequentially, driven by strong Ryzen 7000 Series CPU sales.
The Gaming segment revenues decreased 4.5% year over year to $1.58 billion and accounted for 29.5% of total revenues. The decline was primarily attributed to lower gaming graphics revenues.
The Embedded segment revenues were $1.46 billion, up 16.1% year over year. The segment accounted for 27.2% of total revenues. The top line benefited from strong sales in the industrial, vision and healthcare, automotive and test and emulation markets.
Operating Details
Non-GAAP gross margin contracted 430 basis points on a year-over-year basis to 49.7%, primarily due to lower client segment revenues.
Non-GAAP operating expenses increased 2.8% year over year to $1.61 billion.
Non-GAAP operating margin was 19.9% compared with 30.3% in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jul 1, 2023, AMD had cash and cash equivalents (including marketable securities) of $6.29 billion compared with $5.94 billion as of Mar 31, 2023.
As of Jul 1, 2023, total debt was $2.47 billion, unchanged from the figure reported as of Mar 31, 2023.
Operating cash flow was reported at $379 million compared with $486 million in the first quarter of 2023.
Free cash flow was $254 million in the second quarter of 2023 compared with $328 million in the first quarter of 2023.
Guidance
AMD expects third-quarter 2023 revenues to be $5.7 billion (+/-$300 million), which indicates year-over-year growth of 2.5% and 6.5% sequentially.
It expects to witness growth in Client segments, partially offset by a decline in the Gaming and Embedded segments.
Sequentially, Client and Data Center segment revenues are expected to grow on a double-digit basis. However, Gaming and Embedded segment revenues are expected to decline.
Non-GAAP gross margin is anticipated to be roughly 51%. Non-GAAP operating expenses are expected to be approximately $1.6 billion.
Zacks Rank & Stocks to Consider
Currently, AMD has a Zacks Rank #3 (Hold).
BILL Holdings (BILL - Free Report) , Fortinet (FTNT - Free Report) and Itron (ITRI - Free Report) are some better-ranked stocks that investors can consider in the broader sector. While both Fortinet and Itron sport a Zacks Rank #1 (Strong Buy) each, BILL Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BILL Holdings shares have gained 14.6% year to date. BILL is set to report its fourth-quarter 2023 results on Aug 17.
Fortinet shares have gained 59.8% year to date. FTNT is set to report its second-quarter 2023 results on Aug 3.
Itron shares have gained 55% year to date. ITRI is set to report its second-quarter 2023 results on Aug 3.