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Advanced Micro (AMD) Down 2.5% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Advanced Micro Devices (AMD - Free Report) . Shares have lost about 2.5% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
AMD Q2 Earnings Beat, Revenues Hurt by Weak Data Center
Advanced Micro Devices 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -14.17% due to these changes.
VGM Scores
Currently, Advanced Micro has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Advanced Micro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Advanced Micro (AMD) Down 2.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Advanced Micro Devices (AMD - Free Report) . Shares have lost about 2.5% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
AMD Q2 Earnings Beat, Revenues Hurt by Weak Data Center
Advanced Micro Devices 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -14.17% due to these changes.
VGM Scores
Currently, Advanced Micro has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Advanced Micro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.