AMD (AMD) is set to report earnings Tuesday, Oct. 26, following the closing bell. Investors are hopeful that the California-based semiconductor company will produce another solid print amid the momentum in demand for AMD’s EPYC processors and semi-custom products.
Here are the main metrics expected in AMD’s report based on Bloomberg consensus estimates:
Revenue: $4.12 billion expected, $2.80 billion Y/Y
Adjusted EPS: $0.67 expected, $0.52 Y/Y
Results are expected to be aided by the increased adoption of EPYC processors by hyperscaling giants such as Google (GOOG, GOOGL), Amazon (AMZN), Microsoft (MSFT), and HP (HPE). For instance, AMD processors are taking center stage in powering Microsoft’s Azure cloud computing service.
AMD’s stock has returned over 50% during the past year, more than 15% greater than the SPDR S&P 500’s (SPY) 33.5%. AMD shares have been on an uptrend since the beginning of the month in the lead-up to earnings following a cooldown from August to September.
Industry analysts reiterated their positive outlook for the company, specifically citing potential growth in adoption of AMD's EPYC 7003 series of high-performance microprocessors based on the Zen 3 microarchitecture, codenamed “Milan.”
“From our channel checks and company commentary, hyperscalers/cloud providers are the first-movers in adopting Milan, but we expect that as enterprise spending recovers and customers gain more experience with the chip in a cloud setting, on-prem enterprise adoption of Milan is likely to follow over the next several years,” an Oct. 24 Goldman Sachs (GS) Equity Research report stated. “Coupled with the upcoming release of Genoa (next-generation server CPU based on the Zen 4 core architecture) in 2022, we reiterate our Buy rating for AMD and expect continued share gains for the foreseeable future.”
In terms of a short-term production and sales horizon in light of the global chip shortage, CEO Lisa Su believes that the current supply crunch is unlike anything the industry has seen before.
“If you think about the semiconductor industry, we've always gone through cycles of ups and downs where demand has exceeded supply or vice versa,” Su said at Code Conference 2021 on Sept. 27. “This time it's different and what's different this time is every industry needs more, and so the confluence of that means that there is an imbalance.”
AMD does not manufacture its chips in house. Instead, it outsources the production of its chips to foundries, or chip factories. According to Su, there is a “tremendous amount of investment” occurring in the industry, with more than 20 new factories expected to come online this year. In addition, there are another 20 more factories in the planning stage, and all of this in conjunction may help alleviate the chip shortage, Su said. And though she anticipates that the shortage will extend into 2022, she expects it to become less severe in the second half of next year.
This post will be updated with the results of AMD's Q3 results Tuesday after market close. Check back for updates.
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV
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