AMD Stock Slips After In-Line Q4: Lisa Su Touts 'Exciting Time' For Chipmaker Driven By AI

Advanced Micro Devices, Inc. -1.00%
Intel Corporation -1.12%
PHLX Sox Semiconductor Sector Ishares -0.32%

Advanced Micro Devices, Inc.

AMD

164.66

-1.00%

Intel Corporation

INTC

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PHLX Sox Semiconductor Sector Ishares

SOXX

232.51

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Advanced Micro Devices, Inc. (NASDAQ:AMD) reported Tuesday after the market close with fourth-quarter results that came in line with expectations, with strong Data Center revenue helping to offset weakness in the Embedded and Gaming segments. The chipmaker guided its first-quarter revenue above the consensus. The stock fell in after-hours trading.

AMD’s Key Numbers: Santa Clara, California-based AMD reported fourth-quarter non-GAAP earnings per share of 77 cents per share on revenue of $6.17 billion.

Here’s how the results compare with the Street estimates and prior year results:

Q4’23 Actuals Q4’23 Consensus* Q4’23 Guidance Q4’22 Q3’23 Y-o-Y Change Q-o-Q Change
Revenue $6.17B $6.12B $6.1B +/- $300 M $5.6B $5.8B
Non-GAAP EPS 77 cents 77 cents N/A 69 cents 70 cents
Non-GAAP gross margin 51% N/A 55.1% 51% 51%
* according to Benzinga Pro data

CEO Lisa Su lauded the company’s quarterly performance. “We finished 2023 strong, with sequential and year-over-year revenue and earnings growth driven by record quarterly AMD Instinct GPU and EPYC CPU sales and higher AMD Ryzen processor sales,” she said.

“Demand for our high-performance data center product portfolio continues to accelerate, positioning us well to deliver strong annual growth in what is an incredibly exciting time as AI re-shapes virtually every part of the computing market.”

AMD’s outperformance comes close on the heels of peer Peer Intel Corp.’s (NASDAQ:INTC) fourth-quarter results that sent the latter’s shares down by about 12%,

See Also: Best Artificial Intelligence Stock

AMD’s Segment Results: In line with expectations, AMD’s Data Center business reported solid performance, thanks to solid performance of the fourth-gen EPYC server processor sales and AMD Instinct GPUs.

Q4’23 Revenue Y-o-Y Change Q-o-Q Change % Contribution
Data Center $2.3B +38% +43% 37.2%
Client $1.5B +62% -25% 25.3%
Gaming $1.4B -17% -9% 22.7%
Embedded $1.1B -24% -15% 17.8%

KeyBanc Capital Markets analyst John Vinh had anticipated improving Genoa processor demand despite the weakness seen in traditional servers. Citing checks, the analyst said MI300X AI accelerator chips were seeing positive inflection in customer traction.

The Client segment’s softness is a function of continued weakness in the PC market. Data released by IDC showed that global PC shipments fell 2.7% year-over-year in the fourth quarter. “4Q23 was the eighth consecutive quarter of year-over-year shipment volume contraction.

AMD’s Forward Outlook: AMD guided first-quarter revenue to $5.4 billion plus or minus $300 million and guided the non-GAAP gross margin to 52%.

For the first quarter, analysts, on average, expect non-GAAP earnings per share of 62 cents on revenue of $5.28 billion.

Guiding on first-quarter segmental performance, AMD said:

  • Data Center revenue will be flat, with seasonal decline in server sales offset by a strong Data Center GPU ramp.
  • Client, Embedded and Gaming segment sales are expected to decline sequentially, with semi-custom revenue expected to decline by a significant double-digit percentage.

The consensus earnings per share and revenue estimates for fiscal year 2024 are at $3.59 and $24.74 billion, respectively.

Barclays analyst Tom O'Malley expects the company to exit 2024 with an AI revenue run-rate of $4 billion, which will likely increase to more than $7 billion in 2025. Citing channel checks, the analyst said the MI300 AI accelerator has received stronger feedback. 

On Tuesday, Raymond James’ Srini Pajjuri downgraded AMD shares from a Strong Buy to Outperform, citing elevated AI revenue expectations.

Earnings Call Focus: Ahead of the results, KeyBanc said investors will likely seek clarity on customer engagements for MI300X and any update to the $2 billion-plus MI300X run-rate guidance for 2024, Genoa ramp-up, the status of PC recovery and market share dynamics vis-a-vis Intel.

The earnings call is scheduled for 5 p.m. ET.

AMD Price Action: In after-hours trading on Tuesday, AMD shares were down 2.53% at $167.70, according to Benzinga Pro data. Stung by RayJay’s downgrade, the stock shed 3.24% to $172.06 in the regular session.

The stock hit an all-time closing high of $180.33 (intra-day peak at $184.92), on Thursday but has since slipped. So far in January, the stock is up 16.72%, with the gains coming on top of the 128% surge in 2023.

In comparison, the iShares Semiconductor ETF (NASDAQ:SOXX) is up 3.22% year-to-date.

The average analyst price target for AMD shares, according to TipRanks, is at $165.65, or 3.73% downside from current levels.

Read Next: ‘Big Week For Big Tech,’ Says Munster, As He Details ‘Pressure Points’ For The ‘Magnificent 7’

Photo courtesy of AMD.

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