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AMD Q3 Earnings: What to Expect?

With AMD’s Q3 results looming, will it continue to outperform the market or could we see a revenue pullback amid chip shortage concerns?

Advanced Micro Devices (NASDAQ: AMD), or AMD, is up 27% year-to-date (YTD) and has been one of the top-performing companies over the last five years, rising over 1,600%. So, will it continue this momentum?

What does AMD do?

AMD is a chipmaker in the semiconductor industry. It creates central processing units and graphics processing units for laptops, PCs, gaming consoles, tablets, cloud computing, and the automotive market. It also manufactures chips for data centers, high-performance computing, IT infrastructure, cloud computing, machine intelligence, and cloud gaming in the enterprise sector.

In 2020, AMD entered an agreement to acquire Xilinx, a fellow chipmaker, in a $35 billion all-stock offer deal. An all-stock offer means the target company’s shareholders (Xilinx) will receive shares in the acquiring company (AMD) rather than a cash payment. This acquisition will help AMD compete in the data center, medical devices, and robotics markets. It also estimates the acquisition will increase its total addressable market (TAM) to $110 billion. 

When is AMD’s earnings date?

AMD reports Q3 earnings on Tuesday, 26 October 2021 at 4:15 PM Eastern Time. You can listen to AMD’s earnings call by going to its investor relations page or clicking the link here.

What to look out for in AMD’s earnings?

CEO Dr. Lisa Su expects to see 60% revenue growth for 2021. However, if you decide to tune into the AMD earnings, there’s a couple of things to keep in mind.

1. Enterprise revenue growth — This has been the main growth driver for AMD over the past 12 months, growing over 183% year-on-year (YoY). It has partnered with mega-cap giants Google in recent months, so let’s see if AMD has continued onboarding larger customers. 

2. Gross Margins — It reached the highest level of growth margins it ever had in Q2 2021 at 48%. These are very healthy margins for what is primarily a hardware business, but it will be important for AMD to sustain or grow these over time. 

3. New product announcements — Is AMD continuing to innovate in each product category or is it struggling due to chip shortages? AMD’s primary source of revenue is from its PC and gaming segments, but its high-growth revenue is in data centers and enterprises. Is the investment in research and development, and innovation ongoing to compete with behemoths such as Nvidia, or have chip shortages got in the way?

4. Effect of chip shortages — This is an industry-wide problem but some analysts believe AMD has an advantage in securing resources as it is Taiwan Semiconductor Manufacturing’s second-largest customer after Apple.

Keeping these points in mind, AMD has been an outperformer over several quarters now and has increasingly taken more and more market share from companies like Intel. According to Mercury Research, AMD currently has 22.5% of the CPU market, compared to Intel’s 77.5%. However, AMD has set a roadmap and forecasts that it will surpass Intel as the market leader by 2025. Even in the GPU market, AMD has made many advancements to catch up to market leader Nvidia, and they are essentially operating a duopoly in the high-performance gaming segment.

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