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Key Takeaways
- Analysts estimate adjusted EPS of $0.67 vs. $0.52 in Q3 FY 2020.
- Revenue for the Enterprise, Embedded and Semi-Custom segment is expected to rise at a healthy pace YOY.
- Revenue is expected to expand quickly amid the global chip shortage, but growth is likely to be much slower than in recent quarters.
Advanced Micro Devices Inc. (AMD) has reported explosive profit and revenue growth recently amid the protracted global semiconductor shortage. Demand for processing chips is being fueled by the rising use of chips in more and more products, as well as many companies’ abrupt shift to operating online amid the pandemic. AMD sees the severe global chip shortage lasting until the end of 2022.
Investors will be looking to see if AMD can maintain its recent strong financial performance when the company reports earnings on Oct. 26, 2021 for Q3 FY 2021. Analysts expect adjusted EPS and revenue to grow at a robust pace, albeit slower than in recent quarters.
Investors will also be focusing on AMD’s revenue from its Enterprise, Embedded and Semi-Custom segment, one of the company’s two primary business segments. The segment – which includes server and embedded processors rather than processors for desktops and laptops – has been growing rapidly over the past year. Analysts expect another strong quarter of growth, but decelerating from the pace of recent quarters.
AMD stock has led the broader market over the past year, but its performance has been volatile. It mostly outperformed between mid-October 2020 and mid-February 2021, but then spent a little more than five months underperforming. The stock began to outperform again in late July. AMD’s shares have provided a total return of 50.9% over the past year, well above the S&P 500’s total return of 31.6%.
Source: TradingView.
AMD Earnings History
AMD reported Q2 FY 2021 earnings that beat analysts’ expectations. Adjusted EPS rose 258.7% compared to the year-ago quarter, its fastest pace since the final quarter of FY 2019. Revenue grew 99.3% year over year (YOY), the fastest pace of growth out of any quarter in at least the past three and a half years. During the quarter, AMD announced a $4 billion share repurchase program and purchased 3.2 million shares of common stock for $256 million.
In Q1 FY 2021, the company’s earnings and revenue came in above consensus estimates. Adjusted EPS rose 187.1% compared to the year-ago quarter while revenue expanded 92.9%. Growth in adjusted EPS and revenue accelerated from the previous quarter. During the quarter, AMD announced the new AMD EPYC 7003 series processors. This includes the AMD EPYC 7763, which AMD says is the world’s highest performance server processor.
Analysts expect healthy earnings and revenue growth in Q3 FY 2021, albeit slower than in recent quarters. Adjusted EPS is expected to rise 63.3% YOY, which would be the slowest pace since the final quarter of FY 2020. Revenue is expected to grow 47.1% YOY, which would be the slowest pace since Q2 FY 2020. For full-year FY 2021, adjusted EPS is expected to increase 96.3%, decelerating from last year’s pace of 104.9%. Annual revenue is expected to grow 60.8%, which would be the fastest pace in at least the past five years.
| AMD Key Stats | |||
|---|---|---|---|
| Estimate for Q3 FY 2021 | Q3 FY 2020 | Q3 FY 2019 | |
| Adjusted Earnings Per Share ($) | 0.67 | 0.41 | 0.18 |
| Revenue ($B) | 4.1 | 2.8 | 1.8 |
| Enterprise, Embedded and Semi-Custom ($B) | 1.8 | 1.1 | 0.5 |
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be focused on the amount of revenue generated by AMD’s Enterprise, Embedded and Semi-Custom segment. The segment encompasses server and embedded processors, semi-custom System-on-Chip (SoC) products, development services, and game console technology. It does not include AMD’s desktop and notebook microprocessors, which are included in the company’s Computing and Graphics segment. The Enterprise, Embedded and Semi-Custom segment is the smaller of the company’s two main segments, generating a little over a third of companywide revenue in FY 2020. However, it has been growing much faster than the Computing and Graphics segment as processing chips are being embedded in more and more products.
After declining 14.0% in FY 2019, revenue generated by AMD’s Enterprise, Embedded and Semi-Custom segment rose 64.7% in FY 2020. That was the fastest pace of growth in at least the past four years. But all of it was generated in the last half of that year. Revenue for the segment fell 21.1% YOY in the first quarter and then by 4.4% YOY in the second quarter of FY 2020. It then rose 116.0% YOY in Q3 and 176.1% in Q4. Growth continued to accelerate in Q1 FY 2021, rising 286.5% YOY. It slowed to 183.2% in the second quarter. Analysts expect revenue for the segment to rise 57.3% in Q3 FY 2021. For full-year FY 2021, analysts are forecasting revenue to rise 98.7%, the fastest growth in at least five years.
