Chip maker Advanced Micro Devices Inc. (AMD) is set to release its second-quarter earnings after the bell on Tuesday. Analysts surveyed by FactSet are expecting adjusted earnings of 57 cents per share from AMD on revenue of $5.32 billion. The company had previously forecasted revenue between $5 billion and $5.6 billion, with gross margins around 50%.

Focus on AI and Data-Center Products

In the previous quarter, AMD emphasized its plans for AI and data-center products in the second half of the year. However, the company acknowledged that a rebound in the PC market would be necessary to improve gross margins.

Intel's Potential Impact

Following Intel Corp.'s beat on PC sales, investors are now questioning how much market share Intel has regained from AMD. There is also speculation that AMD's strong sales may result in a boost to its margins.

According to analysts surveyed by FactSet:

  • Data-center sales are expected to decline 7.8% to $1.37 billion compared to the previous year.
  • Client, or PC, sales are anticipated to drop nearly 61% to $843.3 million from $2.15 billion in the same period last year.
  • Gaming sales are predicted to decline by 3.6% to $1.6 billion.
  • Embedded sales are expected to increase by 18.8% to $1.49 billion.

It remains to be seen how these numbers will play out for AMD in the upcoming earnings report.

Intel’s PC and Data-Center Sales on the Decline

Intel reported a decline in sales for both its PC-group and data-center divisions. PC-group sales amounted to $6.8 billion, a 12% decline from the previous year, falling short of analysts' estimated $6.08 billion. Data-center sales also saw a drop of 15% to $4 billion, below the forecasted $3.8 billion.

Challenges for AMD

One analyst believes that AMD may face difficulties given Intel's impressive $720 million beat on PC sales. Additionally, Nvidia's dominance in AI graphics processing units (GPUs) could be drawing data-center spending away from traditional servers and CPUs, posing further challenges for AMD.

Intel's Data-Center Forecast and Other Themes

Intel's data-center forecast wasn't particularly positive, as the company acknowledged a shift in spending from CPUs to GPUs. This shift, along with other factors such as enterprise digestion and slow sales in China, could impact AMD's data-center business negatively.

Analyst Projections for Third-Quarter Earnings

Analysts are predicting that AMD will report adjusted earnings of 73 cents per share for the third quarter, with a revenue of $5.82 billion. This would represent a 4.6% increase in top-line revenue. Furthermore, data-center sales are expected to rise by 7.3% to $1.73 billion compared to the previous year, while PC sales are projected to increase by 2.6% to $1.05 billion.

AMD's Performance and Market Comparisons

Year to date, AMD shares have experienced a significant gain of 76.6%. In comparison, the PHLX Semiconductor Index has surged by 52.5%, the S&P 500 index has grown by 19.5%, and the tech-heavy Nasdaq Composite has gained 37.1%.

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