AMD Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS Beat $0.52 $0.44
Revenue (billions) Beat $3.4 $3.2
Gross Margin Match  46% 46%
Predictions based on analysts’ consensus from Visible Alpha.

Key Takeaways

  • AMD's gross margin matched analysts' expectations at 46%, remaining flat YOY.
  • Due to the cyclical nature of the chip business, AMD needs strong gross margins to maximize profits when demand is high.
  • Revenue performance was driven by the Enterprise, Embedded and Semi-Custom segment. That segment's revenue was up 286% YOY.

AMD Financial Results: Analysis

Advanced Micro Devices Inc. (AMD), commonly known as AMD, posted a strong earnings report for Q1 FY 2021. The semiconductor and computer chip maker reported that its earnings per share (EPS) nearly tripled year-over-year (YOY), beating analysts' expectations. AMD's companywide revenue also surpassed analyst expectations, gaining by 93% YOY thanks in large part to standout performance by the company's Enterprise, Embedded and Semi-Custom segment. This segment contains AMD's, server and embedded processor, semi-custom System-on-Chip (SoC), and game console technology development businesses. The company increased its FY 2021 guidance in response to Q1 earnings, more on that below.

AMD's Key Metric: Gross Margin

A key metric for AMD is its gross margin. Because AMD's computer processor chip products are commodity goods which have minimal differentiation in quality between competing manufacturers, the company's profitability depends on maintaining a lean operation. By increasing its gross margin by increasing sales, cutting costs, or both, AMD can maximize profits when demand is high. For Q1 FY 2021, AMD matched analyst expectations of gross margin of 46%. This is flat YOY but a 1 point increase over Q4 2020.

AMD's Guidance and Stock Performance

In its Q1 report, AMD released increased full-year guidance. The company expects revenue of roughly $3.6 billion for Q2 FY 2021, up about 86% YOY. For the full FY 2021, AMD now projects revenue growth of 50% relative to FY 2020, driven by growth across all businesses, as compared with earlier projects of 37% growth.

Shares of AMD were up more than 3% in after hours trading following the earnings report. The company has slightly outperformed the broader market, providing a 1-year trailing total return of 51.7% as compared with 47.6% for the S&P 500.

AMD's Earnings Call Recap

On AMD's earnings call, CEO Dr. Lisa Su said that the company is on track to continue to grow its revenue in the quarters to come. She emphasized that Q1 was "another quarter of record server-processer revenue" thanks in part to Epyc processor sales which more than doubled YOY. The company also expects data center product revenue to grow "significantly" thanks to a "strong pipeline of new cloud, enterprise and HPC (high-performance computing) wins."

Because AMD is a fabless chipmaker, that uses semiconductors made by Taiwan Semiconductor Manufacturing (TSM) for assemble its chips, the current semiconductor shortage could pose problems. Dr. Su reassured investors on the matter, saying that the company has "good visibility" on potential supply concerns as it increases its forecast through the end of 2021.

Next Earnings Report:

AMD's next earnings report is expected to be released on July 28, 2021.