Strong Earnings Propel AMD’s Shares
Advanced Micro Devices (AMD) has exceeded market expectations with its second-quarter 2024 non-GAAP earnings coming in at 69 cents per share, surpassing the Zacks Consensus Estimate by 2.99% and marking a robust 19% year-over-year growth. Additionally, the company’s revenues of $5.84 billion beat estimates by 2.2%, illustrating a 9% increase from the previous year and a 7% sequential growth.
The standout performance in Data Center and Client revenues has significantly contributed to this top-line boost, effectively offsetting the slower growth observed in the Gaming and Embedded segments.
Key Drivers of Growth
The exceptional growth in Data Center revenues, soaring by 114.5% year over year and totaling $2.83 billion, highlights the successful adoption of products like AMD Instinct GPUs and fourth-gen AMD EPYC CPUs. These figures exhibit a notable increase from the prior quarter as well.
Additionally, strategic partnerships and product innovations, such as Netflix and Uber selecting AMD’s fourth-gen EPYC public cloud instances, have further bolstered the company’s revenue stream.
Financial Performance and Outlook
AMD’s non-GAAP gross margin expanded by 340 basis points, reaching 53.1%, largely due to adjustments in the Embedded segment. Operating expenses also rose by 15.1% year over year, totaling $1.85 billion. On the other hand, the non-GAAP operating margin widened by 170 bps to 21.7% in the second quarter.
Looking ahead, AMD anticipates third-quarter revenues of $6.7 billion (+/-$300 million), signaling impressive year-over-year and sequential growth. The steady expansion in the Data Center and Client segments is projected to drive this growth, although declines are expected in the Gaming segment.
Market Position and Comparative Analysis
Despite a strong performance, AMD’s shares have underperformed the Zacks Computer & Technology sector this year, reflecting a 6.1% decline compared to the sector’s robust 18.2% return. The cautious Zacks Rank #3 (Hold) on AMD contrasts with the more favorable ranks held by companies like Shopify and Apple in the Computer & Technology sector.
While Shopify has positioned itself as a Zacks Rank #1 (Strong Buy), Apple currently holds a Zacks Rank #2 (Buy), showcasing promising investment options within the sector.
Insights into the Future of AMD
As AMD continues to innovate and expand its market presence, particularly in the Data Center and Client segments, investors are keen to witness its sustained growth trajectory. The company’s prudent financial management and strategic outlook set a positive tone for its future performance in a rapidly evolving industry landscape.