Advanced Micro Devices Inc (AMD)

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AMD Stock Surges On Solid Q1 Earnings Beat, Bullish Chip Sales Outlook
By: TheStreet | May 4, 2022

• "Our focus remains on the premium, gaming and commercial portions of the market where we see strong growth opportunities, and we expect to continue gaining overall client revenue share," said CEO Lisa Su.

Advanced Micro Devices (AMD) shares leapt higher in pre-market trading after the chipmaker blasted first quarter earnings forecasts, and boosted its full-year revenue outlook, as cloud demand more than offset a slump on PC-related sales.

AMD posted earnings of $1.13 per share for the three months ending in March, topping Street forecasts by 22 cents, on adjusted revenues of $5.89 billion. Gross margins rose 700 basis points from last year to 53%, topping analysts' estimates of a 52.4% print.

Looking ahead, AMD said 2022 revenues should come in north of $26 billion, with a second quarter tally in the region of $6.5 billion, thanks to what CEO Lisa Su called the "premium, gaming and commercial portions of the (global semiconductor) market where we see strong growth opportunities and expect to continue gaining overall client revenue share."

There is some softness in the PC market. But we had, for the last number of quarters, actually been shifting our mix to the higher end or the more premium segments of the PC market, and so that's where more of our exposure is," Su told investors on a conference call late Tuesday. "And with the addition of Xilinx, we also have another set of end markets that have very strong demand that are all additive to our business."

AMD shares were marked 6.8% higher in pre-market trading to indicate an opening bell price of $97.30 each, a move that would still leave the stock with a year-to-date decline of around 32%.

Earlier this year, AMD pushed deeper into the lucrative data center market with the $1.9 billion purchase of enterprise services start-up group Pensando. AMD is also getting a boost from its $35 billion takeover of Xilinx (XLNX) - Get Xilinx, Inc. Report.

"The strategic importance of the Xilinx acquisition to our long-term goals cannot be overstated," Su said. "As the industry's No. 1 provider of FPGA and adaptive computing solutions, Xilinx significantly expands our technology and product portfolio."

Xilinx's data-center chips have become much more valuable in the wake of the global pandemic, triggered in part by a surge in work-from-home dynamics that have pressured companies around the world to improve their technology and storage capabilities.

"Despite PC weakness, where AMD's assumptions continue to be conservative, and more in line with how we believe the market is shaping out to be, AMD's share gains in servers are helping," said BMO Capital Markets analyst Ambrish Srivastava, who carries a 'market perform' rating with a $100 price target on the stock.

"Assumptions for Xilinx are for 2x growth vs. what we had been modeling for," he added. "Consequently, the acquisition should be slightly accretive this year."

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