AMD shares rise after Q4 report that beat expectations for revenue, EPS

January 31, 2023 5:12 PM EST
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(Updated - February 1, 2023 5:31 AM EST)

Advanced Micro Devices (NASDAQ: AMD) opened higher in premarket trading on Wednesday after its fourth-quarter report encouraged hopes that the worst may be over for the chipmaker.

As expected, weakness in the PC and gaming chip sectors, combined with a higher bill for R&D spending, drove the company to an operating loss of $149 million, left revenue broadly flat from the previous quarter at $5.60 billion and cut earnings per share to only 1c.

However, earnings adjusted for one-off items - chiefly the amortization of intangibles included in its acquisition of Xilinx - were slightly ahead of expectations at 69c. Analysts also took heart from the company's forecast that revenue from the PC sector will bottom out in the first quarter, as inventory levels normalize in the aftermath of the pandemic.

AMD expects revenue to fall to around $5.3B in the current quarter, below expectations for $5.5B.

The company nonetheless held off from giving guidance for the year ahead.

“Although the demand environment is mixed, we are confident in our ability to gain market share in 2023 and deliver long-term growth based on our differentiated product portfolio," Chief Executive Officer Lisa Su said in a statement.

As with rival Intel (NASDAQ: INTC), AMD was hit in the second half by a sharp slowdown in demand for PCs as the pandemic boom unwound. Gaming chip demand also softened as the lifting of lockdowns led consumers to revert to more active forms of entertainment. Those declines were offset by continued growth in data center sales, thanks to the unbroken secular trend of digitization.

The company said it expects both of those trends to continue in the near term, with revenue from the PC segment bottoming in the first quarter. It expects steady growth from the data center segment.

Shares of AMD rose 3.3% in premarket, taking their year-to-date gains to 21%. They're now up 42% from their November low but have still lost more than 50% from their peak during the pandemic.

Analysts at KeyBanc Capital Markets raised their price target for the stock to $95 from $80 in response to the numbers, saying that the outlook for sustained growth in data center chips and for market share gains vis-a-vis Intel, combined with the stock's re-rating in the second half of last year, made it attractive.

They noted however that Intel is planning a major capacity expansion, which could lead to more aggressive price competition and margin compression in the future.

By Liz Moyer

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