AMD Q3 2021 Earnings Preview: Revenue Growth and Segment Insights with Price Trends

Examining AMD's Enterprise, Embedded, and Semi-Custom segment revenue trends

Highlights to Watch

• Analysts predict adjusted EPS of $0.67, up from $0.52 in Q3 2020.
• Enterprise, Embedded, and Semi-Custom segment revenue is forecasted to increase significantly year-over-year.
• Overall revenue growth remains strong despite slowing compared to previous quarters amid ongoing chip shortages.

Advanced Micro Devices Inc. (AMD) has recently experienced remarkable profit and revenue surges driven by the persistent global semiconductor shortage. The demand surge stems from the expanding integration of chips in diverse products and the accelerated shift to digital operations during the pandemic. AMD anticipates the chip shortage to persist through the end of 2022.

Investors eagerly await AMD's Q3 FY2021 earnings release on October 26, 2021, to gauge if the company can sustain its recent robust financial momentum. While analysts expect continued growth in adjusted EPS and revenue, the pace is likely to moderate compared to earlier quarters.

Particular attention will be on the Enterprise, Embedded, and Semi-Custom segment, a key growth driver for AMD. This segment, encompassing server and embedded processors, has shown rapid expansion over the past year. Analysts forecast continued strong, albeit decelerating, growth in this area.

AMD’s stock has outperformed the market over the last year, delivering a total return of 50.9%, surpassing the S&P 500’s 31.6%. However, its performance has seen fluctuations, with periods of both outperformance and underperformance.

AMD's Earnings Trajectory

In Q2 FY2021, AMD surpassed expectations with adjusted EPS soaring 258.7% year-over-year, marking its fastest growth since late 2019. Revenue nearly doubled, rising 99.3%, the highest growth rate in over three years. During this quarter, AMD also initiated a $4 billion share repurchase program, acquiring 3.2 million shares for $256 million.

Q1 FY2021 results also exceeded forecasts, with adjusted EPS increasing 187.1% and revenue up 92.9% year-over-year. This period saw the launch of AMD's EPYC 7003 series processors, including the EPYC 7763, touted as the highest-performing server processor globally.

For Q3 FY2021, analysts anticipate continued earnings and revenue growth, though at a slower rate. Adjusted EPS is expected to rise 63.3% year-over-year—the slowest since late 2020—while revenue is projected to grow 47.1%, the slowest pace since Q2 2020. Full-year FY2021 forecasts suggest adjusted EPS growth of 96.3% and revenue growth of 60.8%, representing a strong performance over the past five years.

Source: Visible Alpha

Crucial Segment Focus

Investors will closely monitor AMD’s Enterprise, Embedded, and Semi-Custom segment, which includes server and embedded processors, semi-custom SoCs, development services, and gaming console technology. This segment excludes desktop and notebook microprocessors, categorized under Computing and Graphics. Though smaller, generating just over a third of total revenue in FY2020, this segment has outpaced Computing and Graphics in growth due to expanding chip integration across products.

After a 14.0% revenue decline in FY2019, the segment rebounded with a 64.7% increase in FY2020, the fastest in four years. This growth was concentrated in the latter half of 2020, with Q3 and Q4 revenue surging 116.0% and 176.1% year-over-year, respectively. Growth accelerated further in Q1 FY2021 at 286.5%, then moderated to 183.2% in Q2. Analysts predict a 57.3% revenue increase for Q3 FY2021 and a near doubling (98.7%) for the full year—the fastest growth in at least five years.

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