AMD Q4 FY2021 Earnings Preview: Key Insights and Growth Expectations

Spotlight on AMD's Enterprise, Embedded, and Semi-Custom segment revenue growth

Highlights to Watch

• Analysts forecast adjusted EPS of $0.76, up from $0.36 in Q4 FY2020.
• Year-over-year revenue growth anticipated to remain strong in the Enterprise, Embedded, and Semi-Custom segment.
• Overall company revenue expected to increase, though at a more moderate pace compared to recent quarters.

Advanced Micro Devices Inc. (AMD) continues to benefit from surging demand across the semiconductor industry. This surge is fueled by accelerated remote work and education driving higher data storage and processing needs, alongside expanding consumer electronics such as automotive technologies embedding more chips. The global chip shortage, caused by supply constraints unable to match skyrocketing demand, remains a critical factor shaping AMD's market environment.

Investors eagerly await AMD's Q4 FY2021 earnings report on February 1, 2021, to gauge if the company can sustain its robust financial momentum. While analysts predict continued EPS growth, it is expected to slow to the most gradual increase in nine quarters. Similarly, revenue growth is projected to slow, marking the softest rise in six quarters.

Particular attention will center on the Enterprise, Embedded, and Semi-Custom segment—one of AMD's core business pillars. This segment, encompassing server and embedded processors distinct from desktop and laptop CPUs, has experienced rapid expansion over the past year. Analysts anticipate continued strong growth this quarter, albeit at a tempered rate relative to prior periods.

Amid this semiconductor boom, AMD is actively pursuing strategic growth initiatives. In October 2020, AMD announced plans to acquire Xilinx Inc., a leading semiconductor firm. The acquisition recently gained approval from Chinese regulators, with U.S. regulatory clearance pending. AMD expects the deal to finalize within the current fiscal quarter.

AMD’s stock has outperformed broader market indices over the past year. After trailing the market from mid-February to late July 2021, shares surged following the Q2 FY2021 earnings release and have maintained a strong performance since. Despite a pullback from early October gains, AMD delivered a total return of 20.3% over the past year, surpassing the S&P 500’s 17.0% return.

AMD’s Earnings Performance Overview

In Q3 FY2021, AMD surpassed analyst expectations with adjusted EPS rising 78.2% year-over-year, reflecting strong but decelerating growth compared to previous quarters. Revenue increased 54.0% year-over-year, marking the slowest growth rate since Q4 FY2020. The company highlighted a more than doubling of data center sales during this period.

During Q2 FY2021, AMD posted exceptional results with adjusted EPS soaring 258.7% year-over-year—the fastest growth since Q4 FY2019—and revenue nearly doubling at 99.3% year-over-year. AMD also initiated a $4 billion share repurchase program, acquiring 3.2 million shares for $256 million.

For Q4 FY2021, analysts project continued earnings and revenue growth, though at a slower pace. Adjusted EPS is forecasted to increase 46.6% year-over-year—the slowest since Q3 FY2019—while revenue is expected to grow 39.6% year-over-year, the slowest since Q2 FY2020. Full-year FY2021 estimates suggest adjusted EPS growth of 106.4%, the fastest since FY2018, and revenue growth of 65.3%, the highest in at least five years.

Source: Visible Alpha

Critical Focus: Enterprise, Embedded, and Semi-Custom Segment

Investors will closely monitor revenue from AMD’s Enterprise, Embedded, and Semi-Custom segment, which includes server and embedded processors, semi-custom System-on-Chip (SoC) products, development services, and gaming console technology. This segment excludes desktop and notebook microprocessors, which fall under the Computing and Graphics segment. Although smaller—accounting for just over one-third of total revenue in FY2020—it has outpaced the Computing and Graphics segment in growth, reflecting the increasing integration of chips into diverse products.

Demand for chips in this segment has surged, especially since the pandemic’s onset. Increased remote work and online education have driven higher data center traffic, boosting server capacity needs. Additionally, gaming consumption has risen as a popular entertainment medium during lockdowns. Supply constraints have led to a global semiconductor shortage. Furthermore, Microsoft's planned acquisition of Activision Blizzard may elevate demand for AMD chips used in Xbox consoles, potentially enhancing the segment’s growth prospects.

After a 14.0% revenue decline in FY2019, the Enterprise, Embedded, and Semi-Custom segment rebounded with 64.7% growth in FY2020, primarily in the year's second half. Q3 FY2020 saw 116.0% year-over-year revenue growth, accelerating to 176.1% in Q4. Growth peaked at 286.5% in Q1 FY2021, then decelerated to 183.2% in Q2 and 68.9% in Q3. Analysts anticipate 63.7% year-over-year revenue growth in Q4 FY2021, continuing the deceleration trend but remaining robust. For full-year FY2021, the segment’s revenue is expected to surge 109.1%, the fastest growth rate in at least five years.

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