AMD Q1 FY2022 Earnings Preview: Anticipating Growth in Enterprise and Embedded Segments

Highlighting AMD’s Enterprise, Embedded, and Semi-Custom segment revenue growth

Key Insights

• Analysts forecast an EPS of $0.91, a significant rise from $0.52 in Q1 FY2021.
• Strong year-over-year revenue growth is expected in the Enterprise, Embedded, and Semi-Custom segment.
• Overall company revenue is projected to increase, though at a more moderate pace compared to the highlighted segment.

Advanced Micro Devices Inc. (AMD) has experienced rapid semiconductor demand growth throughout the COVID-19 pandemic and the ongoing global chip shortage. To fuel this momentum, AMD is expanding its product portfolio in the booming data-center market. In April, AMD announced its plan to acquire Pensando Systems Inc., a networking and security solutions provider, for $1.9 billion, aiming to strengthen its competitive position in data centers. This acquisition is expected to finalize in Q2 2022.

Investors eagerly await AMD’s Q1 FY2022 earnings report on May 3, 2022, to gain insights into how the company will sustain its growth trajectory, including strategies involving the Pensando acquisition. Industry analysts predict a notable year-over-year increase in earnings per share (EPS), albeit at a slower pace than previous quarters. Revenue growth is also anticipated to remain robust but with some deceleration.

A key focus will be AMD’s revenue from its Enterprise, Embedded, and Semi-Custom segment—one of its two main business units. This segment, which includes server and embedded processors rather than consumer desktop and laptop chips, has shown rapid expansion over the last 18 months. Analysts expect this growth trend to continue, though at a slower rate than in recent quarters.

AMD’s stock performance has slightly outperformed the broader market over the past year. After lagging behind in May 2021, AMD shares surged sharply through November, maintaining outperformance despite a gradual decline afterward. As of May 1, 2022, AMD’s stock has largely given back gains from the previous rally but still delivered a 1.9% total return over the past year, marginally surpassing the S&P 500.

AMD’s Earnings Performance Overview

AMD has demonstrated consistent EPS growth in recent years, with only two quarters showing year-over-year declines in the last 16 quarters. EPS growth accelerated notably during the pandemic: from a 41.2% increase in FY2019 to 102.3% in FY2020, and further to 117.9% in FY2021. However, quarterly EPS growth has moderated recently, declining from 187.1% in Q1 FY2021 to 77.9% in Q4 FY2021. Analysts expect this deceleration to continue with an estimated 74.1% year-over-year EPS growth in Q1 FY2022.

Revenue growth has also been strong and steady, with only two quarters of decline over the past four years. The pandemic accelerated revenue growth from 4.0% in FY2019 to 45.1% in FY2020 and 68.3% in FY2021. Recent quarters have seen a slowdown from 92.9% growth in Q1 FY2021 to 48.8% in Q4 FY2021. For Q1 FY2022, analysts project a 51.0% revenue increase, signaling a rebound from Q4 but still below the previous year’s peak.

Source: Visible Alpha

Focus Metric: 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 division. Although smaller, this segment is rapidly growing and may surpass Computing and Graphics as AMD’s primary revenue source. In FY2020, it represented 34.1% of total revenue, increasing to 43.2% in FY2021. It covers areas affected by recent supply shortages, like automotive chips, and sectors poised for growth, such as gaming consoles.

After a modest start, the Enterprise, Embedded, and Semi-Custom segment’s revenue surged dramatically. From $0.4 billion in Q1 FY2019, it dipped slightly to $0.3 billion in Q1 FY2020 but then nearly quadrupled to $1.3 billion in Q1 FY2021. Analysts forecast continued strong growth in Q1 FY2022, with revenue potentially reaching $2.3 billion.

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