AMD earnings are coming. Can they help justify the stock’s huge increase?



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Advanced Micro Devices Inc. shares have rocketed roughly 80% since the company last posted earnings. That means the pressure is on heading into Tuesday afternoon’s report.

Despite the stock’s big rally, AMD’s
AMD,
-3.18%
story at the moment is mixed, as the traditional personal-computer and data-center markets are under pressure. But AMD also has the potential to see more traction with its data-center AI offerings, and that’s been driving the stock’s recent momentum.

Even so, some analysts are skeptical that the upcoming report will be a positive catalyst. HSBC’s Frank Lee wrote earlier this week that there could be some “disappointment” as relates to the company’s forecast for its current quarter, given weakness in several key traditional business areas.

Read: Intel’s stock sees worst plunge in more than three years upon ‘yet another major reset’

Meanwhile, “the recent AMD share price rally has raised expectations significantly, especially for its AI MI300 GPU revenue potential,” he continued. He sees “significant AI upside” as already priced into the stock.

UBS’s Timothy Arcuri, meanwhile, sounded more upbeat.

“The tactical setup around earnings is complicated somewhat by the recent rally, but we are nonetheless more confident on AMD’s data center GPU revenue opportunity,” he wrote, noting that he was “significantly” upping his full-year expectations for 2024 and 2025.

AMD shares were off about 3% in Tuesday afternoon trading heading into the report.

Opinion: Salesforce, AMD and other Big Tech stocks not named Nvidia that look smart as AI goes mainstream

What to expect

Earnings: Analysts tracked by FactSet expect AMD to post 77 cents a share in adjusted earnings, up from 69 cents a share a year before.

Revenue: The FactSet consensus calls for revenue of $6.1 billion, up from $5.6 billion a year before.

Analysts are looking for $2.3 billion in data-center revenue, up 39%, along with $1.5 billion in client revenue, up 70%. But gaming revenue is expected to drop 25% to $1.2 billion and embedded revenue is projected to fall 24% to $1.1 billion.

Stock movement: Shares of AMD have fallen after three of the company’s past five earnings reports, though they gained 9.7% after the most recent one.

Of the 46 analysts tracked by FactSet who cover AMD shares, 33 have buy ratings and 13 have hold ratings, with an average price target of $164.58.

What analysts are saying

Of key interest to analysts will be AMD’s commentary on its MI300 AI accelerator, after the company said three months back that it expected upwards of $2 billion in revenue from data-center graphics processing units during 2024. The thinking on Wall Street is that that target is now stale.

See more: AMD earnings are around the corner, and this number could be the ‘swing factor’

“While we see our new estimate for the ‘plus’ as certainly debatable (with our model now assuming $3.1 billion in datacenter GPU revenue, vs. the ~$2 billion we had previously been modeling), we also would suggest that given AMD’s apparent customer base, that it’s very believable that AMD will be able to take a mid- to high-single-digit share of the overall AI market by the end of the year,” Wedbush’s Matt Bryson wrote recently.

Stifel’s Ruben Roy wrote that while AMD’s MI300 family seems to be gaining momentum, demand isn’t the only factor.

“With the overall AI data center [total addressable market] continuing to accelerate, we continue to view AMD as well positioned to benefit as a diverse group of end customers continue to search out alternatives” to Nvidia, he wrote. “We believe that supply remains a gating factor and, on that front, our recent conversations with industry participants suggest an improving situation.”

Roy’s expectations for MI300 are around the roughly $2 billion the AMD forecasted last time around, though he said “improving supply, coupled with strong ongoing demand, could result in meaningful upside as 2024 progresses.”

Susquehanna’s Christopher Rolland, meanwhile, suggested that expectations may have gotten sky-high.

“On average, investors we speak with are targeting closer to $6 billion, with some suggesting even higher,” he wrote earlier this week.

Read: Super Micro’s monster earnings forecast sends stock soaring yet again

Plus, Raymond James analyst Srini Pajjuri downgraded AMD’s stock Tuesday morning, though he remained bullish, lowering his rating to outperform from strong buy.

While he didn’t focus on the upcoming earnings report in his downgrade, he called out “elevated AI revenue expectations” more generally.

Don’t miss: Missed the boat on AMD’s stock surge? Why this analyst says you’re not too late.



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