What’s in store for Advanced Micro Devices (AMD) in Q3 earnings? – October 28, 2022

Advanced micro-systems (AMD Free report) is expected to release third quarter 2022 results on November 1.

The company expects third-quarter revenue to be $5.6 billion, indicating 29% year-over-year growth. AMD previously expected revenue to grow 55% at the midpoint of the forecast.

Zacks’ consensus estimate for revenue is pegged at $5.58 billion, suggesting growth of 29.45% from the figure reported a year ago.

The consensus estimate for third-quarter earnings is pegged at 67 cents per share, unchanged for the past 30 days. The figure indicates a decline of 8.22% on an annual basis.

AMD’s earnings have topped the Zacks consensus estimate for the past four quarters, with the earnings surprise averaging 14.85%.

Factors at play

AMD’s preliminary third-quarter results reflect lower-than-expected customer segment revenue due to reduced processor shipments resulting from a weaker-than-expected PC market and a large inventory correction. Lower customer segment revenue is expected to have affected AMD’s third-quarter revenue forecast.

In addition, rising geopolitical tensions between the United States and China, global supply chain challenges that have hurt the semiconductor industry, the ongoing Russian-Ukrainian war, which has caused a surging natural gas prices across Europe, rising global inflation and Fed policy Rising interest rates are expected to have affected AMD’s revenue growth in the third trimester.

Additionally, AMD, which currently carries a Zacks Rank #5 (Strong Sell), faces stiff competition from its peers like Nvidia (NVDA free report) and Intel (INTC Free report) in other verticals where the company operates.

You can see youA complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NVIDIA competes with AMD in the high performance computing (HPC) market. NVIDIA’s Grace CPU superchips have benefited from the rapid proliferation of artificial intelligence (AI) as the company expands its base in untapped markets like climate science, energy research, space exploration and computational biology.

Intel is still the leading name in the consumer PC market and is AMD’s main competitor in this segment. INTC is gradually reducing its reliance on PC-centric businesses by shifting to data-centric businesses such as AI and autonomous driving.

However, AMD is expected to have generated significant revenue from its data center, gaming and embedded business segments as it invests heavily to diversify its product portfolio to cater to high-growth markets.

AMD’s third-quarter earnings are expected to have benefited from improved performance of its Ryzen processors to help address the growing proliferation of AI and machine learning in various high-growth sectors.

AMD has also forged strategic partnerships with companies such as Dell Technologies (Dell Free Report) and original equipment manufacturer partners Hewlett Packard, Acer and Lenovo, which should have helped it launch new products, increasing the revenue stream in the third quarter.

At the end of July, AMD collaborated with Dell to launch the most powerful 17″ AMD Advantage laptop – the Alienware m17 r5 gaming laptop. The collaboration will help AMD benefit from the growth of the gaming industry which will reach 545 $.98 billion by 2028, growing at a CAGR of 13.20% between 2021 and 2028, according to Fortune Business Insights.

The company’s revenue should have benefited from its acquisition of Xilinx. The buyout expanded AMD’s technology and product portfolio and helped gain entry into the augmented reality (AR) space.

Main developments in the third quarter

During the third quarter, AMD announced that it had formed a strategic collaboration with ECARX, a global mobility technology company, to develop an in-vehicle computing platform for next-generation electric vehicles.

In the upcoming quarter, it unveiled the Ryzen Embedded V3000 series processors with the Zen 3 core of the V-series portfolio. The processors are designed to deliver better CPU performance using less power than the older V1000 series.

AMD has joined the new PyTorch Foundation as a founding member. The organization is part of the nonprofit Linux establishment, created to drive the adoption of AI.

Stay up to date with upcoming results announcements with the Zacks Earnings Schedule.