AMD Q1 Earnings Beat, Revenues Aided by Strong Embedded Growth
Advanced Micro Devices AMD reported first-quarter 2023 non-GAAP earnings of 60 cents per share, beating the Zacks Consensus Estimate by 7.1% but declining 46.9% year over year.
Revenues of $5.35 billion beat the Zacks Consensus Estimate by 0.91% but decreased 9.1% year over year.
The Embedded segment includes AMD and Xilinx embedded products. Revenues were $1.56 billion compared with the year-ago quarter’s $595 million. The segment accounted for 29.2% of total revenues.
AMD benefited from strong demand for its products in industrial, vision and health care, test and emulation, communications, aerospace and defense, and automotive end-markets.
Top-Line Details
The company announced new reporting segments — Data Center, Client, Gaming and Embedded — beginning second-quarter 2022.
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Advanced Micro Devices, Inc. price-consensus-eps-surprise-chart | Advanced Micro Devices, Inc. Quote
Data Center comprises server CPUs, data center GPUs, Pensando and Xilinx data center products. Revenues inched up 0.2% year over year to $1.295 billion and accounted for 24.2% of total revenues.
Higher cloud sales were offset by lower enterprise sales. EPYC CPU sales grew by a strong double-digit percentage year over year but declined sequentially due to higher inventory levels of several MDC customers.
In the reported quarter, AMD launched 28 new instances, including multiple confidential computing offerings from Microsoft Azure, Google Cloud and Oracle Cloud. It is currently powering 640 available public instances.
The Client segment includes desktop and notebook PC processors and chipsets. Revenues declined 65.2% year over year to $739 million and accounted for 13.8% of total revenues.
The Gaming segment includes discrete graphics processors and semi-custom game console products. Revenues decreased 6.3% year over year to $1.78 billion and accounted for 32.8% of total revenues.
Operating Details
Non-GAAP gross margin contracted 270 basis points on a year-over-year basis to 50%.
Non-GAAP operating expenses increased 17.9% year over year to $1.59 billion.
Non-GAAP operating margin was 20.5% compared with 31.2% in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2023, AMD had cash and cash equivalents (including marketable securities) of $5.94 billion compared with $5.86 billion as of Dec 31, 2022.
As of Mar 31, 2023, total debt was $2.47 billion, unchanged from the figure reported as of Dec 31, 2022.
Operating cash flow was reported at $486 million compared with $567 million in fourth-quarter 2022.
Free cash flow was $328 million in the first quarter of 2023 compared with $443 million in the fourth quarter of 2022.
Guidance
AMD expects second-quarter 2023 revenues to be $5.3 billion (+/-$300 million), which indicates a year-over-year decline of 19% and approximately flat sequentially.
It expects to witness growth in Embedded segments, partially offset by a decline in the Client, Gaming and Data Center segments.
Sequentially, Embedded and Gaming segment revenues are expected to decrease while Client and Data Center segment revenues are expected to grow.
Non-GAAP gross margin is anticipated to be roughly 50%. Non-GAAP operating expenses are expected to be approximately $1.6 billion.
Zacks Rank & Stocks to Consider
Currently, AMD has a Zacks Rank #3 (Hold).
BILL Holdings BILL, Fortinet FTNT and DigitalOcean DOCN are some better-ranked stocks that investors can consider in the Zacks Computer & Technology sector. While Fortinet sports a Zacks Rank #1 (Strong Buy), both BILL and DigitalOcean carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BILL Holdings shares have declined 27% year to date. BILL is set to report its first-quarter 2023 results on May 4.
Fortinet shares have gained 26% year to date. FTNT is set to report its first-quarter 2023 results on May 4.
DigitalOcean shares have gained 21.6% year to date. DOCN is set to report its first-quarter 2023 results on May 9.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
BILL Holdings, Inc. (BILL) : Free Stock Analysis Report
DigitalOcean Holdings, Inc. (DOCN) : Free Stock Analysis Report
