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Advanced Micro Devices (AMD) to Post Q1 Earnings: What to Expect?

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Zacks Equity Research
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Advanced Micro Devices AMD is set to release first-quarter 2021 results on Apr 27.

The company projects first-quarter 2021 revenues to be around $3.2 billion (+/-$100 million). Robust sales across all its businesses are likely to drive year-over-year increase in revenues. On a sequential basis, revenues are expected to register a decline of 1%.

The Zacks Consensus Estimate for revenues is pegged at $3.21 billion, suggesting growth of 79.5% from the year-ago quarter’s reported figure.

Advanced Micro Devices, Inc. Price and EPS Surprise

Advanced Micro Devices, Inc. Price and EPS Surprise
Advanced Micro Devices, Inc. Price and EPS Surprise

Advanced Micro Devices, Inc. price-eps-surprise | Advanced Micro Devices, Inc. Quote

Meanwhile, the Zacks Consensus Estimate for first-quarter earnings is pegged at 44 cents per share. The figure indicates an improvement of 144.4% on a year-over-year basis.

Factors Likely to Have Influenced Q1

AMD’s first-quarter 2021 performance is expected to have benefitted from strength seen in AMD’s EPYC processors. EPYC processors have been witnessing robust adoption among the cloud, enterprise, and high-performance computing (HPC) customers. The strength in its EPYC processors might have positively impacted server revenue growth in the to-be-reported quarter.

Further, the chipmaker is also likely to gain from the steady momentum witnessed in the adoption of Ryzen, Radeon and semi-custom processors. These processors are being heavily utilized in the cloud, gaming, PC, and data center verticals, driven by work-from-home and online schooling trends due to the pandemic.

AMD expects semi-custom revenues to benefit on higher production induced by strong demand for Xbox Series X, Xbox Series S and PlayStation 5 gaming consoles. Both the next-generation hardware consoles were released in November 2020.

Increasing demand for AMD's processor chips augurs well for the top line and instills investors’ confidence in the stock. Shares of the company, which carries a Zacks Rank #2 (Buy), have returned 41.8% in the past year compared with the industry’s rally of 72.6%.

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

Markedly, improving PC shipments’ trend in the first quarter of 2021, driven by increased demand is expected to have favored AMD’s first-quarter performance. Per an IDC report, PC shipments surged 55.2% to 84 million units in the first quarter of calendar year 2021.

Consistent strength in demand for Ryzen 4000 processors in the mobile domain is expected to have contributed to top-line growth in the Computing and Graphics division. In January 2021, at CES 2021, AMD unveiled a new class of mobile processors — AMD Ryzen 5000 Series — based on Zen 3 core architecture.

Ryzen PRO processors are also anticipated to have witnessed incremental adoption across leading OEMs in the first quarter

In the said quarter, AMD’s Data Center GPU sales are likely to have benefited from healthy demand for AMD Instinct MI100 accelerator.

Nevertheless, increasing expenses on product development amid intensifying competition from NVIDIA NVDA and Intel INTC is likely to limit margin expansion in the to-be-reported quarter.

Key Developments in Q1

In March 2021, AMD launched AMD Radeon RX 6700 XT graphics card, which is built on the company’s RDNA 2 gaming architecture. The graphics card is based on the 7 nanometer (nm) process technology and is aimed toward augmenting PC video gaming experiences.

Further, AMD rolled out the third-generation AMD EPYC processors (dubbed Milan) to boost its prospects in the server processor market. The new AMD EPYC 7003 Series CPUs are designed to improve outcomes for HPC, cloud and enterprise customers.

The company also unveiled AMD Ryzen PRO 5000 Series mobile processors based on its Zen 3 core architecture. The new line of Ryzen Pro mobile processors is aimed toward enhancing efficiency of professional laptops amid rise in hybrid work set-up.

Recently, AMD and Xilinx XLNX stockholders unanimously approved the acquisition of Xilinx by AMD. The transaction, subject to regulatory and customary approvals, is slated for completion by the end of 2021.

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NVIDIA Corporation (NVDA) : Free Stock Analysis Report

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Xilinx, Inc. (XLNX) : Free Stock Analysis Report

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