AMD Earnings: What Happened With AMD

What happened

AMD reported an impressive Q4 2020, with Adjusted EPS growing around 63% YoY and revenue up around 53% YoY. Both metrics beat analysts’ expectations, which were already elevated from the fourth quarter of fiscal 2019. Gross margin was flat year-on-year at around 45%, as analysts expected. AMD attributed the strong revenue performance to its Computing and Graphics segment and its Enterprise, Embedded and Semi-Custom segment. The company said an increase in net profit to more than 10 times its level a year earlier was due in part to a $1.3 billion tax benefit associated with a release of a valuation allowance.

(Below is the original Investopedia Earnings Snapshot published on January 21, 2021.)

What to look for

Advanced Micro Devices Inc. (AMD), the global producer of semiconductors, computer processors and similar products, has thrived amid increased demand for microprocessor chips during the COVID-19 pandemic, as more people work from home. The company recently cemented its dominant position during this period of massive growth with a $35 billion all-stock purchase of rival Xilinx Inc. (XLNX).

Investors will be looking for signs that AMD can build on this success when it reports results on January 26 for the fourth quarter of fiscal 2020. Analysts estimate that adjusted earnings per share (PES) and revenue will grow significantly year-over-year (YOY), although Adjusted EPS may grow at a slower pace than in recent quarters.

At the same time, investors will focus on company gross margin, a key metric in the semiconductor industry that measures the degree of operational efficiency in a company’s operations. Analysts believe AMD’s quarterly gross margin will be the second highest in nearly four years, although it will show only a slight improvement from the same quarter a year ago.

AMD’s outstanding performance over the past year has been reflected in its dramatic share price gains. Shares of the company have provided a total return of 73.9% over the past 12 months, nearly 5 times the S&P 500 total return of 16.0% over the same period, as of January 20, 2021. In July 2020, AMD’s stock has greatly widened its performance gap against the broader market.

Over the past three years, AMD has generally experienced robust quarterly Adjusted EPS growth, with only two quarters with declines in the first half of fiscal 2019. The first three quarters of 2020 provided Adjusted EPS growth of more than of 228%, 131%, and 125% YOY, respectively. Analysts predict that pace of growth will slow as AMD reports a still-strong adjusted EPS increase of 49.3% year-over-year.

AMD’s quarterly revenue performance over the past three years has also been generally robust, but marked by five quarters with revenue declines or weak growth. In the first three quarters of fiscal 2020, AMD recorded growth of 40.4% in the first quarter, 26.2% in the second quarter and 55.5% in the third quarter. Analysts estimate a 42.3% year-on-year increase in the fourth quarter, which would be slower than the 49.9% increase in the same quarter a year earlier.