amd

Advanced Micro Devices (NYSE: AMD) is trading higher in US premarket price action today even as it missed Q3 earnings estimates and provided tepid guidance.

It has been a tough year for chipmakers amid plummeting PC and smartphone sales. Apple iPhone sales have been an island of hope in an otherwise gloomy market. Notably, early last month AMD lowered its third-quarter guidance following the footsteps of Nvidia which lowered its earnings guidance in August just days before the earnings release.

AMD eventually posted revenues of $5.57 billion. While the revenues were higher than what the company guided for, they fell slightly short of the $5.62 billion that analysts were expecting.

Looking at the breakup, the company’s Data Center segment posted revenues of $1.6 billion, a YoY rise of 45%. The segment posted an operating profit of $505 million which is 31% of the revenues.

However, the Client segment’s revenues fell 40% YoY to $1 billion. It attributed the fall in revenues to “reduced processor shipments resulting from a weak PC market and a significant inventory correction across the PC supply chain.”

The segment posted an operating loss of $26 million in the quarter as compared to an operating profit of $490 million in the corresponding quarter last year. AMD attributed the operating loss to lower revenues.

AMD Reported Higher Gaming Revenues

AMD’s Gaming segment posted revenues of $1.6 billion which is 14% higher YoY. It said the increase in revenues was “driven by higher semi-custom product sales partially offset by lower graphics revenue.”

The performance of AMD’s Gaming segment is in contrast to Nvidia whose gaming revenues fell by a third in the most recent quarter.

AMD posted an adjusted EPS of 67 cents which is 1 cent below the 68 cents that analysts polled by Refinitiv were expecting.

Commenting on the third quarter performance, AMD CEO Dr. Lisa Su said “Third quarter results came in below our expectations due to the softening PC market and substantial inventory reduction actions across the PC supply chain.”

She added, “We are confident that our leadership product portfolio, strong balance sheet, and ongoing growth opportunities in our data center and embedded businesses position us well to navigate the current market dynamics.”

AMD Expects to Gain Market Share in Data Center

AMD warned of a continued slump in the PC market. Su said, “We’re planning for a weaker PC environment in the fourth quarter.” However, she expressed optimism that the company would continue to gain market share in the data center market.

AMD expects to post revenues of between $5.2-$5.8 billion in the fourth quarter. At the midpoint of the guidance, it would mean a YoY growth of 14%. It expects revenues to be flat on a sequential basis. Meanwhile, the guidance fell short of what analysts were expecting.

Last month, Intel reported a 15% YoY fall in its Q3 2022 revenues. Intel reported an adjusted EPS of 59 cents which were way ahead of the 32 cents that analysts were expecting. However, the company did lower its annual revenue guidance to $63-$64 billion which it said reflected “continued economic headwinds.”

Intel also Soared After Q3 Earnings Release

Intel recently completed the IPO of Mobileye, its self-driving unit. The company priced the IPO at $21 per share. While the overall IPO market has been tepid. Mobileye stock soared after the listing.

The US IPO market has been almost dead this year as investors have been cold to new listings due to the mayhem in growth stocks. However, there is still investor interest in some of the upcoming IPOs like Instacart. We have a list of some of the upcoming IPOs.

Meanwhile, like AMD, Intel also soared after the earnings. Many analysts believe that a lot of negatives are already baked into the valuations of chipmakers. Intel for instance is down 45% YTD while AMD has lost 58%.

Meanwhile, after the steep fall, Intel now offers a healthy dividend yield of 5.2% which is quite attractive. We have a guide on stocks with high dividend yields.

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