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Advanced Micro Devices Inc. reported more than $5 billion in quarterly revenue for the first time Tuesday, and executives predicted their first $6 billion quarter will immediately follow as the acquisition of Xilinx Inc. solidified their data-center strategy.
While reporting a 70% year-over-year revenue surge to a record $5.89 billion in the first quarter, AMD
AMD,
executives forecast second-quarter revenue of $6.3 billion to $6.7 billion, and increased their revenue forecast to about $26.3 billion for the year. AMD would have topped the $5 billion milestone for the first time even without the contribution of the company’s Feb. 14 closing of its Xilinx acquisition.
Analysts surveyed by FactSet were estimating revenue of $5.14 billion for the second quarter, and $21.48 billion for the year. The company also increased its gross margin forecast to 54% for the year. Back in February, AMD forecast gross margins of 51% for 2022, and revenue of about $21.5 billion. At that time, Wall Street analysts had a consensus $19.29 billion.
Shares rallied as much as 7% after hours, following a 1.4% rise in the regular session to close at $91.13.
Xilinx is driving the outlook hike, AMD Chief Executive Lisa Su said. On a conference call Tuesday afternoon, she told analysts that “strong visibility” into all product areas and secured supply allowed the company to increase its guidance.
“We made a lot of progress on the wafer side and significant investments,” Su said on the call. “We continue to get sort of very good support from our suppliers. That’s one of the reasons we can increase our guidance.”
Regarding COVID-19 shutdowns in China that are expected to exacerbate supply-chain problems, Su said the company has not seen a large impact. Chip makers like Texas Instruments Inc.
TXN,
have played it safe with a cautious outlook, believing lockdowns will affect the manufacturing operations of its customers.
Read: Why semiconductor stocks are ‘almost uninvestable’ despite record earnings amid a global shortage
“From our standpoint, we haven’t had any significant impact on our own shipments and our own supply chain,” Su told analysts. “We have been working with some customers that have had some customer build delays, and that is contemplated in our second-quarter guidance.”
With Xilinx in hand, a big change is in store: AMD will finally make data-center sales more transparent. On the call, AMD Chief Financial Officer Devinder Kumar told analysts that beginning in the second quarter, the first full quarter where Xilinx contributes, the company will begin reporting data-center sales independently.
From Xilinx, AMD gets so-called field-programmable gate array, or FPGA, chips that can be configured by a customer or a designer after they are made. Those chips are used as accelerators in data centers to boost computing power and improve power efficiency in existing physical spaces. Additionally in the data-center space, AMD announced in April that it was acquiring data-center platform software company Pensando for $1.9 billion.
For years, AMD has made it difficult to measure data-center performance by refusing to separate those sales out from console sales. On the call, Su said that data-center sales currently account a “low 20s-percent” of revenue.
AMD executives now plan to report four segments — data center, client, gaming and embedded — up from two previously. In Tuesday’s report, AMD executives said sales from the “computing and graphics” segment rose 33% to $2.8 billion from a year ago, while “enterprise, embedded and semi custom” group sales, aka the data-center and console segment, soared 88% to $2.5 billion from the year-ago period. Analysts had forecast $2.67 billion in sales from computing and graphics, and $2.35 billion from the enterprise, embedded and semi custom group.
AMD reported first-quarter net income of $786 million, or 56 cents a share, compared with $555 million, or 45 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $1.13 a share, compared with 52 cents a share in the year-ago period.
Analysts surveyed by FactSet had forecast 91 cents a share on revenue of $5.01 billion, based on AMD’s forecast of $4.9 billion and $5.1 billion.
Gross margins came in at 48% for the first quarter, up from 46% in the year-ago quarter, but down from 50% in the fourth quarter. Without Xilinx, AMD’s gross margin was 51%. In comparison, Intel Corp.
INTC,
reported first-quarter gross margins of 53.1% on a non-GAAP basis, compared with 58.8% a year ago.
AMD’s Su didn’t seem too concerned about reported weakness and inventory builds in the PC market, which has concerned investors.
Read: The pandemic PC boom is over, but its legacy will live on
“Although the PC market has experienced some softness coming off of multiple quarters of near-record unit shipments, our focus remains on the premium gaming and commercial portions of the market where we see strong growth opportunities and we expect to continue gaining overall client revenue share,” Su told analysts.
Su also said that console sales are expected to turn in a record year for the company.
“Semicustom sales grew by significant double-digit percentage year-over-year based on strong demand for Sony
SONY,
and Microsoft
MSFT,
consoles as well as Valve’s new Steam Deck [hand-held game system],” Su said. “Sales for this game-console generation continue to outpace all prior generations and we expect 2022 be a record year for our semicustom business.”
AMD’s strong report could change the tenor of earnings season for the semiconductor sector, after other chip companies handed in mixed results. Intel doubled down on its bullish 2022 outlook even though the current quarter is showing signs of weakness and Wall Street is skeptical. Qualcomm Inc.’s
QCOM,
outlook was also bullish, but analysts could see support in the short term given strength in its handset business.
Late Monday, NXP Semiconductors NV
NXPI,
which has a big presence in the auto chip market, offered a bullish forecast citing demand that outstripped supply. Chip-equipment makers Lam Research Corp.
LRCX,
KLA Corp.
KLAC,
and ASML Holding NV
ASML,
all reported that supply-chain problems are hampering sales in a high-demand environment.
AMD shares are still firmly in bear-market territory as of Tuesday’s close, 44% off their closing high of $161.91 set on Nov. 29, and 16% above their price 12 months ago. By comparison, the PHLX Semiconductor Index
SOX,
is down less than 1% from 12 months ago, while the S&P 500 index
SPX,
is also down less than 1%, and the tech-heavy Nasdaq Composite Index
COMP,
has fallen nearly 10%.
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