AMD's quarterly report was better than expected. Revenue increased 2% year over year, and gross margin was further expanded. Data center revenue, which is closely linked to improvements in the PC market, all surged 80% year over year, and data center revenue reached record highs. However, the revenue guidelines for the second quarter were “no manufacturing excitement”. The annual sales forecast for AI accelerator chips was only 4 billion US dollars after the increase, far lower than competitor Nvidia. The stock price decline deepened after the market.
After the US stock market on Tuesday, April 30, semiconductor giants set up to catch up with Nvidia in the AI chip field and continue to conquer ground from Intel in the CPU field$Advanced Micro Devices (AMD.US)$The financial results for the first quarter of 2024 have been released.
Although the company's quarterly report was better than expected, with data center revenue including AI chip sales and client revenue closely linked to improvements in the PC market surged 80% year over year, its revenue guidelines for the second quarter were “no manufacturing excitement”. The annual sales forecast for AI accelerator chips was only 4 billion US dollars after the increase, far lower than competitor Nvidia. The post-market share price decline deepened to 9%, and now the closing is as narrow as less than 7%.
AMD closed down more than 1% on Tuesday, stopping a four-day rise and breaking away from a two-week high. It has accumulated 7.4% growth since this year, slightly outperforming the NASDAQ's cumulative increase of more than 4%, but lower than the Philadelphia Semiconductor Index's cumulative increase of nearly 12% during the year.
Driven by prospects for artificial intelligence growth, AMD has surged more than 76% in the past year, while rival Nvidia surged nearly 200%. AMD has fallen 25% from the peak of $211.38 in early March due to market concerns about the annual sales volume of the MI300 AI chip.
Among the 32 analysts who covered the stock recently, 25 rated “buy”, 7 rated “hold”, and no one suggested “sell,” indicating that Wall Street is still optimistic. The average target price of $204.15 suggests that there is still room for growth of nearly 29%.
AMD's revenue for the first quarter increased 2% year on year, gross margin further expanded, and the annual sales forecast for AI chips was raised
Thanks to artificial intelligence and PC sales growth, AMD's revenue and profit expanded year over year.
According to financial reports, AMD's revenue for the first quarter increased 2% from US$5.35 billion in the same period last year to US$5.47 billion, slightly higher than market expectations of US$5.45 billion, but lower than the previous quarter's US$6.17 billion.
Adjusted EPS earnings of $0.62 per share were higher than market expectations of $0.61 and $0.60 in the first quarter of last year. Under GAAP, net profit for the first quarter was US$123 million, or earnings per share of US$0.07 million, compared with a net loss of US$139 million or loss of US$0.09 per share for the same period last year.
However, some netizens are not satisfied with the help AI chip sales have provided to AMD's net profit.
The company's gross margin under GAAP rose 3 percentage points to 47% year on year in the first quarter, non-GAAP gross margin rose 2 percentage points to 52%, non-GAAP operating profit was 1.1 billion US dollars, net profit was 1 billion US dollars, and profitability continued to strengthen.
In terms of performance guidance, AMD expects revenue for the second quarter of this year to be about 5.7 billion US dollars, fluctuating up and down to 300 million US dollars. The midpoint of the range is equivalent to a year-on-year increase of about 6% and a month-on-month increase of about 4%, flat market expectations of 5.72 billion US dollars. Non-GAAP gross margin will further increase to 53%.
The company's chief financial officer said it will continue to drive revenue growth and profit margins while investing in huge future artificial intelligence opportunities.
However, some analysts pointed out that simply publishing an earnings report that slightly exceeded expectations and revenue guidelines in line with expectations was not enough for investors who expected AI to quickly provide performance support; this caused AMD's stock price decline to continue to expand after the market.
AMD Chairman and CEO Lisa Su (Lisa Su) raised the annual sales forecast for the MI300 AI accelerator chip this year from $3.5 billion at the beginning of the year to $4 billion. Previously, the market believed that $6 billion was a conservative figure, and disappointment may also contribute to accelerating the post-market stock price decline. In comparison, Nvidia's first quarter data center sales reached $18.4 billion.
Su Zifeng said that in the first quarter, AMD won the market share of server CPU chips. “Due to the booming development of artificial intelligence servers, AMD has seen signs of improvement in demand for its CPUs.”
The first quarter of this year was also the first full sales quarter since the launch of the MI300 AI accelerator. “Supply is tight and products are in short supply.” This AI chip has been used by more than 100 companies and artificial intelligence customers, including Microsoft, Meta, and Oracle. Since its launch in the fourth quarter of 2023, the AI chip has sold more than 1 billion US dollars:
“This is an incredible and exciting time for the entire industry, as the widespread deployment of artificial intelligence is driving the demand for more computing in a wider market. We have performed very well in expanding our data center business and enabling artificial intelligence capabilities in our product portfolio.”
Data center and PC client revenue both surged 80% year over year, and data center revenue reached record highs and accelerated growth
Su Zifeng commented, “Strong performance in the first quarter. Driven by the increase in MI300 AI accelerator shipments and the adoption of Ryzen Ryzen and EPYC processors, the company's data center and client business all achieved a year-on-year increase of more than 80%.”
By business, the first quarter revenue of the data center division, which includes new AI chips, increased sharply by 80% to 2.3 billion US dollars from 1.3 billion US dollars in the same period last year, setting a record high in the business unit's history. It was also significantly better than the 38% year-on-year revenue growth rate in the fourth quarter of last year, representing outstanding credit for the artificial intelligence MI300 chip launched at the end of last year.
According to some analysts, AMD data center revenue growth in the fourth quarter of last year and the first quarter of this year was “quite impressive.”
The company said that, driven by the growth of AMD Instinct GPUs and fourth-generation EPYC CPUs, data center revenue not only reached a record high but also increased 2% month-on-month, better than market expectations and remained flat month-on-month, mainly benefiting from sales promotion of AMD Instinct GPUs. However, the division's revenue was partially offset by seasonal declines in server CPU sales.
The client division's revenue in the first quarter, which includes PC sales, increased 85% year-on-year to US$1,368 billion, higher than the forecast of US$1.29 billion. It was mainly due to sales of Ryzen 8000 series CPUs, but revenue fell 6% month-on-month.
The client division's revenue for the fourth quarter of last year increased 62% year over year to $1.5 billion. The PC market began to recover in the first quarter of this year. According to IDC statistics, global PC shipments increased by 1.5% during the quarter, the first increase after two years of decline.
However, AMD's gaming division revenue plummeted 48% year over year and 33% month-on-month to US$922 million, significantly lower than market expectations of US$966 million, mainly due to reduced semi-custom revenue and declining sales of AMD Radeon GPUs. Customers continued to manage inventory levels, causing the Embedded Division's revenue to drop 46% year over year and 20% month-on-month to US$846 million, which is less than expected of US$941 million.
Why is it important and what do you care about?
Mizuho analyst Jordan Klein said that AMD has the “biggest opportunity” to reshape investment sentiment in the chip industry through financial reports. Previously, its stock price peak compared to March was in an “absolute free fall” trend, and earnings reports may drive other chip stocks to rebound.
The two key indicators investors are most concerned about are sales guidelines for AI chips such as the AI accelerator MI300 and PC market performance. AMD and Intel are also introducing AI computers, which can run generative AI applications locally rather than over a network.
In addition to AI-based capital expenditure, Wall Street also wants AMD to provide a strategic vision for entering the data center artificial intelligence market. At the beginning of the year, AMD raised the revenue forecast for MI300 chips in 2024 from 2 billion US dollars to slightly more than 3.5 billion US dollars, but it is lower than the general market forecast of 6 billion US dollars. AMD once claimed that the MI300 chip directly targets Nvidia's best-selling H100 series accelerators.
What do you think of Wall Street?
According to some analysts, AMD is trying to use the MI300 GPU chip to disrupt Nvidia's dominant position in the data center AI market, but after Nvidia launched the next generation of the most powerful Blackwell platform and the pricing was lower than market expectations, AMD's strategy faced major obstacles.
However, with the Zen 4 architecture and the powerful moat of the MI300 chip, Wall Street has no shortage of confidence in AMD. UBS believes that the sales volume of the MI300 this year is a conservative estimate of 5 billion to 6 billion US dollars. Susquehanna also believes that sales will exceed $5 billion this year. “We believe AMD has accumulated enough MI300 reservations and backlog orders to support the increase in its revenue guidelines.”
Bank of America said it is “still optimistic about suppliers serving the cloud infrastructure market,” adding that AMD will join Nvidia, Broadcom, Marvell Technology (Marvell Technology), and Micron Technology to become the “Big Five Beneficiaries of Artificial Intelligence”:
“The story of AMD's recovery in the second half of this year is unscathed. The growth of artificial intelligence and non-AI servers in data centers is a catalyst. After a long period of inventory digestion, the embedded business will also rise from the trough of the first half of this year. There will be a broad cyclical recovery in the non-artificial intelligence sector, and server CPU inventories will return to normal after a sharp 33% drop in shipments last year.”
Bernstein believes that AMD's MI300 sales this year, which was anticipated at the beginning of the year, were significantly weaker than market expectations. This may be due to delays in customer orders due to high-bandwidth memory supply issues, but this does not reflect poor final demand, nor is it a structural problem. The MI300's ability to be a powerful replacement for Nvidia has not changed:
“Much of the discussion at the end of last year focused on AMD's potential in the AI hardware market, second only to Nvidia. The market opportunities seem vast, but AMD must act quickly to capitalize on this positive trend because Nvidia is not standing still. The MI300 can barely compete with the H100, but Nvidia is launching the H200 and will launch Blackwell chips in the second half of the year.”
Finally, I would like to bring you a small bonus! A number of listed companies are about to release performance reports. Many friends are also active in trading during the earnings conference, and the money saving effect is rising one after another! We'll give you a 15 USD commission card+100 HKD stock cash voucher to help you start your investment plan! Add up to $2,100 in rewards for new guests,Click here for the linkYou can pick it up>>
Editor/Somer