On Wednesday, AMD (NASDAQ:AMD) stock received a reiterated Buy rating and a $200.00 price target from Benchmark following the company's second-quarter earnings report.
The semiconductor manufacturer's recent financial results and future guidance have positively influenced its stock performance, addressing concerns about potential slowdowns in the artificial intelligence sector.
AMD's second-quarter sales reached $5.835 billion, surpassing the Street consensus by $110 million, while earnings per share (EPS) of $0.69 were a cent higher than expected.
The company's success was attributed to the robust performance of its Data Center EPYC CPUs and Instinct AI-Accelerator GPUs, along with a solid showing from its Client Computing business.
The company's forecast for the September quarter is optimistic, with expected revenue of $6.7 billion, plus or minus $300 million, which is approximately $100 million above the Street consensus.
AMD also projects its gross margin to increase sequentially to 53.5%, a significant rise from 53.1% in the June quarter and notably higher than the 51.1% margin from the same period last year.
Operating expenses are anticipated to be around $1.9 billion for the third quarter, which marks a slight increase from $1.85 billion in the previous quarter. With a tax rate of 13% and 1.64 billion shares outstanding, Benchmark's model suggests a third-quarter EPS of $0.92, compared to the prior Street estimate of $0.94.
In other recent news, Advanced Micro Devices, Inc. (NASDAQ:AMD) reported a 9% increase in its Q2 revenue year-over-year, reaching $5.8 billion. The company's data center segment was the standout performer, with revenue surging by 115% to a record $2.8 billion, largely driven by robust sales of Instinct MI300 GPUs and EPYC CPUs.
Client processor demand also surged, resulting in a 49% revenue increase in that segment. However, the gaming segment faced a 59% decline due to weaker semi-custom SoC sales.
Despite this, AMD anticipates significant revenue growth in the latter half of the year, propelled by its data center and client segments. The company also plans to boost investments in AI technology. AMD forecasts significant revenue growth in the second half of 2024, emphasizing the data center and client segments.
The company plans to continue investing in hardware, software, and solutions to leverage growth opportunities in the AI market. Revenue is expected to grow approximately 15% sequentially in the third quarter.
InvestingPro Insights
AMD's growth trajectory and financial health are highlighted by several key metrics and InvestingPro Tips. According to real-time data, AMD boasts a market capitalization of $233.53 billion, reflecting its significant presence in the semiconductor industry. The company's revenue growth remains positive, with a 6.4% increase in the last twelve months as of Q2 2024 and an 8.88% quarterly revenue growth in Q2 2024, signaling sustained demand for its products.
InvestingPro Tips underscore that AMD is expected to see net income growth this year, a positive sign for investors looking for profitability. Additionally, the company is recognized as a prominent player in the Semiconductors & Semiconductor Equipment industry, further cementing its competitive position. Investors should note that while AMD operates with a moderate level of debt, it is trading at a high earnings multiple, with a P/E ratio of 171.95, which suggests a premium valuation in the market.
For those interested in a deeper dive into AMD's financials and future prospects, InvestingPro offers a wealth of additional tips, with 21 analysts having revised their earnings downwards for the upcoming period, indicating potential shifts in market expectations. Furthermore, with AMD not paying a dividend, growth and capital appreciation may be the primary focus for shareholders. More insights and analysis are available on InvestingPro, with a total of 14 additional tips to help investors make informed decisions.
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