Advanced Micro Devices (AMD) reported mixed fourth quarter 2023 earnings after the market closed on January 31st, sending its stock lower in after-hours trading despite strong guidance for its artificial intelligence and data center chips.
Q4 Results Beat Expectations While Q1 Outlook Disappoints
For the fourth quarter, AMD reported revenue of $5.6 billion, up 16% year-over-year but slightly below analyst estimates of $5.75 billion. Earnings per share came in at $0.69, which beat expectations of $0.67 per share [1].
AMD’s Computing and Graphics segment revenue was $2.1 billion, down 7% year-over-year due to lower processor average selling prices and client processor sales. However, the company’s Enterprise, Embedded and Semi-Custom segment saw revenue grow by a robust 45% to $3.5 billion on strong sales of EPYC server processors and Instinct AI accelerators to data center customers [2].
While Q4 results showed resilient demand, AMD disappointed with its revenue guidance for the first quarter of 2024. The company forecasts Q1 revenue of only $5.3 billion plus or minus $300 million, compared to analysts’ expectations of $6.33 billion. This weaker-than-expected outlook overshadowed the company’s strong data center and AI momentum, sending AMD shares down over 3% in late trading [3].
| Key Metrics | Q4 2023 Results | Expectations |
|---|---|---|
| Revenue | $5.6 billion | $5.75 billion |
| EPS | $0.69 | $0.67 |
| Q1 2024 Revenue Guidance | $5.3 billion +/- $300 million | $6.33 billion |
Table showing AMD’s latest quarterly results against Wall Street expectations. Q1 guidance was lighter than forecast, disappointing investors.
Massive Data Center and AI Growth Projected
Despite the disappointing near-term guidance, AMD management struck an extremely bullish tone on data center and artificial intelligence momentum over the next few years.
The company now expects to generate over $35 billion in data center and AI chip sales from 2023-2027, massively increased from its prior forecast of $20 billion. This demonstrates tremendous confidence in AMD’s next-generation EPYC “Genoa” and AI accelerator products rolling out this year, which are expected to take significant market share from rivals Intel and Nvidia [4].
CEO Lisa Su cited artificial intelligence as “the most important technology that has come in the last 50 years,” and one where AMD is ready to capitalize on what could be a $400 billion total addressable market by 2027 [5]. The company is investing heavily to boost production capacity for its next-gen AI and data center chips to meet surging customer demand.
This long-term opportunity explains why most Wall Street analysts remain staunchly bullish on AMD stock despite the muted first quarter guidance…
Analysts Still See Upside for AMD Stock
While AMD shares pulled back nearly 5% after its quarterly report, most analysts continue to see significant upside ahead thanks to the company’s exposure to secular growth markets like artificial intelligence and data center.
Numerous analysts raised their AMD price targets following earnings:
- KeyBanc lifted its target from $195 to $270, seeing AMD gaining data center market share [6]
- CFRA boosted its target from $170 to $200 based on margin expansion and better product mix [7]
- Citi called AMD’s $35 billion AI projection “sandbagged” and said any near-term stock pullback is a buying opportunity [8]
AMD expects to have five leading-edge computing products ramping in 2024, positioning the company extremely well for rapid growth this year and beyond. With artificial intelligence and high performance computing workloads booming, AMD has a multi-year tailwind that should allow it to continue gaining server CPU and AI accelerator market share against Intel and Nvidia.
While the softer-than-expected Q1 outlook warrants some caution around near-term business trends, analysts seem confident AMD will bounce back strongly and remain a top semiconductor play.
What’s Next for AMD?
In the coming quarters, all eyes will be on the pace of AMD’s next-generation EPYC “Genoa” and AI chip ramps and how quickly the company can gain data center share. AMD’s success against rivals Intel and Nvidia in these key markets will determine whether the stock can regain its momentum after this post-earnings stumble.
Additionally, the company’s pending acquisition of Xilinx, expected to close later this year, will bring new FPGA capabilities that can augment AMD’s AI and data center solutions.
If AMD can deliver on its extremely bullish $35 billion AI and data center chip forecast through 2027, while also successfully integrating Xilinx, the company has potential to disrupt the enterprise compute landscape and reward shareholders handsomely.
While its recent quarterly stumble provides reason for some near-term caution, AMD’s long-term outlook remains bright as one of the foremost computing platforms enabling the artificial intelligence revolution.
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