AMD Q2 2022 Investment Note
AMD beat expectations on Q2 revenue whereas Q3 forecast comes in light
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Key Takeaways:
Attitude: AMD's Q2 revenue grew 70% YoY to a record $6.6 billion based on the strong execution, leadership product portfolio and diversified business model. Each of AMD's segments grew much, led by Data Center and Embedded Sales. The gross margin is continuously expanded to 54%, up 640 bp from 2021. This Q2 includes the first full quarter of Xilinx's financial results, and AMD is pleased to have closed the Pensando acquisition. AMD's largest opportunity might be AI, and AMD has already started executing new hardware and software roadmaps to capture the opportunity. AMD remains laser-focused on executing the technology and product roadmaps, deepening the customer relationships and strategical investment to drive AMD's next phase across the $300 billion high-end and adaptive computing markets.
Guidance: AMD expects Q3 2022 revenue to be approximately at $6.7 billion, plus or minus $200 million, an increase of almost 55% YoY. AMD expects non-GAAP gross margin to be approximately 54% in the Q3 2022. For the FY2022, AMD expects the total revenue to be about $26.3 billion, an increase of 60% over 2021 plus or minus $300 million, led by growth in the Embedded and Data Center segments. AMD estimates the non-GAAP gross margin to be roughly steady at 54% for the rest 2022. There has been softness in the PC market in recent months, but AMD is well positioned to navigate through the current environment based on the current product portfolio strength and upcoming product launches.
Product: AMD is on track to launch and ramp production of the next-generation 5nm CPU Genoa as the industry's highest performance server CPU later 2022. The all-new 5nm Ryzen 7000 desktop processors and AM5 platforms are planned to lunch in the Q3 quarter. Powered by Ryzen processors, Acer, HP, Lenovo, and others are on track to expand their portfolio of almost 300 new designs AMD-based notebooks this year. Although expecting the gaming graphics market to be down in the Q3, AMD remains focused on launching the high-end RDNA three GPUs later 2022, which can deliver more than a 50% generational improvement in performance per watt by combining advanced gaming architecture with 5-nanometer triplet manufacturing. Xilinx products are deployed virtually in markets, powering customers' mission-critical applications.
Q: We see media reports about the cloud players wanting to control their spending levels. Do you think you have enough of a share gain story with Genoa to offset any slowdown from a broader spending environment?
Lisa Su: We spend much time with our customers talking about what they're seeing in their businesses and what they're seeing in their markets. Every customer is different and each of them have own dynamics of what they're trying to optimize. We have seen a bit of a slowdown in China. But certainly, with the strong North America cloud need this year and next year, we do feel that we are in a share gain position. In addition to Genoa, we have Bergamo, which is a cloud-optimized capability as well that's coming online early 2023. So there are lots of new products that are supporting our growth plan.
Q: How do you see your inventory levels? Do you think AMD could be impacted by any excess PC or server or graphics inventory from main competitors?
Lisa Su: We continue to see strong demand in the data center, embedded business, and the console business. We are being more conservative in PC outlook. Our PC outlook now at mid-teens would kind of put the market at somewhere around 290 to 300 million units. So I do think we've appropriately de-risked the PC business. As it relates to inventory, given some of the COVID lockdowns and things in the Q2, I think there was a bit of buildup in PC inventory, and we've taken that into account in the H2. We think the AMD portion of that is modest, and it will rebalance itself in the H2. Nevertheless, we were still supply constrained on the embedded side and server side. We have additional supply that's coming and we feel pretty good about those puts and takes.
Q: Can you talk about the cost inflation you are feeling? Do you think that will lessen at next year? What are the drivers of gross margin increase?
Lisa Su: The business is certainly getting to scale across the board, so the increase in margins as we go forward in the long-term model really is as a result of mix. We believe the data center and embedded businesses can get to over 50% of the company. We're right now sitting probably in the low 40s, and we expect data center, in particular, to grow faster than the rest of the company, and that will drive company's overall margin. Besides, we're all working on costs and trying to ensure the inflationary kind of costs to be minimum. Frankly speaking, going back to the work of cost reductions as we do in semiconductors over time. But the primary margin expansion is in data center as well as embedded growing faster than the other businesses in AMD.
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Disclaimer
This article is a script from the AMD Q2 2022 Earnings call. In order to facilitate reading, we have made appropriate cuts and revisions. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services available through the moomoo app are offered by Moomoo Financial Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a member of Financial Industry Regulatory Authority (FINRA)/Securities Investor Protection Corporation (SIPC). In Singapore, investment products and services available through the moomoo app are offered through Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore (MAS).Moomoo Financial Singapore Pte. Ltd. is a Capital Markets Services License (License No. CMS101000) holder with the Exempt Financial Adviser Status. This advertisement has not been reviewed by the Monetary Authority of Singapore. In Australia, financial products and services available through the moomoo app are provided by Futu Securities (Australia) Ltd, an Australian Financial Services Licensee (AFSL No. 224663) regulated by the Australian Securities and Investment Commission (ASIC). Please read and understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other disclosure documents which are available on our websites https://www.moomoo.com/au. Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd. and Futu Securities (Australia) Ltd are affiliated companies.
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Pjun : amd should be good for long terms investment. just buy and hold. market will recover and of course AmD too
Ab Woods : Amd is my target
Srikanth Reddy :
romancer : Long term value no changes
Deep Value : Fast growth with hidden value
Milk The Cow : I think $Advanced Micro Devices (AMD.US)$ got potential.
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However the GAAP net income does not look that great.
A good grade for the non-GAAP net income
But, I still preferred to use the GAAP
Overall, I think I give it a "hold" as I think u may be able to get it cheaper due to economy uncertainty
Milamber : Fundamentals are good but all analyst will say whatever that favour their position. Many storytellers in the markets
_tothemoon_ : I would hold on to AMD as it is currently below the average price. I also believe that it is a good company which is why I am optimistic about it :)
Ram the Mkt : coupled with the latest chip and science bill signed, AMD $Advanced Micro Devices (AMD.US)$ certainly a stock to buy and hold till at least 2023.
Randall Avery : definitely add while its still in the dip. also, dont forget to cross your fingers.
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