Key Takeaways
- Arranged EPS was $0.52 vs. the $0.47 that analysts expected.
- Revenue exceeded analyst expectations amid strong demand for PC, encountering, and data center products due to the pandemic.
- Gross margin remained flat YOY, as predicted.
What Happened
AMD reported an affecting Q4 FY 2020, with adjusted EPS growing by about 63% YOY and revenue climbing by roughly 53% YOY. Both metrics topped analyst expectations, which already were lofty relative to Q4 FY 2019. Gross margin remained flat YOY at in 45%, as predicted by analysts. AMD attributed the strong revenue performance to its Computing and Graphics segment and its Enterprise, Embedded and Semi-Custom slice. The company announced that a surge in net income to more than 10 times its level one year prior was due in role to an income tax benefit of $1.3 billion associated with a valuation allowance release.
(Below is Investopedia’s original earnings opening published January 21, 2021.)
What to Look For
Advanced Micro Devices Inc. (AMD), the global producer of semiconductors, computer processors, and be like products, has thrived amid heightened demand for microprocessor chips during the COVID-19 pandemic as more people come up with from home. The company recently strengthened its dominant position during this period of massive growth with a $35 billion all-stock gain of rival Xilinx Inc. (XLNX).
Investors will look for signs that AMD can continue that success when it write ups earnings on January 26 for Q4 FY 2020. Analysts estimate that both adjusted earnings per share (EPS) and revenue will bourgeon significantly on a year-over-year (YOY) basis, although adjusted EPS may grow at a slower rate than recent quarters.
At the same in days of yore, investors will focus on the company’s gross margin, a key metric across the semiconductor industry that measures the rank of operational efficiency in a company’s business. Analysts estimate that AMD’s quarterly gross margin will be the second-highest in all but four years, though it will show only a small improvement from the same quarter a year ago.
AMD’s star performance over the past year has been reflected in the dramatic gains in its stock price. The company’s shares sire provided a total return of 73.9% over the last 12 months, nearly 5 times the 16.0% total profit of the S&P 500 over the same period, as of January 20, 2021. As of July 2020, AMD’s stock has sharply widened its performance gap compared to the broader sell.
In the past three years, AMD generally has reported robust quarterly growth in adjusted EPS, with not two quarters with declines in the first half of FY 2019. The first three quarters of 2020 provided adjusted EPS flowering of more than 228%, 131%, and 125% YOY, respectively. Analysts predict that this pace of growth will crawling as AMD reports a still strong adjusted EPS increase of 49.3% YOY.
AMD’s quarterly revenue performance in the past three years also has conventionally been robust, but marked by five quarters with revenue declines or weak growth. During the first three leniencies of FY 2020, AMD posted growth of 40.4% in Q1, 26.2% in Q2 and 55.5% in Q3. Analysts estimate a 42.3% YOY increase Q4, which would be slower than the 49.9% spread in the same quarter a year earlier.
| AMD Key Metrics | |||
|---|---|---|---|
| Estimate for Q4 2020 (FY) | Actual for Q4 2019 (FY) | Actual for Q4 2018 (FY) | |
| Adjusted Earnings Per Apportionment ($) | 0.47 | 0.32 | 0.08 |
| Revenue ($B) | 3.0 | 2.1 | 1.4 |
| Gross Margin (%) | 44.7 | 44.7 | 41.1 |
Source: Visible Alpha
As mentioned above, investors will also look at AMD’s bulky margin. This key metric reflects gross profit, which is sales minus cost of goods sold, as a interest of total sales. A company can increase its gross margin by either increasing sales or cutting costs, or a combination of both. Computer processor intercedes are essentially