AMD's Q1 Earnings Anticipation: Wall Street Eyes Surge in AI and PC Sales This Tuesday

Chip titan AMD(AMD) is scheduled to report its first-quarter earnings on Tuesday, following a week marked by competitor Intel's disappointing guidance. Despite beating expectations, Intel's lower-than-expected revenue outlook for the upcoming quarter sent its shares downward. Analysts and investors are particularly interested in AMD's AI chip sales and PC market trends, especially following the December launch of its MI300 AI accelerators. The performance of these AI chips could significantly sway AMD's stock post-announcement.

Latest Earnings Preview for AMD

Earnings and Revenue Estimates:

• Estimated Earnings Per Share (EPS): Analysts expect AMD to report an EPS of $1.00 for the quarter.
• Revenue Estimates: Revenue is anticipated to be around $5.459 billion for the quarter.

Key Factors and Trends:

• AI and Data Center Growth: AMD has been focusing heavily on its AI chip sales, which are expected to be a significant driver of revenue. The company has guided AI-related chip sales of at least $3.5 billion for 2024, indicating strong demand for AI applications and the need for alternatives to Nvidia.
• PC Market Recovery: The PC market is showing signs of improvement, which could positively impact AMD's performance. Total PC shipments rose 3.2% year-over-year to 57.2 million units in Q1 2024.
• Gross Margins: AMD has guided gross margins of 52% for the year, marking a 200 basis point increase compared to last year. This improvement in margins is crucial for profitability.

Stock Performance and Market Sentiment:

AMD's stock has experienced significant volatility, with strong gains in 2021, a sharp decline in 2022, and a robust recovery in 2023. The stock's performance reflects the cyclical nature of the semiconductor industry and market reactions to AMD's strategic moves in AI and data center markets.

AI Chip Battle Heats Up

Wall Street is anticipating AMD's Q1 earnings to report an EPS of $0.61 with revenue reaching $5.45 billion, marking a slight increase from last year's figures. AMD’s MI300 chips, competing directly with Nvidia's H100 line, are part of this focus, with AMD asserting superiority over Nvidia’s products—a claim Nvidia has contested. This sets the stage for a competitive landscape, also featuring Intel with its Gaudi 3 accelerators, as these tech giants vie for dominance in the AI chip market.

Nvidia recently unveiled the Blackwell platform at its GTC conference, promising superior performance over the H100. The race in AI technology continues to heat up as tech giants like Microsoft, Google, and Meta heavily invest in AI data centers to enhance their software ecosystems. While AMD's MI300X is expected to generate significant revenue this year, it remains to be seen if it can challenge Nvidia's dominance in the market.

“We still very much see $5 billion to $6 billion as still conservative for MI300 revenue this year and we also see guidance being fine,” UBS Global Research analyst Timothy Arcuri wrote in an investor note ahead of earnings.

Wall Street forecasts a 78% increase in AMD's Data Center revenue to $2.31 billion for the quarter, alongside a recovery in the PC market, which could boost AMD’s sales further. After two years of declines, global PC shipments rose by 1.5% in the first quarter of 2024, indicating a positive trend that also aligns with Intel’s recent 31% revenue rise in its PC chip segment. This suggests a favorable environment for AMD, especially as it competes in the AI-enabled PC market alongside companies like Qualcomm, which is introducing new AI-capable chips. While AMD's Data Center and PC segments are poised for significant growth, analysts expect a decline in the Gaming and Embedded divisions by 45% and 40%, respectively.