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Earnings Results: AMD stock pops as forecast quells fears about data-center sales, excess inventory

Advanced Micro Devices Inc. shares rose in the extended session Tuesday after the chip maker’s data-center sales held up in quarterly earnings, and started rallying after Chief Executive Lisa Su said the outlook included getting rid of excess inventory by the end of the year.

AMD
AMD,
-0.67%

shares, which had been up about 2% in the extended session after results were first released, surged as much as 6% after Su told analysts on a conference call that the company expects to have excess inventory flushed from its system by the end of the year, and costs are worked into an outlook that just falls short of Wall Street expectations. In the regular session, shares declined 0.4% to finish at $59.66.

For the fourth quarter, AMD forecast revenue of $5.2 billion to $5.8 billion, with its embedded and data-center segments “expected to grow,” with revenue of $23.2 billion to $23.8 billion for the year and gross margins of about 51%.

Analysts had estimated revenue of $5.95 billion for the fourth quarter, and $24.16 billion for the year.

That would suggest data-center sales were not being reduced like the $1 billion cut to PC sales — about the same dollar amount that Wall Street lowered their forecasts for the year by, on average, following a warning in October. With the difference between the Street average and the low end of AMD’s forecast being just shy of $1 billion, on average, that would suggest a forecast that was roughly in line.

“I think as we go into the fourth quarter, we are guiding that embedded in our guidance is that PCs will be down again in the fourth quarter,” Su told analysts.

“We believe that that will be a significant step in clearing inventory between the third quarter and the fourth quarter,” Su said. “And of course we’ll monitor the macro conditions, but we’ll certainly exit the year in a better place.”

The company reported third-quarter net income of $66 million, or 4 cents a share, compared with $923 million, or 75 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were 67 cents a share, compared with 73 cents a share in the year-ago period.

Revenue rose to $5.57 billion from $4.31 billion in the year-ago quarter, while gross margins fell to 42% from the company’s acquisition of Xilinx and Pensando earlier in the year, compared with 48% in the year-ago period.

Analysts surveyed by FactSet had forecast 69 cents a share on revenue of $5.65 billion.

Intel earnings reaction: ‘Shock and awe’ cost cuts rocket Intel stock up 10% to best day since March 2020

Data-center sales rose 45% to $1.6 billion, while analysts expected $1.64 billion, the company reported, using its reclassified product groups. Intel’s data-center sales fell 27% to $4.2 billion from a year ago, and the group was not profitable for the quarter.

Client — that is, PC — sales fell 40% to $1 billion from a year ago, as reported in the warning, while the Street had estimated $1.17 billion.

AMD shares have fallen 58% year to date. By comparison, the PHLX Semiconductor Index 
SOX,
+0.77%

is down about 39%, while the S&P 500 index 
SPX,
-0.41%

is down 19%, and the tech-heavy Nasdaq Composite Index
COMP,
-0.89%

has fallen 30%.

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