Advanced Micro Devices (AMD) is set to post third quarter results on Tuesday, with investors focusing on the datacenter business amid intense competition in the artificial intelligence space.
Wall Street expects the Santa Clara, California-based company to post EPS of $1.17 on revenue of $8.75 billion, implying a rise of over 28% during the quarter.
AMD, considered an alternative to Nvidia’s chips in the AI compute market, has been a major beneficiary of the AI boom, as investors are betting on the company’s ability to capitalize from the massive demand. The company’s encouraging outlook were looked at positively by analysts, even though its data center sales in August raised eyebrows.
Over the last two years, AMD has beaten EPS estimates 75% of the time and has beaten revenue estimates 100% of the time.
Most analysts are bullish on the stock, with Seeking Alpha analysts and Wall Street rating it a Buy. In contrast, Seeking Alpha’s Quant rating considers it a Hold.
“While there are certain headwinds related to anticipated volume loss in China due to export controls, I expect this topline growth momentum to continue in the quarters ahead as overall demand remains favorable,” noted a recent Seeking Alpha analysis, adding that margins are expected to be under pressure in the near term, with higher operating expenses might impact bottom line.
Another analysis by Deep Value Investing noted that the MI 350 ramp will likely be the main theme of the earnings call.
AMD’s recent partnership with OpenAI is also seen as a major turning point by many. The company’s stock has more than doubled in value so far this year, compared to the 16% rise in the broader S&P 500 Index.
Mizuho recently raised its price target to $275 from $205 and reiterated an Outperform rating, with the firm highlighting that the OpenAI deal is expected to contribute tens of billions of dollars to AMD’s revenue pipeline over the coming years.
Over the last three months, EPS estimates have seen 21 upward revisions, compared to 12 downward revisions, while revenue estimates have been revised upwards 31 times versus one downward move.