AMD Beats on Q3 Earnings & Revenues, Set to Buy Xilinx
Advanced Micro Devices AMD reported third-quarter 2020 non-GAAP earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate by 14%. Notably, the bottom line soared 125% both year over year and sequentially.
Revenues of $2.80 billion outpaced the Zacks Consensus Estimate by 9.5%. The figure surged 56% year over year and 45% sequentially.
This Zacks Rank #2 (Buy) company also announced that it has entered into a definitive agreement to acquire Xilinx XLNX for $35 billion in an all-stock transaction. The buyout will significantly help in expanding AMD’s data center businessthat has helped the stock return 71.8% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Computing and Graphics segment’s revenues of $1.67 billion increased 31% year over year and 22% sequentially. This can be attributed to robust adoption of Ryzen processors.
Advanced Micro Devices, Inc. Price
Client processor average selling price (ASP) was lower year over year owing to a higher mix of mobile processor sales. Sequentially, ASP increased due to higher desktop and mobile processor ASPs.
GPU ASP was lower year-over-year due to product cycle timing. However, it increased sequentially due to favorable product mix.
Enterprise, Embedded and Semi-Custom segment’s revenues of $1.13 billion were up 116% year over year and 101% sequentially. The growth was driven by higher semi-custom product sales and increased EPYC processor sales.
Non-GAAP gross margin expanded 100 basis points (bps) on a year-over-year basis to 44%, driven by strong EPYC and Ryzen processor sales.
Non-GAAP operating expenses increased 31% year over year to $706 million. However, as percentage of revenues non-GAAP operating expenses declined 500 bps.
Non-GAAP operating income jumped 119% year over year to $501 million primarily driven by increase in Ryzen and EPYC processor sales and semi-custom product sales.
Non-GAAP operating margin expanded 600 bps on a year-over-year basis.
Segment wise, Computing and Graphics operating income was $384 million, compared with $179 million reported in the year-ago quarter courtesy of higher Ryzen revenues.
Enterprise, Embedded and Semi-Custom operating income was $141 million compared with $61 million reported in the year-ago quarter.
Key Q3 Developments
AMD introduced the AMD Ryzen 5000 Series desktop processors during the reported quarter.
Moreover, Oracle ORCL announced plans to offer cloud instances based on next-generation AMD EPYC processors, codenamed “Milan.”
Further, AMD and Apple AAPL announced the availability of new AMD Radeon Pro 5000 series GPUs for the updated 27-inch iMac.
Balance Sheet & Cash Flow
As of Sep 26, 2020, AMD had cash and cash equivalents (including marketable securities) of $1.77 billion compared with $1.78 billion as of Jun 27, 2020.
As of Sep 26, 2020, total debt (long-term plus short-term) was $373 million, down from $690 million as of Jun 27, 2020.
Operating cash flow was $339 million compared with operating cash flow of $243 million in the second quarter.
Free cash flow was $265 million in the third quarter compared with free cash flow of $152 million in the previous quarter.
For fourth-quarter 2020, AMD expects revenues to be roughly $3 billion (+/- $100 million) indicating an increase of approximately 41% year-over-year and 7% sequentially. Non-GAAP gross margin is anticipated to be 45%.
For 2020, AMD now expects 2020 revenues to grow by approximately 41% over 2019, much better than previous expectation of 32% growth. Non-GAAP gross margin is still expected at 45%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Apple Inc. (AAPL): Free Stock Analysis Report
Oracle Corporation (ORCL): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
Xilinx, Inc. (XLNX): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.