Advanced Micro Devices Inc. (AMD) is bracing for a pivotal earnings report on Tuesday that could redefine the company’s financial narrative, following a period of heightened anticipation around its artificial intelligence revenue potential. Over recent months, AMD’s market expectations have taken a nosedive after a promising forecast failed to meet Wall Street’s lofty projections, especially concerning its MI300 AI accelerator line.
Originally, some analysts believed AMD could generate as much as $10 billion from its AI technology in the full year. However, the company’s more conservative guidance set the bar at just over $3.5 billion. Bernstein analyst Stacy Rasgon recently noted a recalibration of expectations, which had tentatively risen to near $6 billion before concerns of potential customer order delays surfaced, attributed to supply issues in high-bandwidth memory.
These challenges come at a time when AMD strives to compete with industry leader Nvidia Corp. (NVDA), which continues to advance its product line with newer and more potent AI hardware. Rasgon pointed out that AMD’s MI300 is barely keeping pace with Nvidia’s H100, and with the imminent arrival of Nvidia’s H200 and Blackwell models later this year, AMD faces an increasingly difficult competitive landscape.
The anticipation surrounding AMD’s upcoming earnings call is not just about the numbers but the strategic insights the company will offer regarding its MI300 product line. Wedbush analyst Matt Bryson voiced some caution, suggesting that while market expectations have moderated, they still generally exceed the company’s forecast. Bryson’s analysis reflects uncertainty about AMD’s ability to meet these expectations, which could influence the stock’s performance post-earnings.
Despite a significant 25% drop in AMD’s stock price from its early March peak of $211.38, analysts like C.J. Muse from Cantor Fitzgerald believe that meeting or slightly exceeding expectations could stabilize the stock. Muse predicts a possible revenue target adjustment to around $4 billion for the MI300, following an earnings expectation of 62 cents per share on $5.48 billion in revenue for the March quarter, according to FactSet consensus.
The same consensus anticipates notable shifts in AMD’s business segments. Data-center revenue is expected to see a 75% increase to $2.36 billion, and client revenue could rise by 74% to $1.29 billion. In contrast, gaming revenue might decline by 45% to $964 million, with embedded revenue also expected to fall by 40% to $941 million.
Looking ahead to the second half of the year, Muse remains optimistic about AMD’s recovery trajectory, highlighting potential growth areas not only in AI-powered servers but also in client and embedded markets. He suggests that if AMD can manage its supply chain issues, particularly around high-bandwidth memory for the MI300, the company could potentially achieve revenues in the range of $5-6 billion.
In conclusion, AMD stands at a critical juncture where its ability to address supply chain setbacks and compete with Nvidia’s technological advancements will be key to its financial recovery and growth. The upcoming earnings report will be crucial in setting the tone for AMD’s strategic direction and market positioning in the fiercely competitive AI technology landscape. Investors and analysts alike will be watching closely, with the company’s responses potentially shaping its trajectory for the remainder of the year.
