Advanced Micro Devices (NASDAQ:AMD), one of the leading semiconductor companies, is scheduled to announce its fourth-quarter results after the market closes on January 31. A deteriorating demand backdrop in the PC (personal computers) market and macro pressures are expected to weigh on AMD’s Q4 performance.
AMD’s Q4 Earnings Expected to Decline
Despite a weak PC market, AMD’s Q3 2022 revenue increased 29% to $5.57 billion due to higher sales of the company’s data center, embedded, and game console products. The 40% fall in the Client segment (includes PC chips) revenue and lower prices hurt the company’s profitability, with adjusted EPS declining 8% to $0.67.
Last week, rival Intel (NASDAQ:INTC) announced dismal Q4 2022 results as the PC market collapsed further in the quarter.
Coming to AMD’s Q4 2022 results, analysts expect revenue to increase 14.3% to $5.52 billion. Higher revenue from the Embedded and Data Center segments is expected to be partially offset by a revenue decline in the Client and Gaming segments. The company’s Data Center segment is anticipated to benefit from continued strength in the third-generation EPYC server processor sales and the demand for the recently launched fourth-generation EPYC processor, called Genoa.
Meanwhile, Wall Street expects Q4 adjusted EPS to fall 27% to $0.67, mainly due to lower operating income from the Client segment and a fall in prices.
Is AMD a Buy, Sell, or Hold?
Cowen analyst Matthew Ramsay expects December and March quarters to be under pressure despite a solid product roadmap. Nonetheless, he feels that these two quarters could mark the bottom, and results should improve through 2023 and in 2024, mainly due to the demand in the cloud market and higher average selling prices in the server market. In line with his investment thesis, Ramsay reiterated a Buy rating for AMD with a price target of $100.
Despite the ongoing pressures, AMD scores Wall Street’s Strong Buy consensus rating based on 18 Buys and six Holds. The average AMD stock price target of $85.09 implies nearly 13% upside potential. Shares have rallied over 16% since the start of this year.
Conclusion
The slump in the PC market and lower prices are expected to drag down AMD’s Q4 earnings. Management’s outlook for 2023 will influence the movement in AMD shares in the days ahead.
