AMD Prepares to Unveil Q3 Earnings: Will It Overcome Investor Doubts?

Advanced Micro Devices Inc. AMD plans to reveal its financial results for the third quarter of 2024 on Tuesday, October 29, following the market’s close.

As the third-largest semiconductor company in the U.S., trailing only Nvidia Corp. NVDA and Broadcom Inc. AVGO, AMD has struggled to keep pace with its sector peers throughout the year.

This upcoming earnings report raises critical questions: Will it mark a turning point for AMD, or will the gap with its leading competitors continue to expand?

Chart: AMD’s Performance Compared to Nvidia This Year

Earnings and Revenue Projections for AMD’s Q3 2024

According to Wall Street estimates, AMD is expected to report adjusted earnings per share (EPS) of 92 cents for the third quarter of 2024. This represents a solid increase of 31% from 70 cents in the same quarter last year, based on data from Benzinga Pro.

Revenue is anticipated to reach $6.71 billion, reflecting a 16% rise from $5.8 billion reported in Q3 2023.

Track Record: Earnings Surprises, But Mixed Stock Reactions

In the last eight quarters, AMD has achieved adjusted EPS that exceeded expectations seven times, with only one shortfall occurring in the third quarter of 2022 (-1.47%).

Its revenue figures have mostly surpassed projections, with the most notable 7.31% surprise coming in Q1 2024. However, the stock’s immediate post-report price reactions have been somewhat unpredictable.

For example, AMD’s stock climbed significantly after positive quarterly reports in Q3 2023 (+9.69%) and Q4 2022 (+12.63%). Contrastingly, a strong EPS beat of 8.77% and a revenue surprise did not prevent the stock from declining by 8.91% in Q1 2024.

Investor apprehension regarding guidance has contributed to volatility, as demonstrated by negative reactions in Q1 2023 (-9.22%) despite better-than-expected results.

Analysts See Potential Growth Amid Challenges

Rosenblatt analyst Hans Mosesmann expresses confidence in AMD’s upcoming performance, particularly its EPYC server CPUs and MI300 AI GPUs, noting improvements in market share within the high-performance computing sector. However, he foresees modest growth in embedded segments and challenges in gaming console revenues, which could dampen overall results.

Mosesmann notes, “We believe the shares are set to outperform the group after several quarters of skepticism around MI300’s market share potential and mixed quarterly results.” He has set a bullish price target of $250, indicating a potential upside of 60% from current levels.

Goldman Sachs Maintains Positive Outlook

Goldman Sachs analyst Toshiya Hari remarks that AMD’s recent underperformance is tied to downward adjustments in EPS estimates for 2024, which dropped 9% this year. This contrasts with competitors like NVIDIA, which has seen upward revisions.

Despite this, Hari maintains a Buy rating, citing expectations for sustained growth in AI infrastructure capital expenditures, a cyclical upswing in server CPUs, and ongoing market share gains in enterprise solutions. He pointed out that AMD’s x86 server CPU market share rose to 34% by Q2 2024, improving from under 20% in early 2022.

Goldman Sachs anticipates that AMD’s upcoming server CPUs could enhance its competitiveness against Intel Corp. INTC in terms of total cost and efficiency.

Key ETFs with Significant AMD Holdings

For investors interested in AMD’s stock indirectly, here are the top ETFs that allocate a significant portion of their portfolios to AMD shares:

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