AMD’s Strong Earnings Set the Stage for Nvidia’s Big Reveal
The Q3 earnings season is winding down, with only a handful of S&P 500 companies remaining to report their quarterly results.
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The anticipation is building for Nvidia NVDA, whose results will be released after the market closes on Wednesday. Earlier in the quarter, Advanced Micro Devices AMD announced its quarterly figures, providing insights into AI demand and trends in video gaming.
Here’s what we learned.
AMD Achieves Impressive Data Center Growth
Advanced Micro Devices reported substantial growth, with earnings per share (EPS) increasing by 31% and sales rising by 17%. The company’s gross margin reached 54%, an increase from 47% compared to last year, boosting profitability.
Data Center revenue hit $3.5 billion, marking a quarterly record with an incredible 122% rise from the same period last year. These results highlight the ongoing strong demand for AI, a pattern that has become familiar over recent quarters.
Historically, AMD’s data center results have regularly surpassed consensus expectations, indicating a positive trend as shown below.
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Valuation metrics remain reasonable, with a current forward earnings multiple of 29.4X, contrasting favorably with a 42.3X five-year median and peaks of 106.9X. The current PEG ratio is 1.0X, below historical benchmarks and competitive against the average for the Zacks Computer and Technology sector.
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Despite strong Data Center performance, AMD’s stock did not react positively after earnings, as analysts revised earnings expectations downward. The company’s weak sales guidance has contributed to this negative market sentiment.
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Investor Focus Turns to Nvidia Guidance
Nvidia’s Data Center results have consistently exceeded expectations in recent quarters, with its most recent report highlighting an impressive $1.4 billion beat, fueled by high demand.
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Investors can anticipate another strong performance in Nvidia’s Data Center, with a consensus estimate of $28.9 billion suggesting nearly 100% growth year-over-year. The demand trend indicated by AMD also supports a positive outlook for NVDA.
CEO Jensen Huang expressed optimism following Q2 results, emphasizing robust demand for Hopper and anticipation for Blackwell with the remark, “NVIDIA achieved record revenues as global data centers are modernizing with accelerated computing and generative AI.”
Nvidia’s valuation multiples appear reasonable by comparison, with a current forward earnings multiple of 38.7X, well below the 50.7X five-year median and 106.3X five-year high. Additionally, the PEG ratio stands at 1.1X, again significantly lower than historical values and more favorable than the Zacks Computer & Technology sector average of 1.5X.
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Conclusion: Anticipation for Nvidia’s Q3 Results
As Nvidia prepares to announce its Q3 results, investors are keenly interested in how these findings will impact the overall market, especially within the Mag 7 group. AMD’s strong Data Center performance suggests a favorable outlook for Nvidia as well.
While the market didn’t respond favorably to AMD’s results, mainly due to subdued sales forecasts, Nvidia’s guidance is expected to significantly influence post-earnings stock performance. A strong year-over-year growth is anticipated, reinforcing its position as a leader in the AI sector.
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Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
