EPYC processor momentum to help in development

AMD (AMD) is about to report earnings Tuesday, Oct. 26, following the closing bell. Traders are hopeful that the California-based semiconductor firm will produce one other strong print amid the momentum in demand for AMD’s EPYC processors and semi-custom merchandise.

Listed here are the primary metrics anticipated in AMD’s report primarily based on Bloomberg consensus estimates:

  • Income: $4.12 billion anticipated, $2.80 billion Y/Y

  • Adjusted EPS: $0.67 anticipated, $0.52 Y/Y

Outcomes are anticipated to be aided by the elevated adoption of EPYC processors by hyperscaling giants comparable to Google (GOOG, GOOGL), Amazon (AMZN), Microsoft (MSFT), and HP (HPE). As an example, AMD processors are taking middle stage in powering Microsoft’s Azure cloud computing service.

AMD’s inventory has returned over 50% in the course of the previous 12 months, greater than 15% better than the SPDR S&P 500’s (SPY) 33.5%. AMD shares have been on an uptrend for the reason that starting of the month within the lead-up to earnings following a cooldown from August to September.

Business analysts reiterated their constructive outlook for the corporate, particularly citing potential development in adoption of AMD’s EPYC 7003 collection of high-performance microprocessors primarily based on the Zen 3 microarchitecture, codenamed “Milan.”

“From our channel checks and firm commentary, hyperscalers/cloud suppliers are the first-movers in adopting Milan, however we anticipate that as enterprise spending recovers and clients acquire extra expertise with the chip in a cloud setting, on-prem enterprise adoption of Milan is more likely to comply with over the subsequent a number of years,” an Oct. 24 Goldman Sachs (GS) Fairness Analysis report acknowledged. “Coupled with the upcoming launch of Genoa (next-generation server CPU primarily based on the Zen 4 core structure) in 2022, we reiterate our Purchase score for AMD and anticipate continued share beneficial properties for the foreseeable future.”

By way of a short-term manufacturing and gross sales horizon in mild of the worldwide chip scarcity, CEO Lisa Su believes that the present provide crunch is not like something the business has seen earlier than.

“If you concentrate on the semiconductor business, we have all the time gone by way of cycles of ups and downs the place demand has exceeded provide or vice versa,” Su mentioned at Code Convention 2021 on Sept. 27. “This time it is completely different and what’s completely different this time is each business wants extra, and so the confluence of meaning that there’s an imbalance.”

AMD doesn’t manufacture its chips in home. As an alternative, it outsources the manufacturing of its chips to foundries, or chip factories. In line with Su, there’s a “large quantity of funding” occurring within the business, with greater than 20 new factories anticipated to come back on-line this 12 months. As well as, there are one other 20 extra factories within the strategy planning stage, and all of this in conjunction could assist alleviate the chip scarcity, Su mentioned. And although she anticipates that the scarcity will lengthen into 2022, she expects it to grow to be much less extreme within the second half of subsequent 12 months.

This put up shall be up to date with the outcomes of AMD’s Q3 outcomes Tuesday after market shut. Verify again for updates.

Thomas Hum is a author at Yahoo Finance. Comply with him on Twitter @thomashumTV

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