AMD’s (AMD) fiscal fourth-quarter results are expected to match Wall Street estimates, though its first-quarter sales could miss views as it faces a tough near-term setup, BofA Securities said Monday.
The chipmaker is scheduled to report fourth-quarter results Tuesday, with BofA projecting adjusted earnings at $0.77 per share on sales of about $6.13 billion, largely in line with the Street’s views. BofA sees 2023 adjusted EPS at $2.65 on sales of $22.64 billion.
The brokerage said that AMD’s server central processing unit likely gained share from rival Intel (INTC) during the quarter, with gains expected to continue in 2024, BofA analysts, including Vivek Arya, said in a note.
The firm said there’s potential for first-quarter outlook miss versus Street estimates on weakness in AMD’s PC and field-programmable gate array segments. BofA cut its first-quarter sales expectations to $5.53 billion from $5.73 billion, below the Street’s view for $5.8 billion, according to the note. Some of the potential first-quarter miss is already expected following Intel’s “weak” report, the BofA analysts said.
Last week, Intel projected current-quarter revenue at $12.2 billion to $13.2 billion, well short of the $14.16 billion consensus estimate on Capital IQ at the time. Its forecast of adjusted EPS of $0.13 trailed the Street estimate of $0.32.
“We think focus of call will be AMD’s MI300 (artificial intelligence) accelerator expectations where we expect management to qualitatively or quantitively raise (2024) expectations above prior ($2 billion) and more in line with consensus in the ($3 billion to $3.5 billion range,” the analysts said. BofA cut its 2024 adjusted EPS outlook to $3.83 from $3.88, but raised its 2025 forecast to $5.20 from $5.12.
AMD’s PC and server CPU revenue share is seen reaching 20% for the first time in 2024, compared with Intel’s 72% share, according to the note. Heading into 2025, AMD’s share gains could rely on potential for enterprise recovery that tends to favor Intel’s “incumbency,” the analysts said. BofA raised its price objective on the AMD stock to $195 from $165 while reiterating its buy rating.
The brokerage expects AMD AI accelerator sales to reach $6 billion by 2025 and potentially $12 billion by 2027, according to the note. The firm said its base case assumption of 7.5% accelerator share and 21% CPU share represents $7.5 EPS power by 2027.
“While AI presents a large opportunity, AMD faces tough incumbents [Nvidia (NVDA)] and customer chip partners, so while we can see AMD share head towards 5-10% from (less than) 5%, we are skeptical of it crossing 10% yet,” the analysts said. “This is regardless of training/inference mix as incumbents have multiple levers to maintain share even if demand shifts towards AI inference in our view.”