Advanced Micro Devices beat Wall Street's targets for the second quarter, helped by growing sales of chips for artificial intelligence. But AMD stock fell Wednesday after the chipmaker's guidance came up short.
The Santa Clara, Calif.-based company late Tuesday said it earned an adjusted 58 cents a share on sales of $5.36 billion in the June quarter. Analysts polled by FactSet had expected earnings of 57 cents a share on sales of $5.32 billion. However, on a year-over-year basis, AMD earnings dropped 45% while sales declined 18%.
"We delivered strong results in the second quarter as 4th Gen Epyc and Ryzen 7000 processors ramped significantly," Chief Executive Lisa Su said in a news release.
She added, "Our AI engagements increased by more than seven times in the quarter as multiple customers initiated or expanded programs supporting future deployments of Instinct accelerators at scale."
Also, AMD is on track to launch and ramp production of its MI300 accelerators in the fourth quarter, she said.
AMD Stock Falls After Report
On the stock market today, AMD stock fell 7% to close at 109.35. During the regular session Tuesday, AMD stock rose 2.8% to end at 117.60.
AMD stock is in a consolidation pattern with a buy point of 132.83, according to IBD MarketSmith charts.
For the current quarter, AMD forecast revenue of $5.7 billion, vs. analyst expectations for $5.82 billion. In the same period last year, AMD posted sales of $5.57 billion.
"Looking to the third quarter, we expect our data center and client segment revenues to each grow by a double-digit percentage sequentially driven by increasing demand for our Epyc and Ryzen processors, partially offset by gaming and embedded segment declines," Chief Financial Officer Jean Hu said in the release.
AMD has reported four consecutive quarters of declining earnings on a year-over-year basis. Sales have dropped for two straight quarters as it navigates a downturn in demand for personal computers and traditional servers.
AMD Is On Tech Leaders List
Oppenheimer analyst Rick Schafer kept his perform, or neutral, rating on AMD stock. "We remain sidelined as AMD's AI strategy proves out," he said in a note to clients.
Barclays analyst Blayne Curtis maintained his overweight, or buy, rating on AMD stock with a price target of 145.
In a note to clients, Curtis said AMD's conservative guidance was a "minor reset," but should take a back seat to an expected strong ramp in AI business next year.
Advanced Micro Devices ranks seventh out of 36 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. AMD stock has an IBD Composite Rating of 91 out of 99.
IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Further, AMD stock is on the IBD Tech Leaders list.
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