Advanced Micro Devices (NASDAQ:AMD) Delivers Impressive Q4, Stock Soars

Kayode Omotosho /
2022/02/01 4:24 pm EST
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Computer processor maker AMD (NASDAQ:AMD) reported Q4 FY2021 results topping analyst expectations, with revenue up 48.7% year on year to $4.82 billion. On top of that, guidance for next quarter's revenue was surprisingly good, being $5 billion at the midpoint, 15.4% above what analysts were expecting. Advanced Micro Devices made a GAAP profit of $974 million, down on its profit of $1.78 billion, in the same quarter last year.

Is now the time to buy Advanced Micro Devices? Access our full analysis of the earnings results here, it's free.

Advanced Micro Devices (AMD) Q4 FY2021 Highlights:

  • Revenue: $4.82 billion vs analyst estimates of $4.51 billion (6.84% beat)
  • EPS (non-GAAP): $0.92 vs analyst estimates of $0.76 (21.3% beat)
  • Revenue guidance for Q1 2022 is $5 billion at the midpoint, above analyst estimates of $4.33 billion
  • Management's revenue guidance for upcoming financial year 2022 is $21.5 billion at the midpoint, predicting 30.8% growth (vs 58.6% in FY2021)
  • Free cash flow of $736 million, roughly flat from previous quarter
  • Inventory Days Outstanding: 74, down from 78 previous quarter
  • Gross Margin (GAAP): 50.2%, up from 44.7% same quarter last year

“2021 was an outstanding year for AMD with record annual revenue and profitability,” said AMD President and CEO Dr. Lisa Su.

Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices or AMD (NASDAQ:AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.

The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.

Sales Growth

Advanced Micro Devices's revenue growth over the last three years has been impressive, averaging 41% annually. And as you can see below, last year has been especially strong, with quarterly revenue growing from $3.24 billion to $4.82 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Advanced Micro Devices Total Revenue

This was a fantastic quarter for Advanced Micro Devices with 48.7% revenue growth, beating analyst estimates by 6.84%. This marks 10 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.

However, Advanced Micro Devices believes the growth is set to continue, and is guiding for revenue to grow 45.1% YoY next quarter, and Wall St analysts are estimating growth 18.3% over the next twelve months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

Advanced Micro Devices Inventory Days Outstanding

This quarter, Advanced Micro Devices’s inventory days came in at 74, 10 days below the five year average, showing no indication of an excessive inventory buildup at the moment.

Key Takeaways from Advanced Micro Devices's Q4 Results

With a market capitalization of $137 billion, more than $3.6 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were very impressed by the strong improvements in Advanced Micro Devices’s gross margin this quarter. And we were also excited to see that earnings outperformed Wall St’s expectations. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 7.36% on the results and currently trades at $125.4 per share.

Advanced Micro Devices may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.