Shares of computer processor maker AMD (NASDAQ:AMD) jumped 7.53% in the morning session after competitor, Nvidia, delivered an exceptional quarter that topped analysts' estimates across key metrics. Revenue surpassed expectations by an impressive 10.3%, driven by a record-breaking data center revenue of $4.28 billion. Notably, the company exhibited improved profitability, with both gross margin and operating margin outperforming expectations. Earnings per share beat by an impressive 18.8%. Inventory levels experienced a meaningful decrease during the quarter. In addition to the outstanding quarterly results, the revenue guidance for the next quarter surpassed expectations by over 50%. Similarly, the operating profit guidance exceeded Consensus estimates. Founder and CEO Jensen Huang emphasized the ongoing transformations in the computer industry, particularly the advancements in accelerated computing and generative AI. He highlighted Nvidia's readiness to seize the opportunities presented by the anticipated trillion-dollar shift in global data center infrastructure from general-purpose to accelerated computing, as firms implement generative AI into their business operations. Overall, the company's blowout quarter, with its impressive revenue growth, enhanced profitability, and positive guidance, underscored its strength in the market.
What is the market telling us:
AMD's shares are very volatile and over the last year have had 32 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 23 days ago, when the stock dropped 5.91% on the news that the company reported first-quarter results that narrowly beat analysts' revenue estimates. EPS also beat. However, free cash flow fell short of expectations, and inventory levels increased. In addition, revenue guidance for the next quarter was below the Consensus estimates. Management added that the company was still dealing with "a mixed demand environment" in which revenue growth is expected to be "flattish" during the rest of the first half of the year. Overall, it was a weaker quarter for the company. Following the results, Bank of America analyst, Vivek Arya downgraded the stock's rating from Buy to Neutral (Hold).
AMD is up 87.1% since the beginning of the year. Investors who bought $1,000 worth of AMD's shares 5 years ago would now be looking at an investment worth $8,840.
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