AMD reported record quarterly earnings, but analysts worry persistent supply chain disruptions and other headwinds will undermine the chipmaker's upbeat financial guidance.
Despite continuing supply chain disruptions, many technology companies are reporting healthy quarterly earnings, including AMD. The chip maker this week reported fourth-quarter revenue of $4.8 billion, up 49 percent annually, surpassing analysts’ estimates of $4.53 billion. AMD also reported a gross margin of 50 percent, an increase of more than 5 percent year-on-year, marking another all-time high.
Among the unknowns is whether AMD and other tech companies can weather supply chain disruptions that show no sign of abating. AMD also said it expects to close its acquisition of FPGA specialist Xilinx by the end of this quarter.
By mid-week, AMD shares (NASDAQ: AMD) rose 11 percent in after-hours trading following the earnings report that included annual revenue totaling $16.4 billion, up 68 percent from 2020. CEO Lisa Su attributed AMD’s positive results to the booming data center market, including increased adoption of its EPYC processors for cloud and other enterprise customers.
Overall, AMD’s data center segment accounted for a more than 20 percent of total revenue. Su said she expects continued growth into 2022 based on customer demand for AMD’s next generation of PC, gaming, and data center products. The company introduced its RDNA 2 desktop GPU at the year’s Consumer Electronic Show. It also disclosed plans to release Ryzen 6000 Series mobile processors, touting its new Zen 3+ processor cores for delivering improved power efficiency and battery life.
AMD expects first-quarter revenue totaling about $5 billion, a projected 45 percent increase on an annual basis. The company is also forecasting annual revenue of $21.5 billion, a 31-percent increase from 2021 and ahead of Wall Street estimates of $19.3 billion.
Some analysts are concerned whether AMD will be able to reach its optimistic guidance given persistent supply chain disruptions some predict are here to stay. Su countered that AMD’s $1 billion investment in long-term supply chain capacity would allow it to meet profit targets.
“We’ve been working on… the supply chain really for the last four or five quarters knowing the growth that we have from a product standpoint and the visibility that we have from customers,” Su said. “We’ve made significant investments in wafer capacity as well as substrate capacity and back-end capacity. We feel very good about our progress in the supply chain to meet the 2022 guidance and our goal is, frankly, to have enough supply to satisfy the demand out there.”
As for AMD’s acquisition of Xilinx, observers wonder how the FPGA specialist will complement AMD’s product portfolio while extending its reach into other markets such as industrial, automotive and 5G wireless. “I feel good about the progress there, but I would say it’s still quite early,” Su said. Xilinx has “very deep relationships with a number of these [5G] accounts, so we see that as an incremental positive as we think about EPYC in communications.”
In response to analysts’ questions regarding potential technology and revenue synergies, Su responded: “There is a very good synergy with Xilinx in terms of just the customer set and the channels. I do see it as a nice grower for us as we go through it, and there’s very good reuse from our server products as well as our client products,” Su said. “When we think about the technology that they have, it’s very complementary to ours.”
China’s State Administration for Market Regulation approved AMD’s Xilinx transaction on Jan. 27. The deal must still be approved by the U.S. Federal Trade Commission. AMD expects to complete the transaction during the first quarter of 2022.
This article was originally published on EE Times.
Stefani Munoz is associate editor of EE Times. Prior to joining EE Times, Stefani was an editor for TechTarget and covered a host of topics around IT virtualization trends and VMware technologies.