CEO Lisa Su says FTC approval is final hurdle for $35 billion acquisition of Xilinx, expects deal to close this quarter
Advanced Micro Devices Inc. shares soared in the extended session Tuesday after the chip maker’s record results and forecasts blew past Wall Street estimates across the board and the company reached a milestone profit margin of 50%.
AMD AMD, +2.21% shares soared more than 10% after hours, following a 2.2% gain in the regular session to close at $116.78.
For the current quarter, AMD said it expects revenue between $4.9 billion and $5.1 billion, while analysts had forecast $4.35 billion, and forecast gross margins of 50.5%.
Gross margins came in at 50% for the fourth quarter, up from 45% in the year-ago quarter, and 48% for the third quarter. That 50% margin milestone is significant for AMD as larger rival Intel Corp. INTC, +0.27% has been dealing with shrinking margins, which executives have assured would stay “comfortably above 50%,” or in the 52% to 53% range for the year.
“It’s getting increasingly plausible that we might have an AMD with higher GMs than Intel at some point,” Bernstein analyst Stacy Rasgon told MarketWatch. Rasgon has a market perform rating on AMD and an underperform rating on Intel.
For 2022, AMD forecast gross margins of 51% for the year, and said it expects revenue of about $21.5 billion, a 31% gain from 2021’s record $16.43 billion. Analysts had forecast $16.13 billion for 2021 and $19.29 billion for 2022.
On the call with analysts, AMD Chief Executive Lisa Su said she expects data-center sales to lead growth in 2022, and that the company’s footing amid a global chip shortage is steady.
“We have also made significant investments to secure the capacity needed to support our growth in 2022 and beyond,” Su told analysts. “Looking out over the long term, we’re confident in our ability to continue growing significantly faster than the market.”
Su, however, forecast that PC sales would be flat going into 2022, and allayed analysts’ concerns that the company would be locked into those capacity arrangements while admitting that there wasn’t 100% flexibility.
“We’ve certainly worked very hard to give ourselves fungibility amongst the various capacity corridors that we have,” Su told analysts. “We make that a dynamic allocation decision sort of like weekly, based on what we see going on, so I think we have a pretty good pulse on the market.”
On the call, Su also told analysts that the only remaining hurdle to the company’s $35 billion deal to acquire Xilinx Inc. XLNX, +2.46% is U.S. Federal Trade Commission approval of the company’s refiled antitrust paperwork, and reiterated the target of a first-quarter close. Recently, AMD received conditional regulatory approval for the acquisition from Chinese regulators.
AMD reported fourth-quarter net income of $974 million, or 80 cents a share, compared with $1.78 billion, or $1.45 a share, in the year-ago period. After adjusting for stock-based compensation and other factors, the Santa Clara, Calif.-based company reported earnings of 92 cents a share, compared with 52 cents a share in the year-ago period.
Revenue rose to a record $4.83 billion from $3.24 billion in the year-ago quarter. Analysts surveyed by FactSet had forecast adjusted earnings of 70 cents a share on revenue of $4.52 billion, after AMD projected between $4.4 billion to $4.6 billion.
Sales from enterprise, embedded and semi-custom chips — the unit that includes data-center and gaming-console revenue — rose to $2.24 billion, compared with $1.28 billion a year ago. Analysts had forecast $2.1 billion.
In AMD’s computing and graphics segment, the company reported second-quarter sales of $2.58 billion, up from $1.96 billion last year, compared with analyst expectations of $2.42 billion.
At the close of regular trading, AMD shares remained firmly in bear-market territory, 29% off their closing high of $161.91 set on Nov. 29, but have still gained 32% over the past 12 months. In comparison, the PHLX Semiconductor Index SOX, +0.79% is up 16% over that time, the S&P 500 index SPX, +0.69% has gained 20%, and the tech-heavy Nasdaq Composite Index COMP, +0.75% has gained 6.5%.