AMD (Nasdaq: AMD) was down 5% following a strong Q4 earnings result that topped analysts' expectations on the top and bottom-line. The company benefited from a surge in server CPUs and video game console sales.
Overall, revenue was 45% higher in 2020 and guided above expectations for 2021.
Inside the Numbers
AMD reported $0.52 in earnings per share while analysts were looking for $0.47 per share. Revenue also came in above expectations at $3.24 billion vs $3.03 billion. The company's forecast also topped expectations for 2021 with revenue between $3.1 billion and $3.3 billion which would represent growth between 35% and 40%. This was above analysts' expectations of $3 billion.
The biggest contributor to growth was the enterprise segment which had a 176% year-over-year and a 13% increase from last quarter to $1.28 billion. Enterprise sales include server chips, CPUs, and graphics processors for game consoles like the Sony (NYSE: SNE) PlayStation 5 and Microsoft (NASDAQ: MSFT) Xbox One. The company cited strength in server and console sales.
AMD's Computing & Graphics division reported an 18% increase in sales to $2 billion due to strong PC sales. The company's new line of Ryzen processors and graphic chips have seen strong demand amid a strong quarter for PC sales. Increasingly, the company is taking more market share from Intel (NYSE: INTC). Over the last decade, AMD has overtaken Intel in terms of producing the most advanced chips. While Intel manufactures its own chips which have contributed to recent struggles, AMD has outsourced production to Taiwan Semiconductor (NYSE: TSM) which is producing 5-nm chips that are considered a generation ahead of Intel.
Stock Price Outlook
Over the past year, AMD shares are higher by 80%. Over the past six months, shares have been basically trading in a range between $86 and $96. This consolidation pattern underneath all-time highs typically leads to continuation.
Currently, AMD has a market cap of $108 billion, while Intel's is $238 billion. AMD completed its purchase of Xilinix for $35 billion to augment its graphic processing to compete more aggressively in the data center chip market.
Semiconductor sales are expected to be strong in 2021 although decelerate from 2020's pace. Given that AMD's shares have basically been flat over the past six months, this deceleration is likely reflected in share prices. Given AMD's strong results and the macro tailwinds, it's likely that a breakout would see continued gains.