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Computer processor maker AMD (NASDAQ:AMD) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 10.2% year on year to $6.17 billion. On the other hand, next quarter's revenue guidance of $5.4 billion was less impressive, coming in 6.1% below analysts' estimates. It made a non-GAAP profit of $0.77 per share, improving from its profit of $0.69 per share in the same quarter last year.
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AMD (AMD) Q4 FY2023 Highlights:
- Market Capitalization: $287.3 billion
- Revenue: $6.17 billion vs analyst estimates of $6.14 billion (small beat)
- EPS (non-GAAP): $0.77 vs analyst expectations of $0.77 (small miss)
- Revenue Guidance for Q1 2024 is $5.4 billion at the midpoint, below analyst estimates of $5.75 billion
- Free Cash Flow of $242 million, down 18.5% from the previous quarter
- Inventory Days Outstanding: 130, down from 172 in the previous quarter
- Gross Margin (GAAP): 50.7%, in line with the same quarter last year
Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices or NASDAQ:AMD (NASDAQ:AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.
Processors and Graphics ChipsThe 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 GrowthAMD's revenue growth over the last three years has been very strong, averaging 39% annually. But as you can see below, this quarter wasn't particularly strong, with revenue growing from $5.60 billion in the same quarter last year to $6.17 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).
AMD had an average quarter as its revenue grew 10.2% year on year, in line with analysts' estimates. We believe the company is still in the early days of an upcycle, as this was just the second consecutive quarter of growth and a typical upcycle tends to last 8-10 quarters.
AMD's management team believes its revenue growth will continue, guiding to 0.9% year-on-year growth next quarter. Analysts expect the company to grow its revenue by 18.2% over the next 12 months.
Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity 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.
This quarter, AMD's DIO came in at 130, which is 28 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from AMD's Q4 ResultsWe were impressed by AMD's strong improvement in inventory levels. That stood out as a positive in these results. However, its revenue guidance for next quarter missed analysts' expectations. Overall, this was a mixed quarter for AMD. The company is down 1.4% on the results and currently trades at $169.54 per share.
