Chipmaker Advanced Micro Devices, Inc (AMD) is on track to beat analyst estimates for its revenue for the fourth quarter of last year, according to new estimates from investment bank KeyBanc. KeyBanc shared its expectations for the current earnings season in a report released last week, and the company not only expects AMD to exceed its own Q4 2021 forecasts and analyst estimates in its report on the results expected in February, but that it will also perform strongly during the current year due to a growing presence in the sector of enterprise computing and cloud computing.
AMD Expected to Post $4.6 Billion in Q4 2021 Revenue, Investment Bank Says
The full report, accessible here, lists the company’s expectations for the current earnings cycle that was launched by the Taiwan Semiconductor Manufacturing Company (TSMC) earlier this month for major market players.
It focuses on AMD and mentions the company several times throughout the coverage. KeyBanc estimates that for AMD’s fourth quarter 2021 results, which are due next week, the company will end up reporting revenue of $4.633 billion. This estimate is above the low range of AMD’s forecast of $4.6 billion that the company provided in its third quarter 2021 earnings release and Wall Street consensus estimate of $4.52 billion. .
KeyBanc shares strong optimism for AMD’s server market share this year, as it believes that from the 11%-12% market share in 2021, the company will almost double its presence in the segment by posting a 20% share this year.
As the investment bank puts it:
We see AMD benefiting from strong demand in cloud data centers, with increased traction in CSPs, such as FB and in particular at MSFT Azure, where we expect the Milan deployment (link) to be a key driver short-term rise. After securing significant additional wafer and substrate capacity, we expect AMD’s market share in servers to grow to over 20% from 11-12% in 2021. We expect AMD to report results higher in 4Q21 and higher forecasts for 1Q22.
The growth of cloud data centers for AMD will follow the general market trend which, in itself, is expected to grow by 18% this year, KeyBanc points out.
This report also comments on the current supply chain situation in the semiconductor industry, as it warns readers that although inventory is high compared to historical levels, this is overstated due to “kitting” issues. and other constraints. These are reflected in the fact that most of the growth in inventories takes the form of raw materials and not finished products.
KeyBanc clarifies the constraints by stating that:
We do not expect these issues to have a negative impact on results in NT, as the risk is borne by the distributor and any rejections of orders related to incomplete kits are offset by price increases. As these kitting problem imbalances increase, there is concern that this will ultimately lead to an inventory correction in 2H22 [EMPHASIS OURS].
Belief regarding the stock correction in the chip sector that will take place in the second half of this year is also echoed by Piper Sandler’s Harsh Kumar. Kumar, in a note published yesterday, cited statements from an Infineon Technologies AG executive to share his optimism that the inventory correction will begin either in the second half of this year or in 2023.
Thereafter, chipmakers will find limited space to raise prices further, and their margins will come under pressure, Kumar believes.