Advanced Micro Devices (NASDAQ: AMD) is scheduled to announce its Q4 earnings results on January 26. AMD’s stock has gained around 75% during the past year, with its price rising to around $88 from $50 a year ago.
Supported by the strong demand for Radeon, EPYC, and Ryzen processors, the revenues for Q4 are expected to grow by 41.7% from the same quarter last year to around $3 billion. The rise in revenue in Q4 equals 7.5% when compared with Q3 revenues. The increased revenue in Q4 2020 is expected to increase earnings per share by 47% at $0.43 per share, compared with Q4 2019.
The coronavirus-induced work-from-home orders and distant learning trends have been driving the demand for the company’s Radeon, EPYC, and Ryzen processors that are used in gaming, cloud computing, high-performance computing, and personal computers.
The data center and cloud computing providers are adopting the company’s second-generation EPYC processors, increasing AMD’s revenue in the server segment. AMD’s Semi-custom revenue is also expected to increase because of the higher production as a result of high demand for Xbox Series S, Playstation 5, and Xbox Series X. The PC shipments also witnessed an increasing trend during Quarter 4, which would have also contributed to the company’s revenue. The computers and graphics division is also likely to have jumped because of the rising demand for the company’s Ryzen 4000 processors for smartphones.
During Q4, AMD developed a new desktop processor called Ryzen 5000 based on Zen 3 architecture that facilitates and improves gaming and workload performance. Thanks to the high demand for Apple’s MacBook Pro, the company’s M Series Radeon Pro 5000 GPU is expected to have contributed to the company’s top-line.
The company plans to expand its data center business by buying out Xilinx — a chip manufacturing company based in San Jose, California — for $35 billion. The deal is expected to be completed by the end of 2021. Some notable chips and processors launched by the company during the Q4 include the Ryzen Embedded V2000 Series processor, Radeon RX 6000 Series graphics card, and the Instinct M100 accelerator.
Although, the company is expected to generate strong Q4 2020 results, the increase in its expenses because of the stiff competition from its rivals NVIDIA and Intel will likely keep the margins in check. AMD’s stock is currently selling at a premium as it’s forward price-to-earnings ratio stands at 49 against the industry’s average of 22.