AMD Earnings: Soft Guidance Doesn’t Deter Our Positive Thesis on Cloud Growth

AMD reported first-quarter results consistent with our expectations thanks to strong data center and embedded (Xilinx) revenue. Despite ongoing PC weakness, tepid enterprise demand, and elevated inventories at cloud customers, we remain positive on AMD’s data center business. We expect AMD’s latest 5-nanometer Genoa server CPUs to enjoy robust market share gains at Intel’s expense in the coming quarters. Shares of narrow-moat AMD are undervalued relative to our unchanged fair value estimate of $115 per share. During after-hours trading, shares were down nearly 7%, which we attribute to weak second-quarter guidance. Nevertheless, we anticipate strong double-digit revenue growth for AMD in the second half of 2023, led by share gains in the data center segment and a modest recovery in PCs.