Advanced Micro Devices (NASDAQ:AMD) will report its fourth quarter earnings on Tuesday, with Wedbush analysts expecting a solid performance from the company, driven by its CPU and services businesses.
Heading into the report, Wedbush has maintained an 'Outperform' rating on AMD with a 12-month price target of $290. Shares traded up 5% at $249 on Monday afternoon.
“We see no reason to shift our constructive view on AMD,” Wedbush wrote.
For Q4, Wall Street analysts on average expect AMD to report revenue of $9.67 billion, up from $7.66 billion in the year-ago period. Earnings per share are expected to increase to $1.32 from $1.09.
Wedbush expects AMD to be able to” at least modestly exceed Q4 estimates given strong demand for both PC and server compute, with this backdrop providing room for both sales and margin upside assuming AMD optimized shipments.”
“Continued tightness entering Q1 for both categories should provide AMD with further room for upside, particularly with server CPU pricing seemingly set to rise double digits and with AMD having more time to optimize product mix to maximize results.”
The analysts highlighted that AMD’s traditional CPU business has consistently performed at or above expectations over the past two years.
“Solid near-term results tied to PC/server strength are not an anomaly,” they wrote, adding that this foundation may give AMD additional flexibility to execute its AI strategy in the future.
On AI-related products, Wedbush analysts noted that “while we have a constructive view thematically given our view that AMD is best positioned to offer a strong third-party AI accelerator alternative to NVDA, our modeled outlook has more variability (both upside and downside) depending upon AMD’s execution.”
However, they highlighted that upside unit opportunity and stronger pricing in what was already AMD’s highest margin product set should create a more clear path to gross margin and profit growth through 2026.
The analysts also pointed to potential incremental demand from China. “With China seemingly on track to green-light some AI-related shipments, we see this potential incremental demand as providing a bit more leeway for AMD,” they wrote.