AMD Stock Is Crashing After Earnings. Here's Everything You Need To Know

AMD just reported their quarterly figures. The call is over as well. If you missed the live stream, here's everything you need to know why the stock is down despite them beating across the board. Now, people are already saying, "Oh, the advanced money destroyer is back." Not the advanced money doubler, which is quite interesting because year to date, the stock is still up more than 100%. From the all-time highs, it's now down between 15 to 20% or so. What's also interesting is, well, people that freak out have to remember that we're now basically back to prices not seen since since Monday. And Monday is is one day ago from recording this video. So, it's not that bad, right? It's purely about what's baked into the stock today, what you're getting for it, the results, and the guidance. And as you know most of the growth and the accelerated growth from AMD was going to come in the back half of this year also starting 2027 because that's when you have the MI400 series that starts to ramp up. Now they did talk a little bit more about the second half of 2026 2027 as well to give us a little bit more information on the expected growth rates. They also talked about well their longer term targets. They gave us a small update there as well. So, right now when I'm looking at the stock and I'll show you. You can see stock is basically back to prices that we've seen on Monday, which is $470. Yeah, it didn't it didn't stay above that 50-day moving average. Okay, that's fine. Stocks cannot always go up every single day. But, as you can see, year to date, it's still up 114%. So yeah, I don't think we could complain that much, right? Most of us bought AMD even before uh this year at much lower prices. But when you start to look at the company, right, the valuation and everything close to $800 billion in market cap and then you start to look at of course the forward PE. Forward PE of course can change. Those are based on analyst expectations. We also know that they're expecting at least $20 of earnings per share over the next three to five years. And the three to five years already started I believe a year ago or close to a year ago. And they say they are going to well beat that number quite easily. So if you want to have a let's say longer term price to earnings ratio based on that $20 EPS then okay then yeah then the forward PE based on that is going to be much lower but okay a lot of people don't like to look that much into the future when they look at these types of companies then we of course have to look at the comparison of an Nvidia right why buy an AMD today when you can buy an Nvidia AMD as we've seen for PE over 50 times and Nvidia closer to 21 times actually and this is what you're seeing right now with AMD is yes you are seeing growth this is revenue growth but look at the big difference look at Nvidia's growth look at Nvidia's dollar amount right so Nvidia can already produce huge yearover-year growth rates despite the dollar amount being so much bigger and so yes you can make the case you can definitely make the case of you know But AMD has been great, but I believe Nvidia right now, even though Nvidia is a $5 trillion company, Nvidia at a trailing P of 32.5 times and a forward one of 21.2 times, it is undervalued. It's growing faster. Maybe I should make the switch, which okay, you do what's best for you. But remember that for AMD, the growth, the accelerated growth is just behind the corner. If we have a look here at the expected growth rates for revenue per quarter. So next quarter 35% year-over-year growth. But then we are starting to see the acceleration 52% 64 60 and 65%. I am pretty sure that these numbers are a bit too low. As for data center revenue this quarter already increased by 107% year-over-year. Client revenue has been decelerating. The growth there is just 22.5% for the quarter. As for embedded, we are seeing a small revival there. So that's up close to 18.5%, free cash flow is still a bit all over the place, but as for the dollar amount, free cash flow of course is expected to go up over the upcoming quarters and years. If we actually have a look at the annual estimates for free cash flow purely, we see that the market is expecting this company to generate $26.4 $4 billion in free cash flow in fiscal 2028, which of course is much higher. It's $20 billion more than where they're expecting to land this fiscal year. So again, you are paying a lot, but the acceleration, the huge growth, the huge transformation is just around the corner. Now that said, let's jump into this quarter and the comments that were made during the earning score. Of course, if you enjoy these type of videos, you know what to do. Hit all the buttons. Really appreciate that. funds who support me even further. Do check out the link down in the description and hit the pin comment with the top 10 best stocks to buy now or go to full.com/gotchinvestor. Thank you very much. So EPS nonGAAP was a beat, small beat but still a beat. Revenue also a nice beat there. Non-GAAP gross margin of 56% that's up 200 basis points year-over-year. And this is the sixth straight quarter of over 30% year-over-year revenue growth. As for the data center segment that increased 107% year-over-year, 16% quarter over quarter. Again, the huge growth is coming. Segment operating income was $2.1 billion or 31% margin. As for server CPU, which is the epic side, fifth straight record quarter cloud and enterprise sales each grew over 70% year-over-year, beating prior guidance. Both units and ASPs rose as customers moved to higher core count Turing and Genoa chips. AMD gained x86 server share. Again, as for Instinct, which is the data center AI side, revenue more than doubled year-over-year on the MI350 series demand. Again, you cannot expect huge numbers right now when we are going to go to a full rack scale solution, which is Helios, which is the MI 450 series, 400, and then 500, etc., etc. Speaking of Helios, initial shipments will begin this quarter, ramping through Q4 and into 2021. Customer demand is tracking ahead of AMD's own forecast. As for the big customer wins, of course, Entropic, the new deal for up to 2 GW of MI450 series GPUs via Helios, first gigawatt deploying in the first half of 2027, plus a joint engineering partnership using CLO to optimize AMD's software stack. As for Microsoft that will deploy Helios at scale on Azure for frontier model inferencing and the existing multigeneration gigawatt scale deals with OpenAI and Meta of course continue. As for the MI500 that's a 2027 probably back half of 2027 story. They reiterated what they told us a couple of weeks ago during their event. AI accelerator total addressible market is approximately going to be according to them $1.4 trillion by 2030. Server CPU time is around $220 billion also by 2030. As for the other business segments, less sexy I know. Client PC is 3.1 billion, up 23% year-over-year. Gaming still struggling. That's down 31% year-over-year. Now, management is planning for a softer PC market in the second half of 2026 as rising memory and component costs weigh on demand industrywide. AMD expects its own client business to outperform the broader market, but this is a real headwind. Not company specific weakness, but a read on the whole PC supply chain. As for embedded, again, this one is picking up some steam, and it's a very, very profitable business for them. As for the outlook, they're expecting around 13 billion in revenue, give or take 300 million. We know it's probably going to be the plus $30 million. Estimated number was 12.51 billion. So they beat that. Year-over-year growth here is going to be 41% year-over-year. Non-GAAP gross margin 56% non-GAAP OPEX $3.65 billion. That's a continued step up in R&D investment. Then as for the longer term guidance server CPUs they expect over 80% YVIA growth in the second half of 2026 and then over 70% growth for the full year 2027 of a much higher base. Moving to the data center segment, they're expected to more than double yearover-year in 2027 as Helios MDMI 450 deployment scale and server supply keeps expanding. the long-term financial model. This is the big number in my opinion. If you are a long-term investor, AMD now expects revenue growth substantially above its prior over 35% target and to significantly exceed the $20 annual EPS target set at last November analyst day. And again, last November is almost a year behind us. And they told us this is a 3 to 5 year target. Okay? Could be four, could be five, could be three. Let's say it's four. So, it's 3 years from now, they're expecting to generate over $20 of earnings. They did, of course, touch on the cost inflation with regards to memory HBM. So, they said that Helios carries around 50% more HBM than competing systems, a performance edge, but also more exposure to memory pricing. AMD says HBM allocation for 2027 is well secured and can trim memory footprint for workloads where it isn't needed. Of course on Wednesday we are going to have some memory players although not really the HBM players we have Western Digital and SanDisk in I think a month from now something like that we will have Micron to talk a bit more about this whole memory space but in short when you look at the numbers the numbers are good. The question is, are the numbers good enough to justify the price the market gave us? Right? Is it good enough to justify it being a $800 billion company trading at over 50 times forward earnings, etc., etc. That that's the real question here. Of course, as as you can clearly see, there is a growth acceleration that's going to happen in the back half of this year and next year. So, they can grow into the valuation. That also means that the shares might stay around $500 for two quarters or so, which if you're a long-term investor, you should be fine with that, right? To let it grow into valuation, that's fine. And Nvidia, for example, Nvidia is only up 12% year to date. I think a week or two ago, it was flat year to date. Nvidia, the company that is growing still what, 70%, 60% for the whole fiscal year, maybe maybe a little bit more. So it can happen good companies can stay flat for a long period of time just so the business can catch up to the valuation. Again is up triple digits year to date. On Wednesday stock might open even down 10% 20 well maybe not 20 but down 10 12 13%. It can happen which would just put us back to where we were a day ago or maybe at the end of last week. It's not the end of the world because purely looking at the business, purely listening to what Lisa had to say during the earnings call or in the previous events or not even AMD if you go and and have a listen to what the other players are saying the analysts even yeah industry experts there is a lot of growth left of course again you have to go back to the same conversation AMD or Nvidia right it's You either pick the number one player, which we know it's Nvidia, it's not even a question, or you go with AMD, but of course right now you are paying a premium. When it was at 100, $200, $300 per share, the premium was of course much much lower. But yeah, I I do think that if we stay flat for a quarter or two, it's not the end of the world and it would mean that the stock becomes much cheaper. Now of course if the acceleration in growth doesn't happen then there is going to be an issue but if you look at the track record of this company if they tell us there is an acceleration in growth happening then the acceleration in growth is going to happen unless it's a full industrywide issue which again I I don't think is going to happen. Now if you're going to ask me are you buying more shares? No I'm not buying more shares at these prices right now. my position is a pretty good position. This dip is not a worthy dip for me to start buying more and more or in my opinion in my portfolio some other opportunities or just keep a little bit in cash. But yeah, I've bought Palanteer more recently. I've bought Reddit more recently. I thought the valuation there made a little bit more sense. So yeah, right now I have my position. I'll put it on hold. So all in all, that's about it for me in today's video. Leave your thoughts down in the comment section below. See you all in the next one. 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