AMD Grows Revenue In Sixth Straight Quarter Reveal Q3 2021 Results

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Chip designer Advanced Micro Devices, Inc (NASDAQ:AMD) reported fifth consecutive quarterly revenue growth today, as part of its earnings report for the third fiscal quarter of 2021. During Q3, the company earned $4.3 billion through net sales, marking for 54% annual and 12% sequential growth. It achieved this through strong growth in its business segment responsible for data center and custom-design chips, such s those found inside gaming consoles.

AMD Emphasises Annual Gross Margin Growth As Key Highlight Of Q3 2021 Earnings Release

Due to another strong quarter, AMD's revenue for the third quarter marks another record set by the company whose semiconductor products have managed to secure a comfortable market share for themselves owing to design and manufacturing strengths. The company's current growth trend, which is currently in its fifth consecutive quarter, started when revenues grew to $1.9 billion in Q2 2020.

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A leading contributor to AMD's revenue growth is the company's Enterprise, Embedded and Semi-custom segment, which primarily deals with corporate customers. This segment, which provides data center products and system-on-chips for gaming consoles, raked in $1.9 billion in revenue in Q3 2021. This marked for a strong 64% annual growth in an area that several of the company's rivals such as NVIDIA Corporation and Intel Corporation are also targeting.

Datacenter growth also validates assumptions by analysts who believe that high performance computing will grow to command a leading share of orders from contract chip manufacturer TSMC. TSMC, short for the Taiwan Semiconductor Manufacturing Company, is AMD's primary manufacturing partner who is responsible for manufacturing the American company's processors.

While AMD's other business segment, Computing and Graphics, is still the dominant contributor to the revenue pie, it is not the fastest growing. Computing and Graphics revenue stood at $2.4 billion during the third quarter, with the segment exhibiting an annual growth rate of 44%. AMD indicated in its earnings slides that higher selling prices partially influenced by data center graphics processing units (GPUs) contributed to the segment's revenue growth.

AMD's Q3 2021 revenue of $4.3 billion marks its seventh consecutive growth quarter. Image: AMD Presentation For 3Q 2021

In its release, the company was also eager to mention how its gross margins have also improved alongside its revenue. During 3Q 2021, AMD's gross margin stood at 48%, which is still lower than the 50% long term target set by the company for itself. However, as the chip designer pertinently highlighted, the margin in itself grew by four percentage points over the third quarter of the previous fiscal year. However, it remained static over Q2 2021.

A look at AMD's cash flows reveals that even though its revenue for the quarter stood at another record, its cash flows dropped sequentially. While the company generated $952 million from operations and had $888 million in free cash flow during Q2 2021, during Q3, both figures dropped. The third quarter data reveals that as it ended, AMD managed to generate $849 million in operational cash flow and $749 million through free cash flows.

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AMD's stated reason for the Q3 cash flow situation outlines that the figures include investments in "long-term supply chain capacity". It is unclear what capacity building the company is interested in, with one possibility being a deeper relationship with TSMC who is building a chip fabrication plant in the United States.

Heading over to the bottom line, AMD's operating income doubled during the third quarter which translated into a cozy 78% annual net income growth. The company also repurchased $750 million of shares in Q3, and its EPS growth mirrored net income to also stand at 78%.

For the current quarter, AMD believes that it can pull in at least $4.4 billion in revenue and improve its gross margin to 49.5%. By achieving this, the chip designer expects to close the fiscal year 2021 with a 48% margin.