AMD’s Growth Story Is Alive Show Third Quarter Results With Steady Guidance

Ramish Zafar
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AMD chief Dr. Lisa Su at. the CES 2020 showing off the Ryzen and Radeon CPUs and GPUs.

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Chip designer Advanced Micro Devices, Inc (AMD) posted its earnings report for the third quarter of 2022 at the close of markets today. The results followed AMD's preliminary guidance given at the start of October, with the company raking in $5.6 billion in revenue to mark for strong 29% annual growth at a time when the personal computing market is facing an inflationary downturn. More importantly, AMD's non-GAAP results and its cash flows all exhibited solid growth, indicating that the firm is on solid footing, even as the GAAP results let to an operating loss in the wake of its Xilinx acquisition.

AMD Grows Operating and Free Cash Flows In Crucial Quarter Marked By Industry Downturn

The key takeaway from AMD's latest quarterly earnings is the firm's operating and free cash flows. However, before we get to that, a brief look at its income statement shows that the forecasts given at the start of October were on the dot. They had outlined that AMD will bring in $5.6 billion in revenue and $1.5 billion in operating expenses, alongside a 40% annual drop in its client segment that reports revenue from personal computing and notebook product sales.

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Today's results confirmed this, and they also revealed that if AMD's expenses from its Xilinx acquisition are taken into account, then the firm posted a net operating loss of $64 million during the quarter. However, removing these, for the non-GAAP results, shows that AMD's operating income grew by 20% annually and sat at $1.2 billion. The operating income of a firm measures the money left to it after the costs of its products and other expenses such as salaries are taken into account and removed from the revenue or net sales.

On the net income side of things, AMD posted $1.1 billion in non-GAAP and $66 million in GAAP income, to mark a 23% growth and a massive 93% annual drop. While the non-GAAP metric is used to analyze performance, the GAAP metric represents the true earnings per share available to users at the end of a quarter. AMD's GAAP and non-GAAP EPS stood at 4 cents and 67 cents, respectively.

Moving towards the cash flow side of things, AMD raked in $965 million in cash flow from operations and $842 million in free cash flow during the quarter. These marked for 15% and 10% annual growth, from the last year's corresponding quarter's $849 million and $764 million values, respectively. The operating cash flow is the 'true' amount that the firm generates from its operations after adjustments for non-cash expenses such as depreciation have been made.

Similarly, the free cash flow takes a look at the amount that is available to investors after tax and other expenses that do not reflect regular day to day running of a business are removed from the equation.

For AMD, growth in both shows that the firm has improved its operational performance in the third quarter - despite falling from its extraordinary growth due to consumers battling high inflation.

On the costs side of things, AMD's gross margin, which reflects the percentage that its cost of products reflects on the total revenues grew annually as well, if the expenses from the Xilinx deal are removed. This was due to the pricier data center and enterprise products raking in more revenue per item sold. The non-GAAP operating margin was 50%, in line with AMD's own targets.

Looking at the future, AMD expects to bring in $5.5 billion in revenue during its current quarter and $23.5 billion in revenue for the full year 2022. The company had brought in $4.8 billion in revenue during Q4 2021, and its revenue for the full year had stood at $16 billion, which had marked a staggering annual growth of 68%.

The estimates show that the growth story is still alive at AMD, despite the shares taking a beating on the market this year. AMD's Q2 2022 earnings results can be seen here. The firm's shares are up by 2.2% in aftermarket trading at the time of publishing.

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