Why AMD’s 3Q14 earnings missed expectations
Key takeaways for investors from AMD’s 3Q14 earnings review (Part 1 of 11)
Advanced Micro Devices’ 3Q14 results
On October 16, 2014, Advanced Micro Devices (AMD) released its 3Q14 earnings. The company’s revenues and non-GAAP, or generally accepted accounting principles, EPS (earnings per share) were $1.43 billion and $0.03 per share, respectively. AMD missed analysts’ expectations on both the revenue and the EPS front, which were $1.48 billion and $0.04 per share, respectively.
AMD’s stock experienced a decline of ~6% to $2.49 on October 16 on account of its poor performance in 3Q14. Its share price had fallen approximately 43% in the last three months. AMD provided revenue guidance of $1.47 billion for 3Q14.
AMD’s results will impact exchange-traded funds (or ETFs) like the First Trust Technology AlphaDEX Fund (FXL), SPDR S&P Semiconductor ETF (XSD), iShares Morningstar Small-Cap Value ETF (JKL), and the iShares PHLX Semiconductor ETF (SOXX) that have significant exposure to AMD.
Operating performance
AMD’s computing and graphics segment posted a decline in revenues while its enterprise, embedded and semi-custom solutions segment posted decent growth. As the above chart shows, computing and graphics is the key operating segment of the company. Gross margins stood at 35% that were in line with expectations. The company got boost of ~2% by IP licensing revenue through the Synopsys agreement.
To learn more about the AMD-Synopsys agreement, please read Market Realist’s series on Why AMD entered into a partnership with Synopsys.
Restructuring strategy and layoffs announced
To focus on cost containment and profitability, AMD announced its decision to lay off 7% of its employees. The company has not announced cancellation of any product line in tune with this action.
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