Superior Micro Gadgets Inc. is ready to observe one more tough earnings report from Intel Corp., and as soon as once more may present good points in an space that brought about ache for its bigger rival.

AMD is scheduled to report third-quarter earnings on Tuesday after the shut of markets, after Intel reported an earnings beat Thursday that hardly mattered as income got here in gentle. Extra essential to analysts was Intel’s forecast for declining margins over the subsequent few years as its chief government doubles down on new manufacturing capability to attempt to retake its former glory because the undisputed chip chief.

That led to downgrades on Friday and Intel’s worst one-day efficiency because the chip chief mentioned it was going to delay its subsequent technology of chips, an announcement that had fired up much more investor assist for AMD again then.

From July: Intel seems to be feeling the aggressive warmth from AMD

Bernstein analyst Stacy Rasgon, who has a market carry out ranking on AMD and a $110 value goal, mentioned AMD will proceed to learn from Intel’s transition, and referred to as consideration to an AMD metric that was certainly one of huge concern throughout Intel’s name: Gross margins.

“We imagine Avenue gross margin estimates seem unaggressive going ahead (which isn’t one thing we now have usually mentioned for AMD), and the corporate is now (for the primary time ever) beginning to return money,” Rasgon mentioned.

That underscores one other present of how Intel and AMD are transitioning with respect to at least one one other: Analysts on the Intel name had been very involved that Intel’s margins had been falling regardless of firm assurances they’d keep simply above 50% for the subsequent few years. In the meantime, AMD gross margins have been rising, and are prone to break above 50%, if not on this earnings report, then someday quickly. Three months in the past, AMD reported gross margins of 48%, up from 44% within the earlier yr.

For extra: Intel inventory logs worst day in additional than a yr as capital plan raises margin issues

Whereas AMD is known as Intel’s “smaller rival,” that hole has been steadily closing for some time now. At Friday’s shut, AMD had a market cap of $145.34 billion, or almost 73% of Intel’s $200.66 billion. Simply this previous summer time, AMD’s $111.5 billion valuation was slightly greater than half Intel’s $219.5 billion cap.

One different are to have a look at might be data-center gross sales, as lastly swung to a achieve in that essential phase within the quarter. Over the previous two quarters, Intel has posted vital year-over-year declines within the more and more essential class, whereas AMD has greater than doubled its gross sales. That raises the query whether or not Intel clawed again some market share, or whether or not data-center gross sales had been simply typically higher throughout, which AMD’s report may reply.

What to anticipate

Earnings: Of the 34 analysts surveyed by FactSet, AMD on common is anticipated to put up adjusted earnings of 66 cents a share, up from 41 cents a share reported within the year-ago interval. Estimize, a software program platform that crowdsources estimates from hedge-fund executives, brokerages, buy-side analysts and others, requires earnings of 72 cents a share.

Income: Of the 32 analysts polled by FactSet, AMD, on common, is anticipated to put up income of $4.11 billion, up from the $2.8 billion reported within the year-ago quarter. AMD had forecast $4 billion to $4.2 billion. Estimize expects income of $4.24 billion.

Inventory motion: Whereas AMD earnings and gross sales have each topped Wall Avenue estimates over the previous 5 quarterly reviews, however shares solely gained the subsequent day twice, about three months in the past and when the inventory popped almost 13% 5 quarters in the past.

AMD shares rose 9.6% within the third quarter. In distinction, the PHLX Semiconductor Index  declined 2.6%, the S&P 500 index  rose 0.2%, and the tech-heavy Nasdaq Composite Index  declined 0.4%. On Friday, the day after Intel’s report, AMD shares closed at a document excessive of $119.82.

What analysts are saying

Cowen analyst Matthew Ramsay, who has an outperform ranking and a $120 value goal on AMD, mentioned he’s “lookin’ for extra of the identical.”

“We proceed to watch the PC marketplace for indicators of demand slowing or provide bettering,” Ramsay mentioned. “Close to-term, we see resilient demand exterior Chromebooks, however want a prudent/agnostic view on 2022 like AMD took on its final name.”

Earlier within the month, analysis companies launched knowledge exhibiting that pandemic-fueled progress in PC shipments had slowed significantly because the world not solely wrestles with a chip scarcity however total supply-chain points.

On data-center gross sales, Ramsay is much more optimistic estimating that phase will account for greater than 25% of gross sales in contrast with lower than 20% a yr in the past.

“We imagine datacenter passing 1 / 4 of AMD’s enterprise may draw investor consideration,” Ramsay mentioned. “We remind traders that a very powerful enterprise for AMD stays datacenter, which we estimate doubled in 2020, with CEO Lisa Su noting she sees the enterprise momentum accelerating in 2021.”

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Susquehanna Monetary analyst Christopher Rolland, who has a constructive ranking and a $130 value goal on AMD, mentioned he expects one other stable quarter pushed by enterprise and server gross sales, however that “given the slowing PC market, we don’t anticipate mgmt to boost their FY top-line steering as they’ve carried out in quite a few updates during the last yr.”

Nonetheless, Rolland expects AMD to report share good points from Intel in each desktop and laptop computer PCs in addition to enterprise and gaming PCs.

Of the 39 analysts who cowl AMD, 23 have purchase or obese scores, and 16 have maintain scores, with a mean value goal of $117.55.