Shares of Advanced micro-systems (AMD 2.08%) are down 29% in 2022, but there are no signs of the company’s growth slowing down. Its first quarter results were released on May 3 and AMD crushed Wall Street expectations, thanks to phenomenal growth in revenue and earnings. He also released a strong forecast that points to another year of stunning growth.
The latest market share figures for the x86 processor space (which includes processors used in computers, servers, consoles and Internet of Things devices) from Mercury Research tell us why AMD has seen healthy growth quarter after quarter. . AMD has once again taken business away from Intel (INTC -0.28%) in the first quarter of 2022 in key areas that drove its x86 market share to an all-time high. Let’s take a look at why this trend could continue and help AMD maintain its impressive growth.
AMD continues to reduce Intel’s dominance
According to Mercury Research, AMD ended the first quarter with a 27.7% share of the x86 processor market, an increase of 7 percentage points over the prior year period. The laptop and server CPU (central processing unit) markets were the main drivers of this impressive growth.
AMD’s share of the laptop processor market rose 4.4 percentage points year-over-year to 22.5% last quarter. The company’s gains in this segment were driven by strong shipments of commercial laptop processors.
The good part is that AMD expects further growth in this segment, thanks to its recent design wins. Its chips have been chosen to power the next laptops of many leading OEMs (Original Equipment Manufacturers).
AMD CEO Lisa Su said on the company’s May earnings conference call that:
We are well positioned to accelerate our growth in commercial laptops in 2022 based on the increased number of winning designs on track for launch. Although the PC market is experiencing some weakness following several quarters of near-record unit shipments, we remain focused on the high-end, gaming and commercial segments of the market where we see strong growth opportunities, and we expect to continue to win the overall share of customer revenue. .
Su’s statement indicates that AMD may be able to weather the software PC (personal computer) sales environment. Market research firm IDC estimates that the global PC market fell 5.1% in the first quarter of 2022, following two years of robust double-digit growth. AMD, however, was able to post record revenue thanks to mobile processor sales in the first quarter, and the trend is expected to continue as new laptops powered by AMD processors hit the market.
More importantly, AMD is focused on pushing the boundaries of the laptop processor space with the launch of its Dragon Range and Phoenix processors in 2023, which will be based on the 5 nanometer (nm) Zen 4 architecture. Intel, on the other hand, is currently on the 10nm process with its Alder Lake laptop chips. The largest company is expected to move to a 7nm process in 2023 when it launches its Meteor Lake processors.
It should be noted that Intel’s manufacturing process would be denser than the one in which AMD’s chips are made. This means that Chipzilla packs more transistors into a smaller area. As a result, Intel’s processors are expected to be more competitive next year as they can deliver more computing power and consume less power at the same time. CPUs based on a denser process can perform more calculations while generating less heat.
But AMD has the upper hand right now as its latest laptop processors were based on a 6nm process. Therefore, it could continue to take shares from Intel until Chipzilla comes along with a more competitive process node.
The server market is another notable catalyst
AMD’s share of processors used in servers rose to 11.6% in the first quarter, up 2.7 percentage points year-over-year. The chipmaker has been gaining quarterly server processor market share for three years now, and Su pointed out on the earnings call that AMD had “more than doubled server processor revenue year over year.” other in eight of the last 10 quarters”.
AMD’s influence in the server market is expected to continue to grow as cloud service providers ramp up deployments of its EPYC processors, including Amazon, Ali Baba, Baidu, Microsoftand Google using its chips in 70 new virtual servers last quarter. More importantly, AMD’s upcoming server processors could help it take more of Intel’s share.
AMD’s current generation EPYC Milan processors are manufactured using a 7nm process. With competing Intel Sapphire Rapids server chips lagging and not yet widely available, AMD has a great opportunity to grab a bigger share of the server market. Additionally, AMD is expected to launch its 5nm EPYC Genoa processors this year, which are expected to be more powerful and efficient than the Milan processors, as they will be manufactured using a more advanced process.
All of this indicates that AMD’s server business is designed for more benefits, and further advancements in this area could significantly boost the company’s revenue, given the massive opportunity at hand. As such, it will come as no surprise to see AMD continue its impressive growth for years to come.
The company forecasts a 60% increase in revenue this year to $26 billion, and analysts are also optimistic about its long-term outlook, as they expect AMD’s earnings to grow at a annual rate of 33% over the next five years. That’s why investors who haven’t yet taken advantage of AMD’s stock decline should consider buying this semiconductor stock. It is currently trading at 38 times earnings, which is a steep reduction from its five-year average multiple of 107.