AMD Analysts See Momentum Ahead As $110B Xilinx Deal Expands Market Opportunity

Advanced Micro Devices, Inc. (AMDreported strong quarterly results Wednesday and announced an agreement to buy programmable chipmaker Xilinx, Inc. (XLNX) for $35 billion in stock.

Credit Suisse On Xilinx Deal, AMD's Q3: The per-share deal value of $143 represents a 25% premium as opposed to the 30% median premium for the semiconductor industry, Credit Suisse analyst John Pitzer said in a note.

The combined company on a trailing 12-month basis would have had revenues of $11.6 billion, gross margins of 51%, operating margins of 21% and free cash flow of $1.8 billion, the analyst said, citing the company.

This compares to AMD's standalone gross margins of 45%, operating margins of 17% and free cash flow of $154 million, he said.

The deal boosts AMD's total addressable market from $80 billion to $110 billion, Pitzer said.

The incremental opportunity comes from Xilinx's exposure to datacenter, networking, and auto/industrial, the analyst said.

AMD's third-quarter revenue and EPS outperformance was due to strong performances by the Enterprise, Embedded, and Semi-custom and Computing & Graphics segments, he said.

The C&G segment's results were driven by record Ryzen revenues and units and the 12th consecutive quarter of share gains, the analyst said. The EESC segment, meanwhile, benefited from second-generation EPYC revenues more than doubling year-over-year and strong semi-custom revenues from Sony Corp SNE and Microsoft Corporation MSFT console ramps, he said.

The better-than-expected fourth-quarter guidance reflects continued EPYC share gains, momentum in Ryzen, the Radeon 6000 GPU product launch and sequential growth in semi-custom revenues, Pitzer said.

AMD is on track to ship the next-gen Milan server processor based on Zen 3 architecture in the fourth quarter, with volume production expected in the first quarter of 2021, the analyst said.

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