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AMD Buys Xilinx for $35 Billion, Posts Better-Than-Expected Profit

AMD agrees to buy Xilinx for $35 billion in stock, and posts better-than-expected third-quarter earnings.

Advanced Micro Devices  (AMD) - Get Advanced Micro Devices Inc. Report agreed to buy rival Xilinx  (XLNX) - Get Xilinx Inc. Report for $35 billion in stock.

Chipmaker AMD also reported third-quarter earnings that beat analysts’ estimates.

Under terms of the deal, Xilinx investors will receive 1.7234 AMD shares for each Xilinx stock they own. The agreement values Xilinx at about $143 a share. Xilinx shares closed Tuesday at $114.55.

The stock was rising 7.46% to $123.10 in trading Tuesday. AMD shares fell more than 5% to $77.98.

The merger is expected to close by the end of 2021. The deal still needs approval from shareholders and regulators. China also will have to approve the transaction.

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“Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high performance computing leader and partner of choice for the largest and most important technology companies in the world,” said AMD CEO and President Lisa Su. “This is truly a compelling combination that will create significant value for all stakeholders, including AMD and Xilinx shareholders who will benefit from the future growth and upside potential of the combined company.”

AMD posted third-quarter adjusted earnings of 41 cents a share, beating Wall Street forecasts of 35 cents. Revenue of $2.8 billion rose from $1.8 billion a year earlier and topped analysts’ projections of $2.56 billion.

AMD said sales at its core computing and graphics segment were $1.67 billion, higher than estimates of $1.55 billion. Strong sales of Ryzen processor sales were partially offset by lower graphics revenue.

“Our business accelerated in the third quarter as strong demand for our PC, gaming, and data center products drove record quarterly revenue,” Su said in a statement Tuesday.

Gross margin in the third quarter was 44%, up 1 percentage point from last year.

The company estimated fourth-quarter revenue of about $3 billion, up 41% from a year earlier. Non-GAAP gross margin was estimated at about 45% in the fourth quarter.