For weeks, investors have been waiting to see what the Federal Reserve would do with interest rates, and the central bank's two-day meeting will come to a conclusion this afternoon. Most economists are bracing for a half-percentage point increase in short-term rates, but they'll also be looking for clues about what could come next from the Fed. Meanwhile, stock markets are taking the uncertainty in stride, with the futures on the Nasdaq Composite (^IXIC -0.64%) rising about half a percent as of 8:30 a.m. ET.
Some of the biggest companies on the Nasdaq have reported their latest financial results recently, and late Tuesday afternoon, investors learned about what's been happening with Starbucks (SBUX -1.02%) and Advanced Micro Devices (AMD 1.33%). Both Nasdaq stocks are up sharply in premarket trading as shareholders respond favorably to their latest news. Read on to learn more about what's happening with the coffee and semiconductor companies.
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Starbucks perks up
Shares of Starbucks were up nearly 7% in premarket trading Wednesday morning. The worldwide operator of café locations reported fiscal second-quarter results for the period ending April 3 that showed some of the challenges it faces, but shareholders seemed generally comfortable with the numbers.
Starbucks' results were mixed. Revenue rose 14.5% to $7.64 billion, with particularly strong growth from its licensed store locations. However, higher costs weighed on earnings growth, with net income rising 2.4% to $675 million. That translated to earnings of $0.58 per share, up just $0.02 year over year. Global comparable store sales were up 7%.
Investors saw two different stories from Starbucks during the quarter. In North America, comps were up 12%, with average ticket amounts rising 7% and the number of transactions getting a 5% boost. However, internationally, comps were down 8%, with both average ticket and transaction counts falling significantly. China was hit especially hard, with 20% less traffic contributing to a 23% drop in comparable-store sales.
Moreover, Starbucks suspended its guidance for the rest of fiscal 2022, given the uncertainties related to China's zero-COVID policy and its impact on business in the world's second-largest economy. Even with those headwinds, union pressures, and inflationary trends weighing, however, the gain in Starbucks shares suggests that some investors believe the downdraft in the coffee stock has run far enough for now.
AMD keeps chipping away
Elsewhere, shares of Advanced Micro Devices were also up nearly 7%. The semiconductor company kept taking advantage of extremely favorable conditions in its market and sees industry strength continuing throughout the rest of the year and potentially beyond.
AMD's numbers were extremely impressive. Revenue soared 71% year over year to $5.89 billion in the first quarter of 2022. Adjusted gross margin strengthened by nearly 7 percentage points to 53%, and adjusted net income of $1.59 billion soared 148% from year-ago levels. That translated into adjusted earnings of $1.13 per share, more than doubling year over year.
Some of the gains came from the completion of AMD's merger with Xilinx, but even on a pro forma basis excluding the acquisition, revenue climbed 55%. AMD cited particularly sizable gains in its computing and graphics segment, as well as the enterprise, embedded, and semi-custom business. Enterprise customers that are undergoing digital transformation efforts have increasingly relied on cloud computing, and AMD's performance chips to power those efforts are seeing extremely high demand.
AMD nearly doubled its growth estimate for 2022, now seeing revenue rising 60% to $26.3 billion. With margins improving, AMD has built up considerable momentum, and now it wants to make sure it sustains its upward trajectory as it aims to claw back some of the losses in its stock price recently.
