The earnings season is in full swing, and against this backdrop, Cowen analyst Matthew Ramsay previewed the earnings of large-cap semiconductor companies Advanced Micro Devices, Inc. (NASDAQ: AMD), Intel Corporation (NASDAQ: INTC) and QUALCOMM, Inc. (NASDAQ: QCOM).

Earnings Schedule

AMD: after the close Wednesday, July 25.

Intel: after the close Thursday, July 26.

Qualcomm: after the close Wednesday, July 25.

The Analyst

Ramsay reiterated an Outperform rating and $21 price target for AMD and maintained a Market Perform rating and $54 price target for Intel.

The analyst maintained a Market Perform rating for Qualcomm with a $58 price target.

AMD Gains Share Against Intel

AMD is likely to have snared market share from Intel across the business, resulting in margin expansion, Ramsay said in the preview note. (See the analyst's track record here.)

AMD boasts a more competitive position within CPU/GPU products, leading to process node parity at 7 nm vs. Intel's 10nm, the analyst said.

Ramsay expects AMD to generate over $1 billion in annual high-margin server sales by 2020, and mid-single digit unit server share exiting 2018 for 7nm Rome and 7 nm+ Milan products.

" ... Based on the same underlying processor IP, we anticipate further share gains are possible in the second half of 2018 and 2019 in both the notebook and desktop markets as well."

Q2 Estimates

Cowen expects AMD to report Q2 revenue of $1.73 billion against a consensus estimate of $1.72 billion, and non-GAAP EPS of 12 cents compared to the Street estimate of 13 cents. Gross and operating margins are expected to land at 37 and 10.4 percent, respectively.

Despite a sharp sequential drop in crypto revenues, Ramsay said he expects Q3 revenues and EPS to outpace consensus expectations, driven by PC and server share gains.

See also: Bank Of America Raises AMD Target On Market Share Optimism

Intel Faces Near-Term Risk, But Data Center Position Strong

Cowen sees the departure of CEO Brian Krzanich, a foundry expert, as creating a void as Intel struggles with 10nm delays and increasing manufacturing equivalency with Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE: TSM) in 2019 and 2020.

That said, Intel recently positive pre-announced above-consensus Q2 revenue and EPS of $16.9 billion and 99 cents, respectively.

The forecast outperformance is attributable to robust data center growth, Ramsay said. Intel is likely to guide to a strong September quarter for its DCG business, he said.

The company's data center group business remains robust thanks to strong spending, although it could be challenged in the medium term by competition from accelerators such as AMD's GPUs, FPGAs and ASICs, according to Cowen.

Q2 Estimates

Cowen expects Intel's revenue to grow 14.5 percent year-over-year to $16.9 billion, with the data center group contributing $5.87 billion — a 34.3-percent increase — and the client computing group accounting for $8.3 billion, up 1.6 percent.

The gross margin is likely to contract from the mid-60s to 60 percent, dragged by the unwinding of the Intel Inside program and higher 10nm costs, Ramsay said.

The analyst estimates non-GAAP EPS of 99 cents. Intel should report above-consensus Q3 and fiscal 2018 revenue and EPS thanks to data center group strength, but growth could slow and margins could contract in 2019 due to market share losses, according to Cowen.

NXP Deal, Cost Cuts In Focus For Qualcomm

Even as the July 25 deadline for the Qualcomm- NXP Semiconductors NV (NASDAQ: NXPI) deal now hangs in a limbo due to the U.S.-China standoff, Cowen forecast a slightly higher than 50-percent probability for the deal to go through.

The focus is also likely to be on Qualcomm's $1-billion cost reduction plan and the impact of the removal of legal costs associated with disputes between Apple Inc. (NASDAQ: AAPL) and Huawei, Ramsay said.

"Additionally, we look for indications for a more balanced supply/demand environment in the smartphone market following [March quarter] China-related softness."

Q2 Estimates

Cowen expects Qualcomm to post Q2 revenue of $5.2 billion. That figure is in-line with the consensus but down over 16 percent, reflecting steady smartphone chipset results, weak QTL revenue and the exclusion of Apple and Huawei royalties.

Gross margins are expected to shrink from 57 percent in the second quarter of 2017 to 53 percent due to much lower high-margin QTL revenue, Ramsay said.

Non-GAAP EPS is likely to decline from 83 cents a year-ago to 70 cents against a consensus estimate of 71 cents, the analyst said.

Improvement could come in the September quarter as revenue benefits from the launch of "premium-tier" smartphones and strong market share in China, Ramsay said. The bottom line is expected to get a boost from cost controls, the analyst said.

Price Action

For the year-to-date period:

AMD shares have gained about 62 percent.

Intel has added roughly 14 percent.

Qualcomm has slipped about 8 percent.

Related Link: The Semiconductor Stocks That Fund Managers Love And Hate