Advanced Micro Devices Inc. (NASDAQ: AMD) reported third-quarter results, showing a mix of achievement and concern for investors. The semiconductor company exceeded revenue expectations but provided a cautious fourth-quarter outlook that disappointed some analysts, sending AMD’s stock down over 7% in after-hours trading.
The firm posted a quarterly revenue of $6.82 billion, beating the consensus estimate of $6.71 billion and marking a 22% year-over-year increase from $5.8 billion in Q3 2023.
In terms of earnings, AMD reported a GAAP net income of $771 million, or $0.47 per share, nearly tripling the $299 million, or $0.18 per share, reported in the same quarter last year. On an adjusted basis, AMD’s earnings per share (EPS) landed at $0.92, precisely meeting analysts’ forecasts.
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CEO Dr. Lisa Su attributed the robust revenue growth primarily to high demand for AMD’s data center products, with revenue in that segment reaching $3.5 billion, a 122% increase year-over-year. Su noted the company is experiencing “strong demand from cloud providers and enterprises to expand AI infrastructure,” which AMD expects will continue to fuel growth in the coming quarters.
However, AMD’s Q4 2024 revenue forecast fell short of market expectations. The company projected Q4 revenue in the range of $7.4 billion to $7.8 billion, with a midpoint of $7.6 billion. This outlook did not reach the anticipated $7.55 billion midpoint that analysts were hoping for, signaling slower-than-expected growth as the company faces increased competition in the AI semiconductor market.
AMD remains optimistic, projecting approximately $5 billion in AI-related revenue for 2024, an increase from an earlier estimate of $4.5 billion, but this guidance reflects tempered confidence in the short-term market conditions .
The company’s data center segment has emerged as a powerhouse, with growth attributed to its Instinct-branded GPUs used in artificial intelligence applications. AMD’s continued push into AI chips places it second to Nvidia Corp. (NASDAQ: NVDA) in the highly competitive AI graphics processing unit (GPU) market. Notably, AMD’s gross margin improved to 50% from 47% in Q3 2023, which the company attributes to the high demand for its advanced data center products. This progress was underscored by Su’s comments in the earnings call, where she highlighted the company’s strategy of leveraging the “insatiable demand for more compute power” across various sectors.
In AMD’s other segments, the performance was mixed. The Client segment, which includes desktop and notebook processors, posted a strong 29% increase in revenue to $1.9 billion. The Gaming segment, however, saw a significant downturn, with revenue falling 69% year-over-year to $462 million, a drop the company attributed to decreased semi-custom product sales, including lower demand for gaming consoles. The Embedded segment, encompassing products for industrial and automotive applications, also saw a 25% decline, reaching $927 million.
Despite these weaker areas, Su indicated AMD’s long-term outlook remains positive, noting that the company is “well-positioned to capture opportunities across the data center, client, and embedded businesses” as technology demands evolve.
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