AMD's Q3 Earnings: Strong AI Growth Amid Market Challenges

AMD Stock Is Getting Hammered This Week: What's Going On? - Advanced Micro Devices (NASDAQ:AMD)

Advanced Micro Devices shares are trading lower by 14% since Wednesday's open. Advanced Micro Devices, Inc. AMD shares are trading lower by 14% to $142.44 since Wednesday's open after the company reported third-quarter results. The company posted revenue of $6.8 billion, which exceeded analyst expectations of $6.71 billion. Earnings per share aligned with projections at 92 cents. What To Know: AMD's data center segment was the driving force behind the company's growth, achieving a 122% increase to $3.5 billion. The company also saw a 29% rise in client segment revenue, totaling $1.9 billion. However, gaming revenue experienced a steep decline of 69% to $462 million, and embedded revenue fell 25% to $927 million, though embedded revenue saw an 8% sequential quarterly increase. CEO Lisa Su attributed AMD's results to high demand for the company's EPYC and Instinct data center products, as well as Ryzen processors in the PC segment. She also projected further growth opportunities across data center, client and embedded business sectors, driven by escalating demand for computing power. Looking ahead, AMD forecasts fourth-quarter revenue of $7.5 billion, representing a 22% year-over-year increase at the midpoint. Adjusted gross margins for the fourth-quarter are expected to remain consistent at 54%. Read Also: US Economy Adds Only 12,000 Jobs In October, Sharply Misses Estimates As Hurricanes, Strikes Pummel Hiring Analyst Reactions: The company's expansion in artificial intelligence (AI) and data center solutions has drawn positive reactions from analysts, who suggest AMD could increasingly challenge its main competitor, NVIDIA, in the AI domain. KeyBanc analyst John Vinh noted the importance of AMD's MI300 chip, which is projected to generate $5 billion in revenue by 2024. Vinh believes that this chip could broaden customer adoption across cloud and AI applications, despite conservative fourth quarter guidance. Cantor Fitzgerald analyst C.J. Muse pointed out that AMD's AI progress with the MI300 may eventually generate $12 billion in revenue, supporting potential earnings growth by 2025 or 2026, even though he anticipates a short-term trading range for AMD shares. Other analysts provided mixed assessments. Oppenheimer's Rick Schafer commended AMD's rapid establishment of a competitive AI franchise, projected to surpass $5 billion in annual revenue, though he suggested that investor expectations might be overly ambitious. Meanwhile, Piper Sandler's Harsh Kumar highlighted strong GPU execution but acknowledged challenging guidance, noting that while AMD's GPU and server segments are promising, gaming and embedded segments pose risks. Read Also: AMD Stock Drops On Q4 Outlook As 10 Analysts Highlight 'Long-Term AI Growth Opportunity,' Nvidia Rivalry Market News and Data brought to you by Benzinga APIs

Why AMD Stock Is Plummeting Today | The Motley Fool

AMD showed some strong momentum in artificial intelligence in Q3. So why is the stock sinking? Advanced Micro Devices (AMD -9.46%) stock is losing ground Wednesday after the publication of the company's third-quarter results. The semiconductor specialist's share price was down 9.6% as of 1 p.m. ET. AMD published its Q3 results after the market closed yesterday, delivering earnings that were in line with the market's expectations and sales that came in better than anticipated. The company posted non-GAAP (adjusted) earnings per share of $0.92 on sales of $6.82 billion, with revenue in the period beating the average Wall Street estimate's call for revenue of $6.71 billion. But despite the sales beat in the quarter, management's forward guidance left investors feeling bearish. While the stock is seeing big sell-offs in today's trading, AMD's third-quarter results weren't concerning in isolation. Overall revenue was up 17.6% year over year in the period, and adjusted earnings per share were up 31% compared to the prior-year period. The company saw some encouraging momentum in the crucial data center segment, with revenue climbing 122% year over year thanks to momentum for its Instinct GPUs and EPYC central processing units. Meanwhile, client segment revenue increased 29% year over year to $1.9 billion. On the other hand, gaming segment revenue declined 69% year over year to $462 million, and embedded segment revenue fell 25% to $927 million. If AMD had issued stronger forward guidance, the performance for the data center segment might have been enough to power gains for the stock today, but Wall Street wasn't satisfied with management's outlook. For the fourth quarter, AMD is guiding for sales to come in between $7.2 billion and $7.8 billion. Hitting the midpoint of its guidance range would mean delivering annual sales growth of 22% and sequential quarterly sales growth of 10%. Meanwhile, the average analyst estimate calls for the business to post sales of $7.55 billion in the quarter. On the margins front, management is targeting an adjusted gross margin of 54% for Q4 -- in line with what it posted in Q3. AMD's forward guidance wasn't terrible by any stretch of the imagination, but Wall Street analysts are becoming concerned that the business won't be able to maintain its momentum in artificial intelligence (AI) processors into next year. With sales guidance falling slightly short of Wall Street's target and expected gross margins not climbing over those in Q3, investors may be worried that the company is relying on relatively low pricing to drive adoption for its AI chips. Performance for the the data-center segment will continue to be the key driver for AMD stock, and the outlook on that front remains somewhat speculative.

AMD Stock Drops Nearly 8% on Guidance Letdown, but It Raises 2024 Artificial Intelligence (AI) Chip Sales Outlook | The Motley Fool

The chipmaker's data center revenue soared 122% year over year, driven by continued powerful demand for its artificial intelligence (AI) chips that compete with larger rival Nvidia's chips. Shares of Advanced Micro Devices (AMD 3.96%) declined 7.6% in Tuesday's after-hours trading, following the chipmaker's release of its third-quarter 2024 report.The stock's drop is largely attributable to fourth-quarter revenue guidance coming in slightly lower than Wall Street had expected. As to third-quarter results, revenue was a little better than the analyst consensus estimate while adjusted earnings were essentially in line with the estimate. On the positive side, management increased its forecast for 2024 data center artificial intelligence (AI)-enabling graphics processing unit (GPU) chip revenue. It now expects this metric to exceed $5 billion, up from its greater than $4.5 billion outlook in July, CEO Lisa Su said on the earnings call. Management has been regularly hiking this forecast, which was $4 billion in April and $2 billion at the start of the year. Data source: Advanced Micro Devices. GAAP = generally accepted accounting principles. YOY = year over year. Growth was driven by strong performances by the data center and client segments. Investors should focus on the adjusted numbers, as they exclude one-time items. Wall Street was looking for adjusted EPS of $0.91 on revenue of $6.71 billion, so AMD modestly surpassed the top-line expectation and essentially met the bottom-line estimate. (I say "essentially met" because it only beat the estimate by $0.01, or by about 1%.) The company also exceeded its own revenue guidance of $6.7 billion. (It doesn't issue a profit outlook.) In the quarter, AMD generated cash of $628 million running its operations, up 49% from the year-ago period. It ended the quarter with cash, cash equivalents, and short-term investments of $4.54 billion, down from $5.34 billion in the prior quarter. The company ended the period with long-term debt of $1.72 billion, unchanged from the prior quarter. The decline in cash, cash equivalents, and short-term investments was driven by a cash outflow of $548 million in the quarter associated with the acquisition of Silo AI, which closed in August. Prior to being bought by AMD, this company was reportedly the largest private AI lab in Europe. Data source: Advanced Micro Devices. YOY = year over year. QOQ = quarter over quarter. The data center's revenue marked a fourth consecutive quarterly high, driven largely by the strong ramp up in production and shipments of Instinct MI300 GPUs. AMD introduced the Instinct series in the fourth quarter of 2023 to compete with Nvidia's data center GPUs, which dominate the data center AI chip market. An increase in EPYC central processing unit (CPU) sales also contributed to the segment's growth. The client segment's year-over-year and sequential growth was primarily driven by sales of Ryzen processors. This segment sells chips for personal computers (PCs). The gaming segment continues to struggle, largely because of a decrease in semi-custom revenue, which is revenue from sales of processors for consoles. The embedded segment's year-over-year revenue declined but its sequential revenue rose. The decline is due to customers who are continuing to normalize their inventory levels following slowdowns in some end markets, notably auto and industrial. The sequential rise is due to an improving demand environment for some end markets. For Q4, management guided for: Going into the report, Wall Street had been modeling for Q4 revenue of $7.54 billion, so AMD's outlook fell just a bit short of this estimate. AMD turned in a good third-quarter report. It's a particularly positive sign that adjusted EPS growth was notably stronger than revenue growth, reflecting an expanding profit margin. Third-quarter revenue and margin guidance were solid, even if the revenue outlook was a tad lower than Wall Street had expected. The after-hours stock sell-off might seem an overreaction to some investors since AMD's Q4 revenue guidance was just a little lighter than Wall Street had expected. However, this dynamic is explainable in the context of AMD stock's recent run-up. Over the one-year period through Tuesday's regular trading session, AMD stock rose 72%, outperforming the S&P 500's 42% return. Given this strong performance, investors have high expectations. Reiterating my closing after AMD's last quarterly report:

AMD shares fall as forecast fails to impress despite strong AI growth

AMD CEO Lisa Su makes the opening speech at COMPUTEX forum in Taipei, Taiwan June 3, 2024. Advanced Micro Devices (AMD) reported third-quarter results on Tuesday, with earnings in line with forecasts and revenue that slightly beat expectations. Here's how the company did, compared to LSEG estimates for the quarter ending Sept. 28: AMD said its important data center business doubled in sales for the second quarter in a row, but overall revenue guidance for the fourth quarter was in line with consensus expectations. AMD shares fell 5% Tuesday in extended trading. AMD said it expected about $7.5 billion in sales in the current quarter, in line with consensus expectations of $1.16 in adjusted earnings per share on $7.54 billion in revenue. That would be a 22% year-over-year decline for the December quarter. The chipmaker reported net income of $771 million, or 47 cents per share, compared to $299 million, or $0.18 cents per share, a year ago. Overall mean absolute deviation (MAD) revenue was up 18% on an annual basis. AMD shares are up about 20% so far in 2024, although rivals such as Nvidia and Broadcom have had much greater gains during the same period, driven by the increasing demand for AI chips. AMD is the second-largest vendor of data center graphics processing units (GPUs), which are used to train and deploy large generative AI models. In October, AMD announced a new artificial intelligence chip called the MI235X and said it expected the AI GPU market to be worth $500 billion by 2028. The company also said earlier this year that it expected about $4 billion in sales this year in total AI chips, or about 15% of the company's overall revenue. AMD's AI chips are reported in its Data Center segment, which more than doubled on an annual basis to $3.5 billion in total sales. AMD said it was mainly driven by the strong sales of its Instinct-branded GPUs for AI. Overall data center revenue was up 122% year-over-year. AMD's gross margin expanded to 54%, which the company said was because of higher Data Center revenue. AMD also makes central processing chips for laptops and servers. PC sales are reported in AMD's Client segment, which grew 23% during the quarter to $1.9 billion. During the quarter, AMD's chips were included in high-end laptops marketed by Microsoft as "Copilot+" machines that can run advanced AI included with Windows. AMD also makes chips for gaming consoles and PCs. Its gaming category slumped, with sales sliding 68% year-over-year, which the company blamed on a decrease in "semi-custom revenue," which includes custom chips for game consoles like the Sony PlayStation 5. The company's embedded business, which includes less-expensive chips for industry and other applications, fell 25% annually to $927 million in sales.

AMD's guidance leaves investors wanting more, and its stock tumbles - SiliconANGLE

AMD's guidance leaves investors wanting more, and its stock tumbles Advanced Micro Devices Inc. disappointed investors with a tepid sales forecast today, and its stock was heading south during the extended trading session. The company's stock was down more than 7% after hours, despite solid third quarter earnings that met expectations and revenue that came in ahead of them. AMD reported earnings before certain costs such as stock compensation of 92 cents per share, in-line with Wall Street's forecast. Revenue for the period rose 18% from a year earlier to $6.82 billion, above the Street's consensus estimate of $6.71 billion. The company said its data center business managed to double its revenue for the second quarter in a row, but its fourth quarter guidance fell just shy of the analyst's consensus. For the fourth quarter, AMD said it's targeting sales of $7.5 billion, give or take $300 million, below the Street's forecast of $7.54 billion. That would represent a decline of around 22% from the fourth quarter of fiscal 2023. Despite that, the company is at least becoming more profitable. AMD reported net income of $771 million at the end of the third quarter, up from a profit of just $299 million one year earlier. Digging into the numbers, it was AMD's data center segment that once again showed the most impressive numbers, with sales more than doubling from a year earlier to $3.5 billion. On a conference call, AMD Chair and Chief Executive Lisa Su (pictured) said the data center growth was driven by strong sales of the company's Instinct-branded graphics processing units, which provide an alternative to Nvidia Corp.'s GPUs for companies looking to run artificial intelligence workloads. All told, data center revenue grew by 122% from a year earlier, and Su said there will be more to come as the company is still seeing lots of demand from cloud infrastructure providers and other enterprises looking to build out their AI infrastructure. AMD also sells central processing units for personal computers, laptops and servers, and that segment of its business, the client division, saw sales rise 23% to $1.9 billion. In the conference call, Su said AMD's CPUs power a number of new, high-end laptops that have been branded as "Copilot+" devices because they've been customized to run advanced AI models embedded with Microsoft Corp.'s Windows operating system. Because the data center segment contributed more revenue to the company's total, AMD was able to expand its gross margin to 54%, ahead of the Street's expectations. AMD also operates a gaming sector that makes chips for video games consoles and graphics cards for PCs, but it had a disappointing quarter, with sales falling 68% from a year earlier. According to Su, this was due to a decline in "semi-custom revenue", which pertains to chip sales for consoles such as the PlayStation 5 and Microsoft Xbox. As for AMD's embedded business, which sells low-power chips for industrial and automotive applications, revenue there declined 25% to $927 million. Third Bridge analyst Lucas Keh said the after-hours stock decline suggests investors were hoping for the data center segment to drive even more growth than what materialized, though they may also be concerned about the weakness in AMD's client and embedded segments. Although AMD's stock is headed in the wrong direction today, it's still up more than 20% in the year to date. However, the company may be concerned that rivals such as Nvidia and Broadcom Inc. have enjoyed much greater gains over the same period, benefiting from enterprises' insatiable demand for AI chips. AMD might have hoped for better, as it is the world's second-biggest supplier of GPUs after Nvidia, but it still has reason to be optimistic about its longer-term prospects. During the quarter, it announced the next generation of its Instinct AI accelerator, the MI325X chip, plus a new networking platform based on the AMD Pensando Salina data processing unit. According to the company, the MI325X accelerator provides 1.3-times greater performance than Nvidia's most powerful alternative, the H200 GPU, with 1.8-times greater capacity and 1.3-times more bandwidth. The chipmaker has been tight-lipped about its expectations for the MI325X accelerator, but it cites third-party data that forecasts the AI GPU market to grow to more than $500 billion by 2028, which suggests there's enormous room for growth if AMD can take more market share away from Nvidia. Currently, the company only commands a small fraction of that market. During the conference call, AMD's executive vice president, treasurer and chief financial officer Jean Hu said the company expects to generate $5 billion in AI chip sales this year, up from $4.5 billion in 2023. "Customer and partner interest in the MI325X is high," Su insisted, when asked about its prospects. "Production shipments are planned to start this quarter." Keh said GPU sales will continue to be the main driver of AMD's growth going forward, and although it remains the "clear number two" in the AI accelerator market, it can benefit from Nvidia's delays in bringing its next-generation Blackwell GPUs to market. "AMD has a good opportunity to gain incremental share from Nvidia with its 325x and 350 Instinct products amidst the current Blackwell delay concerns," he said.

AMD shares slump as forecast disappoints AI-focused investors

Oct 30 (Reuters) - Advanced Micro Devices (AMD.O), opens new tab shares fell 8% on Wednesday after the chip company's revenue forecast failed to impress investors looking for a bigger windfall from the AI boom. AMD could lose around $20 billion in market value, based on premarket movements. The company has been one of the biggest winners of the chip demand boom sparked by the rise of generative AI, with its shares up nearly 156% since end-2022. Its soft quarterly revenue forecast and a $5 billion AI chip sales target for 2025, however, showed that demand for the processors was rising faster than their production, with CEO Lisa Su saying chip supplies will be tight going into next year. "It is probably unpalatable for an 'AI name' to even guide inline, let alone below," Bernstein analyst Stacy Rasgon said. "At this point AI performance, while not bad in the objective sense, appears unlikely to drive upside to current expectations, and talk of 2025 'lumpiness' in the business will probably increase risk (or at least raise some eyebrows)." Other chip firms such as Arm and Qualcomm (QCOM.O), opens new tab also fell more than 2%. But AI chip leader Nvidia (NVDA.O), opens new tab was down just 0.3% in a sign that investors did not expect a similar supply shortage impact on the company. Both Nvidia and AMD rely on chip-making giant TSMC to manufacture their advanced AI chips, but analysts have so far shown little concern about Nvidia's AI chip supply. "AI still dominates this (AMD) story, and while the company did raise (sales expectations) every quarter this year, the concern from here is that AMD won't be able to provide upside to Street estimates that are already $8 billion-$9 billion for calendar 2025," Jefferies analysts said. At least 10 analysts lowered their target price on the AMD stock, while 8 raised their views, moving the median to $187.50, according to LSEG data. That represents an upside of nearly 13% to the company's last closing price. AMD trades at nearly 32 times its 12-month forward earnings estimates, compared with 36 times for Nvidia. Reporting by Aditya Soni in Bengaluru; Editing by Saumyadeb Chakrabarty Our Standards: The Thomson Reuters Trust Principles., opens new tab

AMD shares slump as forecast disappoints AI-focused investors

(Reuters) - Advanced Micro Devices shares fell 8% on Wednesday after the chip company's revenue forecast failed to impress investors looking for a bigger windfall from the AI boom. AMD could lose around $20 billion in market value, based on premarket movements. The company has been one of the biggest winners of the chip demand boom sparked by the rise of generative AI, with its shares up nearly 156% since end-2022. Its soft quarterly revenue forecast and a $5 billion AI chip sales target for 2025, however, showed that demand for the processors was rising faster than their production, with CEO Lisa Su saying chip supplies will be tight going into next year. "It is probably unpalatable for an 'AI name' to even guide inline, let alone below," Bernstein analyst Stacy Rasgon said. "At this point AI performance, while not bad in the objective sense, appears unlikely to drive upside to current expectations, and talk of 2025 'lumpiness' in the business will probably increase risk (or at least raise some eyebrows)." Other chip firms such as Arm and Qualcomm also fell more than 2%. But AI chip leader Nvidia was down just 0.3% in a sign that investors did not expect a similar supply shortage impact on the company. Both Nvidia and AMD rely on chip-making giant TSMC to manufacture their advanced AI chips, but analysts have so far shown little concern about Nvidia's AI chip supply. "AI still dominates this (AMD) story, and while the company did raise (sales expectations) every quarter this year, the concern from here is that AMD won't be able to provide upside to Street estimates that are already $8 billion-$9 billion for calendar 2025," Jefferies analysts said. At least 10 analysts lowered their target price on the AMD stock, while 8 raised their views, moving the median to $187.50, according to LSEG data. That represents an upside of nearly 13% to the company's last closing price. AMD trades at nearly 32 times its 12-month forward earnings estimates, compared with 36 times for Nvidia. (Reporting by Aditya Soni in Bengaluru; Editing by Saumyadeb Chakrabarty)

AMD Stock Slides as Profits Fall Short of Expectations

Advanced Micro Devices (AMD) reported third-quarter earnings that missed expectations, sending shares lower after the closing bell Tuesday. The chipmaker's third-quarter revenue grew 18% year-over-year to $6.82 billion, ahead of the Visible Alpha analyst consensus. Net income at $771 million or 47 cents per share was up from $299 million or 18 cents per share a year earlier, but below Street estimates as costs rose. AMD's revenue gains came as data center sales more than doubled to a fresh high of $3.5 billion, driven by demand for the company's artificial intelligence (AI) chips. The results come after AMD launched its next generation of AI chips at its Advancing AI event earlier this month, but did not raise its AI sales outlook or announce new customers as many investors had hoped, weighing on its stock price. AMD said Tuesday it expects fourth-quarter revenue to land between $7.2 billion and $7.8 billion, up from $6.2 billion in the prior-year quarter. The analyst consensus was at the higher end of that range at $7.6 billion, according to Visible Alpha. Shares of AMD fell over 7% in extended trading Tuesday following the release.

AMD Forecast Falls Short, Suggesting a Slower Pace of AI Growth

Advanced Micro Devices Inc. gave a lackluster revenue forecast for the current period, sparking concern that its artificial intelligence sales are growing more slowly than anticipated. Revenue will be roughly $7.5 billion in the fourth quarter, the company said Tuesday. Analysts estimated $7.55 billion on average. AMD also predicted an adjusted gross margin -- the percentage of sales remaining after deducting the cost of production -- that was just shy of projections.