AMD Reports Strong Q3 Earnings Amid AI Boom Despite Share Drop
On June 3, 2024, AMD CEO Lisa Su delivered an opening address at the COMPUTEX forum in Taipei, highlighting the company’s strategic direction in an evolving tech landscape. Following this event, Advanced Micro Devices (AMD) released its third-quarter financial results, showcasing a solid performance that met earnings expectations and exceeded revenue forecasts slightly.
In financial terms, AMD reported earnings per share of 92 cents, aligning with analysts’ estimates. The company’s revenue totaled $6.82 billion, comfortably outpacing the expected $6.71 billion. Notably, AMD’s data center business has demonstrated remarkable growth, with sales doubling for two consecutive quarters. However, despite the positive financial results, AMD’s shares dropped more than 9% on the morning following the announcement.
Looking forward, AMD has set revenue guidance for the fourth quarter at approximately $7.5 billion, matching consensus forecasts. Additionally, the company anticipates adjusted earnings per share of $1.16, down from the previous year, indicating a potential 22% year-over-year decline for the December quarter. In comparison to last year’s figures, AMD’s net income rose substantially to $771 million or 47 cents per share, compared to $299 million or 18 cents per share in the same period last year. This indicates a strong performance in revenue, which climbed 18% annually.
Despite AMD’s shares rising approximately 20% since the beginning of 2024, it faces stiff competition from rivals such as Nvidia and Broadcom, who have seen even greater gains due to the surging demand for artificial intelligence components. Notably, AMD holds the position of the second-largest vendor in the data center GPU sector, crucial for training and deploying AI models.
In its pursuit of innovation, AMD announced the introduction of a new AI chip, the MI235X, and projected the AI GPU market to reach a whopping $500 billion by 2028. The company also revised its forecast for AI chip sales for the year to $5 billion, up from earlier predictions of $4.5 billion. Lisa Su mentioned that early interest in their upcoming MI325X AI chip is robust, with production shipments set to commence in the current quarter.
The reported figures illustrate the success of AMD’s data center segment, which soared, garnering $3.5 billion in total sales—an annual increase of over 122%. This surge is largely attributed to strong performances from the Instinct-branded GPUs designed for AI applications. As cloud providers and enterprises ramp up their AI infrastructure, the demand for AMD’s advanced chips continues to rise, supporting an expansion of the company’s gross margin to 54%.
AMD also produces central processing units for laptops and servers. Its client segment saw revenue growth of 23% this quarter, totaling $1.9 billion. The company has made advances in the high-performance laptop market, collaborating with Microsoft to feature its chips in high-end models branded as "Copilot+" that enhance AI capabilities.
On the flip side, AMD experienced a significant decline in its gaming category, reporting a 68% year-over-year drop in sales, mainly due to decreased revenue from semi-custom chips for gaming consoles—particularly affecting products like the Sony PlayStation 5. The embedded segment also took a hit, with annual sales dropping 25% to $927 million.
Overall, while AMD shows promising growth in key sectors, especially within AI, it faces challenges in maintaining its momentum in gaming and embedded markets.
