AMD (AMD, Financial) recently released its third-quarter financial results, showcasing an 18% year-over-year revenue increase to $6.82 billion, surpassing market expectations of $6.71 billion. Adjusted earnings per share stood at $0.92, aligning with forecasts.
The company's data center segment revenue more than doubled from the previous year, reaching $3.5 billion, slightly outpacing market predictions. However, gaming revenue fell by 69% to $462 million, missing estimates, while personal computer chip revenue grew by 29% to $1.88 billion.
Looking ahead, AMD anticipates fourth-quarter revenue to hit approximately $7.5 billion, slightly below analysts' average estimate of $7.55 billion. Despite a forecasted better-than-expected $5 billion in AI accelerator sales for the year, some investors remain hopeful for even higher figures. Additionally, AMD's projected fourth-quarter adjusted gross margin slightly trails market expectations.
AMD continues to chase NVIDIA in the lucrative AI computing chip market. Although AMD's revenue from these products has seen rapid growth, it still lags behind NVIDIA's substantial billions in revenue. AMD's MI300 accelerator products have emerged as key sales drivers, but growth has been hampered by supply shortages.
As with many competitors, AMD outsources production to TSMC, no longer maintaining its own factories. Investors are keenly observing AMD's performance as a barometer for overall AI-related hardware demand. Companies like Amazon's AWS and Microsoft have heavily invested in this new computing infrastructure, transforming the industry landscape.
Investor concerns linger over the substantial profits yet to be realized from AI services, raising questions about the justification for continued chip expenditures. AMD remains NVIDIA's largest competitor in the AI accelerator arena and also competes with NVIDIA in graphics chips for gaming and with Intel in PC and server processors.
AMD supplies custom processors to Microsoft's and Sony Group's gaming consoles. However, the gaming segment's sales have been sluggish due to the current console generation approaching its lifecycle end.
At the time of reporting, AMD's stock saw a post-market decline of 7.44%, dropping to $153.88.
