Advanced Micro Devices, Inc. (AMD, Financial) reported its third-quarter financial results, showing an 18% year-over-year revenue increase to $6.82 billion, surpassing the market's expectation of $6.71 billion. The adjusted earnings per share (EPS) aligned with market predictions at $0.92.
Breaking down by business segments, AMD's data center revenue more than doubled from the previous year to $3.5 billion, slightly exceeding market expectations. Revenue from personal computer chips reached $1.88 billion, marking a 29% increase. However, gaming revenue fell 69% year-over-year to $462 million, falling short of market expectations.
Looking ahead, the company anticipates fourth-quarter revenue of approximately $7.5 billion, slightly below analysts' average forecast of $7.55 billion. Although AMD expects sales from AI accelerators to surpass $5 billion this year, up from a previous forecast of $4.5 billion, some analysts and investors had higher expectations. The company's projected adjusted gross margin for the fourth quarter also slightly misses market expectations.
AMD is striving to catch up with NVIDIA in the lucrative AI computing chip market. While AMD's revenue from these products has grown rapidly year-over-year, it remains significantly lower than NVIDIA's multi-billion-dollar revenues. The recently launched MI300 accelerator has become one of AMD's key sales drivers, but supply constraints have hampered growth. Like most industry peers, AMD outsources its production to TSMC as it no longer owns its factories.
Investors view AMD's performance as an indicator of overall demand for AI-related hardware. Companies like Amazon's AWS and Microsoft are heavily investing in this new computing infrastructure, transforming the industry. However, investors worry that AI services have yet to generate substantial profits, which might make it difficult for companies to justify continued chip investments.
AMD represents NVIDIA's biggest competitor in the AI accelerator space and contends with NVIDIA in the graphics chip market used by PC gamers. Additionally, AMD competes intensely with Intel in the PC and server processor markets. AMD also supplies custom processors for gaming consoles from Microsoft and Sony Group. The gaming division's sales have weakened as the current generation of gaming consoles approaches the end of their lifecycle.
As of the latest update, AMD's stock price dipped 7.44%, trading at $153.88.
