Advanced Micro Devices, Inc. (AMD, Financial) reported robust third-quarter results, with revenues reaching $6.819 billion, an 18% increase compared to the previous year, surpassing the market expectation of $6.71 billion. GAAP net profit surged 158% to $771 million, while non-GAAP net profit climbed 33% to $1.504 billion, aligning with market forecasts. Earnings per share increased 31% to $0.92.
AMD's CEO, Lisa Su, highlighted the strong performance driven by data center products, including EPYC processors and Instinct chips, as well as solid demand for Ryzen PC processors. Looking forward, AMD sees significant growth opportunities in data center, client, and embedded business sectors, owing to the rising demand for computing power.
Jean Hu, AMD's CFO, expressed optimism about achieving record annual revenue in 2024, based on notable growth in data center and client businesses. The company expects AI accelerator sales to exceed $5 billion this year, surpassing the previous estimate of $4.5 billion.
However, AMD's forecast for the fourth-quarter revenue range of $7.2 billion to $7.8 billion, with a midpoint suggesting a 22% year-over-year increase, fell slightly below market expectations of $7.55 billion. Following the third-quarter report, AMD's stock, which ended the day with a 3.96% gain at $166.25 per share, dropped over 7.5% in after-hours trading.
In the third quarter, AMD's data center business achieved remarkable results with revenue of $3.549 billion, marking a 122% year-over-year increase. This success was attributed to strong sales of EPYC CPUs and Instinct GPUs, doubling sales for the second consecutive quarter. The increased data center revenue also expanded AMD's gross margin to 54%.
Lisa Su noted significant demand for AI infrastructure from cloud providers and other companies. A new AI chip, the MI325X, announced in early October, is set to ship in the fourth quarter, drawing strong interest from customers and partners.
In other business segments, client segment revenue rose 29% to $1.881 billion, driven by demand for Zen 5 AMD Ryzen processors. However, gaming revenue declined 69% to $462 million due to reduced semi-custom income, while embedded business revenue fell 25% to $927 million, as customers normalized inventory levels.
AMD is considered a major competitor to NVIDIA in the AI chip sector. Analysts indicate that investor concerns about potentially slowing AI demand contributed to the stock's post-report decline. Supply chain constraints may also hinder AMD's ability to meet rising AI chip orders.
Lucas Keh, an analyst at Third Bridge, noted the after-hours stock decline reflects investor desire for more growth from the data center division. He remains optimistic about AMD's position as the "second player" in the AI chip market, predicting that GPU sales will be a key growth driver. Amid delays in NVIDIA's Blackwell chip shipments, AMD's 325x and 350 Instinct products present an opportunity to gain market share.
Despite launching the new MI325X AI chip at the "Advancing AI" conference in October, AMD did not provide new customer or financial performance information, which pressured the company's stock.
