Analysis
AMD Guided to $17B as Data-Center Sales Nearly Doubled
AMD forecast fourth-quarter revenue of about $17 billion, above the $16.2 billion expected, after data-center sales rose 97% to $8.5 billion. The shares rose about 7% after hours.
AMD's third quarter was a record, and its forecast for the fourth was the bigger surprise. For the three months to September, the chipmaker reported revenue of $13.4 billion, up 45% from a year earlier and above the roughly $13.1 billion analysts expected, and adjusted earnings of $2.09 a share against a consensus of $1.95, according to LSEG. On a reported basis it earned $1.46 a share. Chair and chief executive Lisa Su called it "a record quarter with revenue exceeding the high end of our guidance".
Almost all the growth came from one place. Data-center revenue, which includes the Instinct AI accelerators and EPYC server processors, rose 97% to $8.5 billion, close to two-thirds of the total. The rest of the business was mixed: client processors grew 7% to $2.9 billion, short of the roughly $3.06 billion expected; gaming revenue fell 40% to $773 million; and the embedded segment grew 29% to $1.1 billion. The adjusted gross margin was 56%.
The guidance is where the stock found its move. AMD expects fourth-quarter revenue of about $17 billion, plus or minus 3%, against about $16.2 billion expected, which would be an increase of more than a quarter from the third quarter alone. Chief financial officer Jean Hu said the outlook reflects accelerating revenue and earnings growth, driven by strong data-center demand. The one soft spot was the adjusted gross margin forecast of about 55%, slightly below the 55.3% to 55.5% analysts had pencilled in, which is consistent with more of the mix shifting to AI accelerators.
The shares had already risen 3.7% to $483.90 in Tuesday's session as chip stocks rebounded, and they jumped as much as double digits after the release before settling around 5% to 7% higher in extended trading, according to CNBC. Then the election counts came in. As Democrats were projected to take both chambers of Congress and Nasdaq-100 futures fell, AMD was still about 5% above its close on Robinhood's overnight market, while Nvidia, Micron and the chip ETFs slipped.
The report changes the argument about AMD rather than ending it. For two years the question was whether it could win a meaningful share of AI accelerator spending from Nvidia; a data-center business near $8.5 billion a quarter and a $17 billion guide says it has. The new question is the one Tokyo asked on Wednesday morning: how much of that spending survives tighter politics around data centres. A guide is only as good as the customer budgets behind it, and those budgets are now set in a less friendly Washington.