AMD Q3 Revenue Soars 122% in Data Center Sales, Stock Drops 7.6%
On October 30, AMD released its third-quarter financial results, exceeding revenue expectations but experiencing a stock drop of over 7.6% in after-hours trading due to fourth-quarter guidance that fell short of market predictions.
For Q3, AMD reported revenue of $6.82 billion, an 18% year-over-year increase that surpassed analyst expectations of $6.71 billion and set a new company record. Under GAAP standards, net income surged by 158% year-over-year to $770 million. Excluding stock-based compensation and one-time expenses, the non-GAAP net income rose by 19% to $1.504 billion, slightly above market expectations. The non-GAAP earnings per share (EPS) was $0.92, with a non-GAAP gross margin up 3 percentage points to 54% and a non-GAAP operating margin also increasing by 3 percentage points to 25%, all in line with forecasts.
Breaking down revenue by segment, the Data Center division reached a record $3.5 billion, marking a 122% year-over-year increase and a 25% quarter-over-quarter rise, driven by robust sales of AMD Instinct GPUs and EPYC CPUs. The Client Computing segment generated $1.9 billion, up 29% year-over-year and 26% quarter-over-quarter, fueled by strong demand for Ryzen processors based on the Zen 5 architecture. However, the Gaming division saw a significant decline in revenue to $462 million, down 69% year-over-year and 29% from the previous quarter, primarily due to a decrease in semi-custom sales. The Embedded segment experienced a 25% year-over-year drop in revenue to $927 million, attributed to customers normalizing their inventory levels. On a quarter-over-quarter basis, embedded revenue improved by 8%, reflecting a recovery in demand across various end markets. While the Gaming and Embedded divisions continue to face challenges, AMD noted clear signs of recovery in these areas.
Overall, the Data Center and Client Computing divisions contributed significantly to profit growth, although this was partially offset by declines in Gaming and Embedded segments and increased R&D expenses.
AMD CEO Lisa Su highlighted the historic revenue performance in Q3, driven by sales growth in EPYC and Instinct data center products, alongside strong demand for Ryzen PC processors. Looking ahead, she emphasized the potential for substantial growth in Data Center, Client Computing, and Embedded sectors due to the increasing demand for computational resources.
AMD’s Executive Vice President and Chief Financial Officer Jean Hu expressed satisfaction with the Q3 execution, noting robust year-over-year growth in gross margin and EPS. She forecasted record annual revenue in 2024, supported by notable growth in Data Center and Client sectors.
Additionally, Lisa Su mentioned ongoing high demand from cloud providers and other companies investing in AI infrastructure, projecting AI chip sales to exceed $5 billion in 2024, up from the previous estimate of $4.5 billion for Q2. Nonetheless, this figure aligns closely with market expectations. For Q4, AMD anticipates revenue of approximately $7.5 billion, a 22% year-over-year increase and a 10% quarter-over-quarter rise, slightly below analyst expectations of $7.55 billion. The projected gross margin for Q4 is 54%, an improvement from 51% in the same period last year, and generally in line with market forecasts.
Despite the strong Q3 performance, the less-than-ideal Q4 guidance and lower-than-expected annual AI chip sales projections contributed to the decline in AMD’s stock price after the earnings announcement.
