Revenue and EPS Overview
Advanced Micro Devices (AMD) reported third-quarter 2024 revenue of $6.82 billion, a 17.6% year-over-year increase. This figure outperformed the Zacks Consensus Estimate of $6.71 billion, resulting in a revenue surprise of 1.59%. AMD posted earnings per share (EPS) of $0.92, slightly above the consensus estimate of $0.91, delivering a modest EPS surprise of 1.10%. Despite this beat, AMD shares experienced a significant post-market drop of over 7% due to investor concerns about overall profitability and near-term growth prospects.
Detailed Segment Performance
Data Center: This segment reported robust revenue of $3.55 billion, significantly surpassing the analyst estimate of $3.43 billion and marking an impressive 122.1% year-over-year growth. This increase was primarily fueled by demand for AMD's artificial intelligence (AI) chips, a key area of strategic focus and investment.
Embedded: Revenue for the Embedded segment was $927 million, slightly above the analyst estimate of $917.67 million. However, the year-over-year decline of 25.4% reflects challenges in maintaining previous growth levels, likely due to shifts in market demand and competitive pressures.
Gaming: Gaming revenue came in at $462 million, falling short of the $560.02 million expected by analysts and reflecting a steep year-over-year decline of 69.3%. This decline points to softer performance in consumer-driven markets, as AMD faces increased competition in the gaming and graphics card sectors.
Client: Revenue in the Client segment reached $1.88 billion, ahead of the $1.80 billion consensus estimate, representing a strong 29.5% year-over-year increase. This growth indicates resilient demand for AMD’s CPU products despite broader market headwinds in the consumer electronics sector.
Profitability and Cost Pressures
While AMD reported a significant increase in net income to $771 million ($0.47 per share) from $299 million ($0.18 per share) a year ago, this result fell short of Street estimates. Rising costs, partly driven by ongoing investments in AI and next-generation chip technologies, have exerted pressure on AMD’s profit margins. As a result, AMD’s profitability improvements, while substantial, have not fully met investor expectations, contributing to the post-earnings decline in share value.
Q4 2024 Outlook and Strategic Considerations
AMD provided guidance for Q4 2024 revenue in the range of $7.2 billion to $7.8 billion, representing year-over-year growth from the prior-year quarter’s $6.2 billion. However, the midpoint of this range aligns closely with analyst expectations, leaving limited upside. Market participants anticipated a more aggressive outlook, especially following AMD’s recent launch of advanced AI chips at the Advancing AI event. Yet, AMD refrained from raising its AI sales forecast or announcing new customer wins, which may have tempered enthusiasm among investors.
In summary, while AMD’s Q3 results demonstrate solid growth in core segments like data centers, profitability pressures and cautious guidance have tempered market optimism. The company’s strategic focus on AI technology and next-generation chip development continues to offer long-term potential, though immediate expectations may require a reset as AMD navigates an increasingly competitive landscape.
Advanced Micro Devices (AMD) reported third-quarter 2024 revenue of $6.82 billion, a 17.6% year-over-year increase. This figure outperformed the Zacks Consensus Estimate of $6.71 billion, resulting in a revenue surprise of 1.59%. AMD posted earnings per share (EPS) of $0.92, slightly above the consensus estimate of $0.91, delivering a modest EPS surprise of 1.10%. Despite this beat, AMD shares experienced a significant post-market drop of over 7% due to investor concerns about overall profitability and near-term growth prospects.
Detailed Segment Performance
Data Center: This segment reported robust revenue of $3.55 billion, significantly surpassing the analyst estimate of $3.43 billion and marking an impressive 122.1% year-over-year growth. This increase was primarily fueled by demand for AMD's artificial intelligence (AI) chips, a key area of strategic focus and investment.
Embedded: Revenue for the Embedded segment was $927 million, slightly above the analyst estimate of $917.67 million. However, the year-over-year decline of 25.4% reflects challenges in maintaining previous growth levels, likely due to shifts in market demand and competitive pressures.
Gaming: Gaming revenue came in at $462 million, falling short of the $560.02 million expected by analysts and reflecting a steep year-over-year decline of 69.3%. This decline points to softer performance in consumer-driven markets, as AMD faces increased competition in the gaming and graphics card sectors.
Client: Revenue in the Client segment reached $1.88 billion, ahead of the $1.80 billion consensus estimate, representing a strong 29.5% year-over-year increase. This growth indicates resilient demand for AMD’s CPU products despite broader market headwinds in the consumer electronics sector.
Profitability and Cost Pressures
While AMD reported a significant increase in net income to $771 million ($0.47 per share) from $299 million ($0.18 per share) a year ago, this result fell short of Street estimates. Rising costs, partly driven by ongoing investments in AI and next-generation chip technologies, have exerted pressure on AMD’s profit margins. As a result, AMD’s profitability improvements, while substantial, have not fully met investor expectations, contributing to the post-earnings decline in share value.
Q4 2024 Outlook and Strategic Considerations
AMD provided guidance for Q4 2024 revenue in the range of $7.2 billion to $7.8 billion, representing year-over-year growth from the prior-year quarter’s $6.2 billion. However, the midpoint of this range aligns closely with analyst expectations, leaving limited upside. Market participants anticipated a more aggressive outlook, especially following AMD’s recent launch of advanced AI chips at the Advancing AI event. Yet, AMD refrained from raising its AI sales forecast or announcing new customer wins, which may have tempered enthusiasm among investors.
In summary, while AMD’s Q3 results demonstrate solid growth in core segments like data centers, profitability pressures and cautious guidance have tempered market optimism. The company’s strategic focus on AI technology and next-generation chip development continues to offer long-term potential, though immediate expectations may require a reset as AMD navigates an increasingly competitive landscape.