AMD Reports Strong Q3 Earnings, Forecasts $2 Billion in AI Chip Sales for 2024

Advanced Micro Devices (AMD) has posted impressive results for the third quarter, surpassing analyst expectations and demonstrating the company's growing influence in the AI chip market. For the quarter ending in September, AMD reported adjusted earnings per share (EPS) of 70 cents, beating the anticipated 68 cents. Revenue reached $5.8 billion, exceeding the $5.7 billion that analysts had forecasted.

However, AMD's fourth-quarter outlook, with sales projected at approximately $6.1 billion, fell short of analysts' expectations of $6.37 billion. Nevertheless, what sparked optimism and led to a rebound in AMD's stock price was the company's exciting projection for AI chip sales in 2024.

AMD is among the select group of chip manufacturers equipped to produce high-end GPUs crucial for training and deploying generative artificial intelligence models. These GPUs are essential in AI applications and are a domain where Nvidia currently reigns supreme. AMD plans to release its MI300A and MI300X AI chips, both of which are "on track" for volume production in the current quarter.

CEO Lisa Su affirmed that AMD's data center GPU revenue is estimated to reach approximately $400 million in Q4 and is expected to surpass $2 billion in 2024, with revenue growth anticipated throughout the year.

In Q3, AMD's net income surged to $299 million, up from $66 million the previous year, and the company's revenue grew by 4% compared to the same period in the previous year, reaching $5.6 billion.

Data center, which encompasses AMD's server processors and AI GPUs, reported $1.6 billion in sales, reflecting stable performance compared to the previous year. While overall data center sales remained steady, AMD noted that its sales of server CPUs experienced growth, with strong data center business growth anticipated for Q4.

CEO Lisa Su highlighted AMD's aspirations to be a significant player in the AI chip market, particularly with the substantial opportunities arising in generative AI workloads. Recent AI acquisitions and enhancements in the company's AI software suite were also discussed, emphasizing the growing importance of AI in enterprise business productivity applications.

Furthermore, AMD's Client group, including sales from PC processors, exhibited a remarkable 42% YoY increase in revenue, reaching $1.5 billion. This growth was largely driven by demand for PC chips.

In the same period, AMD's embedded segment revenue saw a 5% decrease to $1.2 billion, attributed to challenges in the communications market. This segment includes products for networking and field-programmable gate arrays (FPGAs) acquired when AMD purchased Xilinx.

Lastly, sales in AMD's gaming segment, responsible for producing processors for gaming consoles, reported an 8% decline to $1.5 billion due to fewer "semi-custom" chip sales. These semi-custom chips are utilized in consoles like Sony's PlayStation 5.

Overall, while AMD's Q4 forecast may be softer than anticipated, its robust performance and the promise of a substantial presence in the AI chip market in 2024 make for an encouraging outlook.