AMD reports better-than-expected results but margin guidance only meets estimates

Advanced Micro Devices (AMD) has announced its fiscal third-quarter results, revealing performance that outpaced Wall Street's predictions. However, the company's guidance on profit margins aligned with estimates, leading to a slight dip in stock price during after-hours trading. In the third quarter, which concluded on September 27, AMD reported a remarkable 36% increase in revenue compared to the same period last year. The company's net income surged to $1.24 billion, translating to 75 cents per share, up from $771 million or 47 cents per share a year ago. Looking ahead, AMD anticipates approximately $9.6 billion in revenue for the fourth quarter, indicating a robust 25% growth, which exceeds the consensus estimate of $9.15 billion from LSEG. The firm projects an adjusted gross margin of 54.5% for the upcoming quarter, matching StreetAccount's forecast. AMD is actively competing with Nvidia in the artificial intelligence (AI) processor market. Notably, the revenue guidance does not factor in earnings from shipments of AMD's Instinct MI308 chips to China, a point echoed by executives in the previous quarter as well. As of the latest market close, AMD's shares have soared 107% this year, significantly outperforming the Nasdaq's 21% increase. A recent partnership with OpenAI may further bolster AMD's position. The AI company is expected to acquire a 10% stake in AMD and plans to utilize 6 gigawatts of AMD's Instinct GPUs over several years, starting with a 1-gigawatt rollout in the latter half of next year. Traditionally, companies like OpenAI have depended on Nvidia's graphics chips for their large-scale AI models. Additionally, Oracle revealed plans to integrate 50,000 AMD Instinct MI450 AI chips into its cloud offerings beginning next year. AMD's data center division, which encompasses both standard CPUs and AI GPUs, generated $4.34 billion in revenue for the fiscal third quarter, marking a 22% increase and surpassing the expected $4.13 billion. Client revenue also saw a significant rise, reaching $2.75 billion, up 46%, exceeding the consensus estimate of $2.61 billion. In the gaming sector, AMD reported a staggering 181% increase in revenue, totaling $1.30 billion against StreetAccount's conservative estimate of $1.05 billion. Meanwhile, Amazon, a significant customer for AMD, disclosed that it had divested its entire holding of 822,234 AMD shares as of September 30, a position it had built during the first quarter. AMD executives are scheduled to elaborate on these results in a conference call with analysts at 5 p.m. ET. This story is still developing, and further updates will follow.