Advanced Micro Devices (AMD) experienced a decline in its share prices early Wednesday, as the chipmaker provided a less optimistic fourth-quarter revenue forecast despite announcing higher year-over-year results for the third quarter. The company anticipates fourth-quarter revenues of approximately $7.5 billion, with a variance of $300 million.
This midpoint reflects an expected 22% year-over-year growth, which was announced late Tuesday. The prevailing forecast on Capital IQ stands at $7.55 billion. Following this announcement, the stock dropped by 8.4% in premarket trading. During an earnings call, Chief Financial Officer Jean Hu emphasized that strong growth in data center and client sectors should more than counterbalance declines in the gaming and embedded divisions for the fourth quarter.
"We are on track to deliver record annual revenue in 2024," Hu conveyed in the earnings report. For the three-month period ending on September 28, AMD reported revenues rising to $6.82 billion, an increase from $5.8 billion the previous year, surpassing Wall Street's expectation of $6.71 billion. Adjusted earnings rose by 31% year-over-year to $0.92 per share, aligning with analysts' estimates for the quarter. "We delivered strong third-quarter financial results with record revenue led by higher sales of EPYC and Instinct data center products and robust demand for our Ryzen PC processors," stated Chief Executive Lisa Su in the earnings announcement.
"We see substantial growth opportunities across our data center, client, and embedded sectors, fueled by the insatiable appetite for increased computing power." The data center division saw impressive growth, with revenue soaring by 122% to $3.55 billion, primarily due to a significant increase in Instinct GPU shipments and boosts in EPYC CPU sales.
"We have built significant momentum across our data center AI business, with deployments ramping up among a diverse array of cloud, enterprise, and AI clients," Su noted during the call. Client revenue also grew by 29%, reaching $1.88 billion amid strong demand for the Zen 5 AMD Ryzen processors. Conversely, gaming sales plummeted by 69% to $462 million, attributed to decreased semi-custom revenue as major companies like Microsoft and Sony scaled back channel inventory.
Furthermore, embedded revenue decreased by 25% to $927 million as gradually recovering demand was overshadowed by persistent weakness in the industrial market, the CEO added. Adjusted gross margin improved by 3 percentage points year-over-year, reaching 54%. However, the adjusted operating expenses saw an increase, climbing to $1.96 billion from nearly $1.7 billion in the same quarter last year. Price: 151.86, Change: -14.39, Percent Change: -8.66..