AMD’s Q3 Earnings Beat Expectations, But Q4 Outlook Raises Concerns – Can AI GPU Sales Save The Day?

In the world of high-tech stocks, Advanced Micro Devices (NASDAQ: AMD) has been a buzzword for quite some time. With its cutting-edge semiconductor technology and competitive products, AMD has been giving industry giant Intel a run for its money.

However, the latest report from the company has left investors with mixed feelings. While the third-quarter results outperformed Wall Street expectations, AMD’s guidance for the fourth quarter has raised concerns.

AMD Q3 Earnings Surpass Expectations

AMD reported its third-quarter earnings with adjusted earnings per share (EPS) of $0.70 on a revenue of $5.80 billion. Analysts had anticipated earnings of $0.68 cents per share on revenue of $5.7 billion.

This seemingly strong performance in Q3 comes as a pleasant surprise to investors who had high hopes for the company.

Optimistic Guidance For Q4

Despite a successful Q3, AMD’s guidance for the fourth quarter is what’s been making headlines. The company expects to generate approximately $6.1 billion in revenue, give or take $300 million, representing a 9% increase year-on-year.

While this is undeniably promising, it falls short of analysts’ estimates, which were set at $6.4 billion.

AI GPU Sales on the Horizon

During the earnings call, AMD’s CEO, Lisa Su, shared an exciting projection.

The company anticipates that its Artificial Intelligence (AI) Graphics Processing Unit (GPU) sales will exceed $2 billion in 2024. In Q4, Data Center GPU revenue is expected to reach about $400 million, making the MI300 product the fastest to reach $1 billion in sales in AMD’s history.

This growth highlights AMD’s commitment to capturing a significant share of the AI market, a move that could potentially pay off in the long run.

Mixed Analyst Reactions

HSBC analysts have described the Q3 earnings as in line with expectations, but they are less enthusiastic about the Q4 outlook, which they consider “muted.”

They believe that the potential upside in AI GPU sales may not be enough to offset any potential downturn in non-AI servers, embedded systems, and gaming, resulting in a neutral risk-reward scenario.

BofA analysts have reaffirmed a Neutral rating for AMD. They appreciate AMD’s strong presence in the computing sector, management execution, and the company’s promising start in generative AI inference, with projected $2 billion in sales in 2024.

However, they caution that AMD’s anticipated $1.6 billion in incremental AI sales next year could be largely offset by a combined decline in embedded systems (-20% YoY) and gaming (-8% YoY) segments.

The recent financial report from Advanced Micro Devices is a mixed bag for investors. While the company has posted strong Q3 earnings, the guidance for the fourth quarter has left some feeling uncertain.

AMD’s ambitious foray into the AI GPU market holds the promise of future success, but it also brings about challenges, especially in the face of potential declines in other key segments.

The company’s ability to navigate these challenges while capitalizing on the AI opportunity will likely determine its future performance in the competitive tech landscape.

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