AMD Shares Plummet 14% After Q3 Earnings Report
Strong Data Center Performance Fails to Offset Gaming Revenue Decline
Advanced Micro Devices, Inc. (NASDAQ:AMD) shares took a hit, falling 14% to $142.44, following the company’s third-quarter earnings report. Despite exceeding analyst expectations with revenue of $6.8 billion and earnings per share of 92 cents, investors were left underwhelmed.
Data Center Segment Drives Growth
The company’s data center segment emerged as the primary growth driver, achieving a remarkable 122% increase to $3.5 billion. Additionally, client segment revenue rose 29% to $1.9 billion. However, these gains were offset by a 69% decline in gaming revenue to $462 million and a 25% drop in embedded revenue to $927 million.
CEO Lisa Su Attributes Success to High Demand
CEO Lisa Su credited the company’s strong performance to high demand for EPYC and Instinct data center products, as well as Ryzen processors in the PC segment. She also expressed optimism about future growth opportunities across data center, client, and embedded business sectors, driven by escalating demand for computing power.
Fourth-Quarter Projections
Looking ahead, AMD forecasts fourth-quarter revenue of $7.5 billion, representing a 22% year-over-year increase at the midpoint. Adjusted gross margins for the fourth quarter are expected to remain consistent at 54%.
Analysts Weigh In
Analysts reacted positively to AMD’s expansion in artificial intelligence (AI) and data center solutions, suggesting the company could increasingly challenge NVIDIA in the AI domain. KeyBanc analyst John Vinh highlighted the importance of AMD’s MI300 chip, which is projected to generate $5 billion in revenue by 2024. Cantor Fitzgerald analyst C.J. Muse pointed out that AMD’s AI progress with the MI300 may eventually generate $12 billion in revenue, supporting potential earnings growth by 2025 or 2026.
Mixed Assessments
Other analysts provided mixed assessments, with Oppenheimer’s Rick Schafer commending AMD’s rapid establishment of a competitive AI franchise, while Piper Sandler’s Harsh Kumar highlighted strong GPU execution but acknowledged challenging guidance.
Investment Opportunities
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