Updated version 1 - As data center business accelerates, AMD expects quarterly revenue to exceed market forecasts

Supplemented stock price data and added a chart in the second paragraph

Reuters, November 3 - AMD (AMD.O) on Tuesday forecast that fourth-quarter revenue would exceed Wall Street expectations, benefiting from strong demand for its chips. At the same time, the company's multibillion-dollar push to challenge Nvidia (NVDA.O) in the artificial intelligence semiconductor market is showing solid progress.

The company's share price rose more than 6% in after-hours trading. So far this year, the stock has more than doubled.

AMD's third-quarter data center revenue nearly doubled, driven by AI workloads shifting toward running models in real-world applications, boosting demand for its graphics processing units (GPU) and central processing units (CPU).

This has allowed AMD to capture market share from rival Intel INTC.O. Intel last week forecast quarterly revenue (link) well below expectations, triggering a sell-off in chip stocks globally (link).

According to data compiled by London Stock Exchange Group (LSEG), AMD expects fourth-quarter revenue of approximately $17.0 billion (plus or minus 3%), exceeding the analyst average estimate of $16.23 billion.

The company's adjusted gross margin is expected to be about 55%, lower than the 55.27% expected and down from 56% in the third quarter.

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AMD has accelerated the launch of artificial intelligence products, expanding from standalone chips to rack-level systems to compete with Nvidia.

The company's flagship Helios rack system—combining the MI455X accelerator with the new “Venice” server chip—is now in production, with plans to significantly ramp up output in the fourth quarter. The first systems are being tested at Meta META.O.

In February this year, the company agreed to sell up to $60 billion in AI chips to Meta (link) over five years. Under the agreement, the Facebook parent company can acquire up to 10% of the chip company.

AMD’s third-quarter revenue grew by 45% to $13.38 billion, exceeding the expected $13.09 billion. Data center revenue soared 97% to a record $8.55 billion, beating the $8.20 billion estimate.

Adjusted earnings per share were $2.09, above the expected $1.95.

The semiconductor industry is also facing a global memory shortage. Despite manufacturers racing to boost production, high-bandwidth memory used in AI processors is both expensive and in short supply.

AMD’s client and gaming business segments (which cover its PC chips and gaming console processors) saw third-quarter sales drop 8% to $3.72 billion, missing the $3.79 billion estimate.

In addition to its chip business, AMD agreed in September to acquire World Labs—founded by Fei-Fei Li and focused on building AI for 3D environmental modeling—for $8.2 billion in stock (link), establishing a foothold in the research field of physical AI systems.

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