Updated Version 3 - With Accelerated Growth in Data Center Business, AMD Expects Quarterly Revenue to Surpass Market Expectations

Updated the stock performance in the third paragraph, and added analyst comments in the fifth paragraph.

Anhata Rooprai/Max A. Cherney

Reuters, November 3 - AMD (AMD.O) on Tuesday forecasted fourth quarter revenue to exceed Wall Street expectations, driven by robust growth in chip demand. Meanwhile, AMD's multi-billion dollar efforts to challenge Nvidia's (NVDA.O) dominance in the artificial intelligence semiconductor market have been making continuous progress.

The company's stock price surged more than 8% in after-hours trading. Year-to-date, the stock has more than doubled. Intel’s share price rose 2%, NVIDIA’s climbed over 1%, and Broadcom’s increased 1.2% as well.

AMD’s third quarter data center revenue nearly doubled, fueled by AI workloads shifting to running models in real-world applications, boosting the demand for its graphics processing units and central processing units.

This enabled AMD to take market share away from competitor Intel (INTC.O). Last week, Intel's quarterly revenue forecast was well below expectations (link), sparking a global sell-off in chip stocks (link).

"AMD’s results provide a much-needed boost for AI infrastructure, and to a lesser extent, the PC market," said Bob O’Donnell, chief analyst at TECHnalysis Research.

According to data compiled by London Stock Exchange Group (LSEG), AMD expects fourth quarter revenue of about $17 billion (fluctuating 3%), above the analyst consensus forecast of $16.23 billion.

The company’s adjusted gross margin is expected to be around 55%, in line with the expected 55.27%, and down from 56% in the third quarter.

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AMD has accelerated its rollout of AI products, expanding from standalone chips to competing with NVIDIA at the rack system level.

The company’s flagship Helios rack system, which integrates the MI455X accelerator with the new "Venice" server chip, is now in production and plans to significantly ramp up capacity 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 worth of AI chips over five years to Meta (link). Under the agreement, the Facebook parent company may acquire up to 10% ownership of the chipmaker.

AMD’s third quarter revenue grew 45% to $13.38 billion, exceeding expectations of $13.09 billion. Data center revenue soared 97% to a record $8.55 billion, surpassing the forecast of $8.20 billion.

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

The semiconductor industry is also facing a global memory shortage. Although manufacturers are racing to expand capacity, the high-bandwidth memory used in AI processors remains expensive and is in short supply.

AMD’s client and gaming segment (covering its PC chips and console processors) saw sales decline 8% in the third quarter to $3.72 billion, missing the expectation of $3.79 billion.

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

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(For the convenience of non-English speakers, Reuters has automatically translated its report into several other languages. As automated translation may contain errors or fail to capture required context, Reuters does not guarantee the accuracy of the automated translation and provides it solely for the convenience of readers. Reuters accepts no responsibility for any damage or loss arising from the use of automation translation.)