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AMD Reports Q3 Earnings, Falls Short on Q4 Guidance

AMD (AMD) reported its third-quarter earnings Tuesday after the bell, surpassing expectations on both revenue and earnings per share (EPS). However, the company’s Q4 guidance fell short, resulting in a decline of about 4% in its shares during after-hours trading.

In Q3, AMD generated $5.8 billion in revenue and achieved an EPS of $0.70. Despite these positive results, the company projected revenue of $6.1 billion for the next quarter, missing analysts’ expectations of $6.4 billion.

One area where AMD aims to catch up is in the field of artificial intelligence (AI) chips, where Nvidia (NVDA) currently holds the lead. AMD CEO Lisa Su believes that the AI market is more open than it appears, and the company is placing its bets on this opportunity.

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In line with its efforts to compete in the AI market, AMD’s newly released data center chip, the MI300, is expected to help the company narrow the gap with its competitors. According to analyst Matt Bryson from Wedbush, AMD is well-positioned to thrive in the second half of 2024, with increasing AI revenues.

AMD’s data center business is on a significant growth trajectory, driven by the strength of its EPYC CPU portfolio and the increasing deployment of Instinct MI300 accelerator shipments for AI, enterprise, and hyperscale customers. Analyst Matthew Ramsay from TD Cowen believes that despite a potentially uncertain earnings season, AMD, along with competitors like Broadcom (AVGO) and Marvell (MRVL), is poised for strong growth by the end of 2024 and into 2025.

The Earnings Rundown

Here are the key numbers reported by AMD compared to analysts’ expectations:

Revenue: Actual – $5.8 billion, Expected – $5.7 billion

Adjusted EPS: Actual – $0.70, Expected – $0.68

Adjusted operating margin: Actual – 22%, Expected – 21.6%

Q4 revenue outlook: Actual – ~$6.1 billion, Expected – $6.4 billion

The Wall Street analyst consensus for AMD currently includes 39 Buy recommendations, 12 Holds, and one Sell.

While exceeding expectations in certain areas, AMD’s gaming revenue reached $1.5 billion, an 8% YoY decline, falling short of the expected $1.53 billion. The company’s gaming chips are predominantly used in consoles like Sony’s PlayStation 5.

Furthermore, AMD’s embedded segment revenue for Q3 was $1.2 billion, reflecting a 5% YoY decrease and missing estimates of $1.31 billion. This decline can be attributed to the sluggish PC market.

This news story is still developing, and updates will be provided accordingly.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on X, formerly Twitter, at @agarfinks and on LinkedIn.

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