AMD (NASDAQ:AMD) released its third-quarter earnings report after the bell, surpassing expectations on both the top and bottom lines. However, the company fell short on its Q4 guidance, causing its shares to dip approximately 4% in after-hours trading, although they later regained the loss.

In premarket trading on Wednesday, the company’s share price was down nearly 1%.

For Q3, AMD reported $5.8 billion in revenue and $0.70 in EPS but predicted $6.1 billion in revenue for the following quarter, missing analysts’ expectations of $6.4 billion.

While AMD is making strides in the AI field, it continues to compete with Nvidia, the current leader in AI chips. AMD’s CEO, Lisa Su, emphasized at the 2023 Code Conference that the AI landscape remains wide open, dismissing the notion of moats in such a rapidly evolving market.

Looking forward, AMD is betting on its latest data center chip, the MI300, to gain ground in the data center market. The company aims to secure a share of the profitable data center business, as tech companies seek the computing power required to train their AI models. Su explained that if the MI300 achieves significant growth, it could become the fastest product to reach $1 billion in sales in AMD’s history.

According to TD Cowen’s Matthew Ramsay, AMD, along with competitors like Broadcom and Marvell, may experience a “choppy” earnings season, but they are positioned for strong growth by the end of 2024 and into 2025. He emphasized that these semiconductor companies have high-quality, high-margin businesses, and long-term trends in the industry remain positive.

Last week, Cathie Wood’s Ark Invest made a substantial purchase of over 50,000 shares of AMD, worth more than $5 million.

AMD’s stock has gained approximately 50% year-to-date.

Key financial figures for AMD compared to analyst expectations:

Revenue: $5.8 billion actual versus $5.7 billion expected

Adjusted EPS: $0.70 actual versus $0.68 expected

Adjusted operating margin: 22% actual versus 21.6% expected

Q4 revenue outlook: ~$6.1 billion actual versus $6.4 billion expected

Currently, Wall Street analysts’ recommendations for AMD include 39 Buy ratings, 12 Holds, and one Sell.

AMD’s gaming revenue for the quarter was $1.5 billion, an 8% decrease compared to the previous year and missing analysts’ expectations of $1.53 billion. AMD’s gaming chips are utilized in video game consoles like Sony’s PlayStation 5.

In Q3, AMD’s embedded segment revenue amounted to $1.2 billion, a 5% year-over-year decline and falling short of the estimated $1.31 billion. This segment is affected by the sluggish PC market.

In 2024, AMD intends to maintain its focus on AI and data centers, increasing R&D and go-to-market investments to capitalize on these opportunities. Su emphasized that the company’s objective is to achieve faster top-line growth than OpEx growth, driving long-term growth through its investments.

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