Advanced Micro Devices exceeded expectations with strong data center growth despite challenges in the gaming and embedded segments.
Advanced Micro Devices (AMD 3.96%), a leader in semiconductors and high-performance computing solutions, has reported its third-quarter 2024 earnings, outpacing both its guidance and investor expectations.
The release, dated October 29, 2024, revealed that AMD achieved a revenue of $6.8 billion, exceeding its forecast of $6.7 billion. This works out to year-over-year growth of 18% and sequential growth of 17%. The company also reported a non-GAAP gross margin of 54%, slightly above its 53.5% guidance.
Overall, the quarter reflected significant advancements particularly in AMD’s data center and client computing segments, juxtaposed against challenges in the gaming and embedded markets.
| Metric | Q3 2024 | Management’s Expectation | Q3 2023 | Y/Y % Change |
|---|---|---|---|---|
| Revenue ($ billion) | $6.8 | $6.7 | $5.8 | 18% |
| Non-GAAP Gross Margin | 54% | 53.5% | 51% | Up 3 pts |
| Diluted EPS (Non-GAAP) | $0.92 | — | $0.70 | 31% |
| Data Center Revenue ($ billion) | $3.5 | — | $1.6 | 122% |
Source: SEC filings. Expectations based on management’s guidance, as provided in 2024-07-30 earnings report.
Overview of Advanced Micro Devices
AMD is a major player in the semiconductor industry, known for its cutting-edge processors and graphics solutions used in various applications including personal computers and data centers. It competes with industry titans such as Intel and Nvidia. AMD’s core business segments include Client, Data Center, Gaming, and Embedded, and it focuses on innovation through high-performance and adaptive computing solutions.
Recently, AMD has concentrated its efforts on leveraging artificial intelligence (AI) and high-performance computing technologies. The company’s strategic initiatives have emphasized technological innovation, underscoring its commitment to advancing AI capabilities and developing partnerships that strengthen its ecosystem. These efforts are crucial to maintaining its competitive edge, particularly amidst rapid AI advancements.
Quarter Highlights
The third quarter of 2024 marked a significant period of growth for AMD, with notable financial achievements and strategic developments. Record performance in the Data Center segment led to revenue of $3.5 billion, up a remarkable 122% year-over-year. This success stemmed from robust sales of Instinct GPUs and EPYC CPUs, emphasizing AMD’s strong position in high-performance computing.
In addition to the Data Center success, the Client segment also delivered strong results, boosting revenue to $1.9 billion, a 29% increase from the same period last year. This growth was driven by heightened demand for Ryzen processors based on the new Zen 5 architecture. However, AMD faced challenges in its Gaming and Embedded segments, with a 69% and 25% revenue decline respectively. These declines were largely due to inventory normalization and reduced demand for semi-custom products.
Operating expenses slightly rose by 7% year over year, driven by investments in research and development (R&D). Despite rising expenses, operating margin significantly improved to 11%, up from 4% a year ago. Notably, management reaffirmed its financial health, emphasizing a Q4 2024 revenue outlook of $7.5 billion, with an unchanged non-GAAP gross margin of 54%.
During the quarter, AMD also focused on strategic developments, enhancing its AI capabilities through acquisitions like Silo AI and announcing a pending acquisition of ZT Systems aimed at expanding its data center offerings. These initiatives underscore AMD’s dedication to product and technological innovation, crucial for its sustained growth and market leadership.
Looking Ahead
Looking forward, AMD expects continued growth driven by its Data Center and Client segments. Management has forecasted revenue growth for Q4 2024, projecting $7.5 billion with an anticipated sequential growth of 10%. New product launches, such as the next generation of EPYC processors and ramping production of next-generation Instinct AI accelerators, are expected to bolster this trajectory.
Investors should watch for AMD’s continued expansion in the AI segment and improvements in its product line, particularly as the company integrates recent acquisitions to enhance its technological capabilities. These strategic initiatives, alongside robust market demand for high-performance computing, suggest a promising outlook for the quarters ahead.
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