AMD Earnings Smash Forecasts as Data Centre Sales Surge

AMD earnings beat Wall Street expectations on Tuesday, November 3, as the chipmaker reported the largest quarter in its history and forecast growth far ahead of what analysts had pencilled in for next year.

Revenue reached $13.38 billion in the three months to September 26, up 45 percent from a year earlier and above the $13.09 billion analysts expected, according to LSEG data cited by Reuters. Adjusted earnings per share rose 74 percent to $2.09. The result also topped the high end of the outlook AMD gave in August. The shares rose 8 percent in extended trading after the results, adding to a 3.65 percent gain in the regular session.

The results landed after a rough stretch for chip stocks. Shares across the sector had fallen for days as investors questioned whether spending on artificial intelligence infrastructure would keep rising, and rival Intel issued a weak outlook last week. AMD's numbers answered that doubt directly, with its data-centre division doing most of the work. The slide was not limited to American chipmakers: Samsung and SK hynix fell sharply in Seoul on the same worries, as covered in our report on the Kospi plunge.

Data centre chips drive the quarter

Data-centre revenue jumped 97 percent to a record $8.55 billion, above the $8.20 billion analysts expected. The division now accounts for about 64 percent of AMD's total revenue, up from 47 percent a year earlier. Operating income in the division rose to $2.88 billion from $1.07 billion a year earlier.

AMD credited the growth to strong demand for its EPYC server processors and the launch of its Instinct MI450 Series graphics chips. The company said Anthropic, Meta, Microsoft, OpenAI and Oracle have started running models and workloads on its first Helios rack-scale systems, which pair the new graphics chips with sixth-generation EPYC processors. It also began revenue shipments of the new server processors, known by the code name Venice, during the quarter.

Chief executive Lisa Su said demand for the company's Instinct and EPYC products continued to strengthen and that growth would accelerate further in the fourth quarter as production of Helios and Venice scaled up, according to the company's prepared remarks. In a statement, AMD said the third quarter was the largest and most profitable in its history as it began ramping its next-generation data-centre products.

On a GAAP basis, net income was $2.4 billion and diluted earnings per share were $1.46, up from $0.75 a year earlier. The GAAP figure included a $1.1 billion non-cash charge tied to warrants issued under customer agreements, which the company said reflected the rise in its share price and changes in the estimated probability of meeting the warrant conditions. The full results are set out in AMD's earnings release.

Forecast calms fears over AI spending

For the fourth quarter, AMD forecast revenue of about $17 billion, plus or minus 3 percent, above the $16.23 billion average analyst estimate compiled by LSEG. On a call with analysts, Su said the company expects revenue to grow by more than 80 percent next year, ahead of the 77 percent analysts estimate, and that data-centre chips will make up about four-fifths of sales.

The forecast matters because it tests the central question hanging over the chip sector: whether the build-out of AI data centres can sustain the pace of the past two years. Reuters reported that AMD's outlook offered a strong counterpoint to mounting fears that the AI boom is losing steam, and that it soothed investor concerns after Intel's weak outlook. Nvidia still dominates the market for AI accelerators, and AMD's challenge to that lead depends on whether customers beyond its first Helios buyers keep ordering at the same pace. The wider market had steadied the day after the midterm elections, with the Dow rising sharply in a post-election rally.

Production is the near-term test. AMD said Helios production was ramping as planned and the first systems built by manufacturers using the new EPYC processors are due this quarter. The EuroHPC Joint Undertaking also selected AMD graphics chips and sixth-generation EPYC processors to power the LUMI-AI supercomputer, the company said.

The first Helios racks went live quickly with lead customers, the company said, and AMD expects the ramp to carry into the final quarter of the year.