Shares of Advanced Micro Devices (AMD) tanked in after-hours trading after the chip maker reported Q3 earnings results that included a soft outlook. Earnings per share came in at $0.92, which was in line with analysts’ consensus estimate. However, sales increased by 18% year-over-year, with revenue hitting $6.82 billion. This beat analysts’ expectations of $6.71 billion.
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This increase in sales was primarily driven by its Data Center segment, which saw revenue jump by 122% year-over-year to $3.5 billion. The main cause of this jump was a steep increase in Instinct GPU shipments, along with strong growth in AMD EPYC CPU sales. It’s worth noting that the company’s Data Center segment is its largest revenue driver, as it makes up more than 28% of its total sales.
However, its Gaming segment saw a 69% year-over-year decrease to $462 million. This was due to a reduction in semi-custom revenue, which involves designing and manufacturing customized chips tailored to the specific needs of individual customers.
Guidance for Q4 2024
Looking forward, management has provided the following guidance for Q4 2024:
- Revenue of between $7.2 billion and $7.8 billion versus analysts’ estimate of $7.548 billion
- Non-GAAP gross margin of approximately 54%
As we can see, the company’s revenue outlook at the midpoint of $7.5 billion was worse than analysts’ expectations, which, when combined with EPS figures that matched expectations, did not impress investors and led to the after-hours move in the stock price.
Is AMD a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMD stock based on 25 Buys, six Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 73% rally in its share price over the past year, the average AMD price target of $188.54 per share implies 13.6% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
