Advanced Micro Devices reported stronger-than-expected results and issued fourth-quarter guidance that topped Wall Street estimates, signaling that demand for AI chips in data centers remains firm. AMD said fourth-quarter revenue is expected to reach $17 billion, plus or minus 3%, above the average analyst forecast of $16.3 billion. The outlook sent the stock up about 7% in after-hours trading.
The forecast arrived as investors have been questioning how durable spending on AI infrastructure will be. CEO Lisa Su said the company remains optimistic about long-term growth and expects full-year revenue growth next year to exceed 80%.
Fourth-quarter outlook beats expectations
AMD’s fourth-quarter revenue forecast of about $17 billion, with a 3% range on either side, came in well above the $16.3 billion expected by analysts. Technology and semiconductor shares have recently faced pressure as the market weighed whether AI infrastructure spending could be running ahead of itself. Emarketer said AMD’s results serve not only as a measure of the company’s own execution, but also as a test for the broader AI trade.
The upbeat guidance lifted AMD shares and also supported after-hours trading in companies including Dell and HP.
Data center becomes the main growth driver
Driven by strong cloud demand for central processing units, or CPUs, and AI accelerators, AMD’s data center segment generated $8.5 billion in third-quarter revenue. That was nearly double from a year earlier and above market expectations of $8.2 billion.
Under Lisa Su, AMD’s market capitalization crossed the $1 trillion mark in September. Management also said data center revenue is expected to more than double next year and could account for as much as 80% of total revenue, underscoring the scale of that business.
PC and gaming remain under pressure
In contrast with the expansion in data centers, AMD’s PC and gaming business posted third-quarter revenue of $3.7 billion, down 8%. The report said AI servers have absorbed memory chip capacity, raising component costs for PCs and weighing on end demand. Su expects the overall PC market to decline by a double-digit percentage next year.
Profitability is also expected to soften slightly. AMD said fourth-quarter gross margin will likely fall to about 55%, from 56% in the previous quarter, reflecting changes in production costs and product mix.
Competition with Nvidia intensifies
AMD continues to widen its competitive edge over Intel in the traditional CPU market. In accelerators used to train and run AI models, however, Nvidia still holds the leading position.
To narrow that gap, AMD is rolling out a new generation of CPUs and accelerator products and is using its Helios server architecture to compete directly with Nvidia. The report said Nvidia, currently the world’s most valuable chipmaker, is also expanding across software, networking and full-system offerings, setting up a more direct contest in high-end computing infrastructure.
