AMD Reports Strong Earnings, But AI Growth Overshadows Gaming Weakness
In a nutshell:
- AMD beats earnings and revenue expectations but misses consensus on gaming sales.
- Strong growth in Data Center segment fueled by AI chip sales.
- AMD announces plans for next-generation AI chips and expanding server market share.
Breaking it Down:
Advanced Micro Devices (AMD) reported solid first-quarter earnings, slightly exceeding Wall Street’s estimates. However, shares dipped 7% in extended trading as investors focused on the decline in gaming revenue.
- Earnings per Share: Adjusted earnings came in at 62 cents, slightly higher than the expected 61 cents.
- Revenue: AMD generated revenue of .47 billion, edging out the projected .46 billion.
AI Chip Success Story:
AMD’s Data Center segment stood out with an impressive 80% year-over-year growth to .3 billion. This surge is largely attributed to the popularity of its MI300 series AI chips, which rival Nvidia’s offerings. CEO Lisa Su highlighted Microsoft, Meta, and Oracle as major clients using their MI300X. In fact, AMD has seen sales of over billion for these chips since their launch last year.
Buoyed by this success, AMD revised its 2024 AI chip sales forecast upwards to billion, a jump from .5 billion projected earlier this year. Nvidia, the leading AI server chip vendor, reported a staggering .4 billion in sales from its data center segment alone in its most recent January quarter.
“We’re getting closer to our top AI customers,” Su told investors, emphasizing the company’s commitment to developing new and improved AI chips.
Server and PC Bright Spots:
AMD also noted market share gains in the server CPU segment, suggesting inroads against rival Intel. Su cited indications of increasing demand for server CPUs due to the AI server boom.
Meanwhile, AMD’s client segment (PC processors) saw a significant 85% annual increase in revenue to .4 billion, signaling a potential end to last year’s PC slump. AMD’s chips have the capability to run local AI programs, giving them an edge in the emerging “AI PC” market.
Gaming’s Struggle:
The one weak spot in AMD’s report was its gaming segment, which plummeted 48% to 2 million. AMD attributed this decline to reduced chip sales for consoles such as Sony’s PlayStation 5 and PCs. The gaming revenue also fell short of analyst estimates.
Focusing on the Future:
Despite the gaming weakness, AMD remains upbeat about the future. The company is developing next-generation AI chips and server CPUs to maintain its competitive edge. With the AI market poised for continued growth, AMD is well-positioned to capitalize on this opportunity.
Data sourced from: cnbc.com
