AMD’s Q3 2024 Release: Key Financials Ahead of Anticipated Results
Advanced Micro Devices (AMD) will announce its third-quarter 2024 financial results on October 29. The company forecasts that revenues will range around $6.7 billion, with a variation of +/- $300 million. This midpoint suggests a year-over-year increase of about 16% and a sequential growth of approximately 15%.
The Zacks Consensus Estimate currently predicts revenues at $6.71 billion, indicating a year-over-year growth of 15.72%. Additionally, earnings are expected to reach 91 cents per share, a figure that has remained stable over the past month.
Recently, AMD has exceeded the Zacks Consensus Estimate for earnings in three out of the last four quarters, matching expectations in one, resulting in an average earnings surprise of 2.32%.
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AMD’s Price Performance and EPS Surprise History
AMD price and EPS surprise history | AMD Stock Quote
Here’s an overview of AMD’s performance leading up to this announcement.
Challenges in Embedded and Gaming Segments Likely Impact Q3 Revenues
The expected revenue for AMD in the third quarter of 2024 is likely to be impacted by declines in the Embedded and Gaming divisions. Year-over-year, revenues from these segments show a downward trend.
The Zacks Consensus Estimate projects Embedded revenues to be around $918 million, marking a significant year-over-year decrease of 29.2%. Similarly, Gaming revenues are estimated at $560 million, reflecting a substantial 64.03% drop compared to last year.
Growing Data Center and Client Revenues Expected
In contrast, AMD anticipates strong growth in its Data Center segment, with revenues expected to rise by double-digit percentages. The increase is attributed to a sequential ramp in data center GPU sales. Client segment revenues are also predicted to experience growth.
On a year-over-year basis, both the Data Center and Client segments are projected to see significant improvements, fueled by AMD’s robust product offerings.
The company has been capitalizing on its diverse product lineup and growing relationships with partners. Its fourth-Generation EPYC processor is regularly integrated into hyperscalers’ internal workloads and public instances.
As of the end of the second quarter of 2024, AMD had over 900 public cloud instances available. Notably, quarterly revenues from the MI300 accelerator in the data center AI sector exceeded $1 billion for the first time.
With the launch of new products, AMD is well-positioned to compete against NVIDIA in both the data center and the expanding AI-enabled consumer PC markets.
AMD Trails Sector and Industry Growth
Year to date, AMD shares have increased by 7.4%, falling short of the Zacks Computer & Technology sector’s growth of 25.5% and the Zacks Computer – Integrated Systems industry’s 16.3% increase.
AMD’s Year-to-Date Performance Compared to Sector
Image Source: Zacks Investment Research
Currently, the Value Score of F indicates AMD stock may be overvalued. The company trades at a forward Price/Sales ratio of 7.96X, surpassing the sector’s 6.14X and the industry’s 3.32X.
Price/Sales (P/S) Ratio Comparison
Image Source: Zacks Investment Research
Acquisitions and Strong Data Center Presence Enhance Long-Term Outlook
AMD’s long-term prospects look promising, thanks to increasing investment in AI chips. The World Semiconductor Trade Statistics (WSTS) estimates global sales will reach $611.2 billion, signifying a 16% growth over 2023, up from previous forecasts of 13.1%. For 2025, WSTS projects an additional 12.5% growth, totaling $687.4 billion.
These projections bode well for AMD’s future. The introduction of products like the Instinct MI325X accelerator aims to bolster the company’s position in the data center market. AMD has also launched the Ryzen AI 300 Series, the latest generation of its AI-enabled mobile processors, along with the Ryzen 9000 Series processors for PCs.
In 2024, AMD anticipates data center GPU revenues to exceed $4.5 billion, with future series like MI350 and MI400 planned for subsequent years, boasting significant performance improvements over previous models.
AMD is collaborating with companies such as Broadcom, Cisco, HP Enterprise, Intel, Google, Meta Platforms, and Microsoft to introduce Ultra Accelerator Link, a standard technology to connect advanced AI accelerators based on its infinity fabric technology.
To close the technological gap with NVIDIA, AMD has aggressively pursued acquisitions to enhance its AI ecosystem. Over the past year, it has spent $125 million on approximately twelve acquisitions, including recent purchases like Nod.ai and Mipsology.
The acquisition of Helsinki-based Silo AI has strengthened AMD’s AI capabilities, along with a notable acquisition of ZT Systems for $4.9 billion in cash and stock.
Conclusion
While AMD’s upcoming Q3 results may reflect challenges in the Embedded and Gaming segments due to fierce competition from NVIDIA, the company maintains a strong presence in the data center market. The combination of moderate growth prospects and a possibly overvalued stock makes AMD a cautious investment choice.
Currently, AMD holds a Zacks Rank #4 (Sell), indicating that investors may want to reconsider their positions in the stock for now.
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