AMD Q4 Earnings Meet Expectations, but Q1 Forecast Falls Short

Advanced Micro Devices (AMD) reported fourth-quarter earnings that aligned with analyst expectations, with the semiconductor company’s revenue surpassing estimates. Despite the positive performance, AMD’s stock declined over 6% in extended trading. Here’s a breakdown of the results compared to consensus estimates from LSEG (formerly Refinitiv) for the quarter ending in December:

• EPS: 77 cents per share (adjusted), matching the expected 77 cents per share.
• Revenue: $6.17 billion, exceeding the anticipated $6.12 billion.

For the first quarter, AMD projected sales of about $5.4 billion, with a margin of plus or minus $300 million, falling short of analysts’ revenue expectations of $5.73 billion. The company anticipates some major businesses, including PC chips, to decline sequentially during the quarter. While data center revenue is expected to remain flat, the decline in server central processing units (CPUs) will be offset by sales of graphics processing units (GPUs) used in training and deploying generative artificial intelligence models.

CEO Lisa Su provided insights on the 2024 outlook, stating, “For 2024, we expect the demand environment to remain mixed.”

In the fourth quarter, net income was $667 million, or 41 cents per share, compared to $21 million, or 1 cent per share, in the previous year.

Although Nvidia currently dominates the GPU market, AMD believes its new AI chips introduced last year will challenge Nvidia’s H100 GPUs for certain applications. AMD reported a bullish update on its AI chip sales, expecting $3.5 billion in data center GPU sales under its “Instinct” brand in 2024, up from the previous estimate of $2 billion in October.

AMD’s data center business, encompassing server CPUs and AI chips, experienced a 38% annual rise to $2.28 billion in sales, becoming the company’s largest segment. The growth was attributed to strong sales of Instinct graphics processors for AI. The client segment, primarily chips for PCs and laptops, rose 62% year over year to $1.46 billion in sales.

However, sales in AMD’s gaming segment, including “semi-custom” processors for Microsoft Xbox and Sony PlayStation consoles, declined by 17% due to slower console sales. AMD expects semi-custom revenue to experience a “significant” double-digit percentage decline in the current quarter.

The embedded segment, covering chips for networking, reported $1.1 billion in sales, reflecting a 24% annual decrease.