AMD shares fall as first-quarter forecast comes in light

AMD reported fourth-quarter earnings on Tuesday that were in line with analyst expectations. And while the company’s revenue beat estimates, AMD offered a first-quarter forecast that fell short of expectations.

AMD stock slid more than 6% in extended trading, even after the company gave a positive update on how quickly its new AI chips are selling.

Here’s how the company did versus LESG (formerly Refinitiv) consensus estimates for the quarter ended in December:

• EPS: $0.77 per share, adjusted, versus $0.77 per share expected
• Revenue: $6.17 billion, versus $6.12 billion expected

For the first quarter, AMD said it expects about $5.4 billion in sales, plus or minus $300 million, while analysts were looking for revenue of $5.73 billion. AMD added that it expected some of its major businesses, including PC chips, to decline sequentially during the quarter. It said that its data center revenue would be flat as server CPU declines are offset by AI GPU sales.

“For 2024, we expect the demand environment to remain mixed,” AMD CEO Lisa Su said on a call with analysts.

Net income in the fourth quarter was $667 million, or $0.41 per share, versus $21 million, or $0.01 per share a year ago.

AMD makes graphics processing units, or GPUs, which are needed to train and deploy generative artificial intelligence models. While that market is currently dominated by Nvidia, AMD has said that its new AI chips introduced last year will challenge Nvidia’s H100 GPUs for some applications. Investors are looking for significant growth in the company’s data center segment over the next few years.

AMD gave a bullish update on its AI chips sales. In October, AMD said it expected $2 billion in server GPU sales in 2024. On Tuesday, it said it now expects $3.5 billion in data center GPU sales under its “Instinct” brand this year.

“In cloud, we are working closely with Microsoft, Oracle, Meta and other large cloud customers on Instinct GPU deployments powering both their internal AI workloads and external offerings,” Su said.

AMD’s data center business, which includes server CPUs and AI chips, rose 38% on an annual basis to $2.28 billion in sales. It’s now firmly AMD’s largest segment. The company said that much of the increase in revenue was attributable to “strong growth” in sales of its Instinct graphics processors, which are used for AI. However, AMD’s overall performance in the business was in line with a $2.29 billion FactSet estimate for the Data Center business.

Historically, AMD’s main business has been central processors, or CPUs, for PCs and servers. Compared to AI chips, that part of the semiconductor industry has been flat or shrinking over the past few years, as PC sales have suffered post-pandemic.

AMD’s client group, which is comprised mostly of chips for PCs and laptops, rose 62% year-over-year to $1.46 billion in sales, thanks to recent chip launches.

Sales in AMD’s gaming segment, which includes “semi-custom” processors for Microsoft Xbox and Sony Playstation consoles, fell 17%. AMD blamed slower console sales and said it expected semi-custom revenue to decline by a “significant” double-digit percentage in the current quarter.

AMD’s embedded segment, which includes chips for networking, reported $1.1 billion in sales, down 24% on an annual basis.