AMD earnings: data-centre sales nearly double and give the AI trade a breather

AMD earnings came in above forecasts on Tuesday night, and they landed at the right moment for the AI trade. Sales of data-centre chips nearly doubled, up 97% to $8.5bn in the quarter to 26 September, and the company forecast about $17bn of revenue for the current quarter, 66% more than a year earlier, its results show. The shares rose as much as 7% after hours, Investing.com reported, on the same night that the Democrats’ midterm sweep knocked AI shares lower.

AMD earnings: what the numbers show

Revenue was a record $13.4bn, up 45% from a year earlier and 16% from the quarter before. Lisa Su, the chief executive, said revenue exceeded “the high end of our guidance”. On AMD’s adjusted measure, earnings per share were $2.09, up 74%, against analysts’ estimates of $1.95, according to an LSEG poll cited by CNBC.

The growth came almost entirely from data centres. AMD sells two kinds of chip there: EPYC processors, which run ordinary server work, and Instinct accelerators, which train and run AI models and compete with Nvidia’s. The quarter included the launch of the Instinct MI450 series. The company says Anthropic, Meta, Microsoft, OpenAI and Oracle are running work on its first Helios systems, whole racks built around those chips.

The rest of the business was mixed:

• Client and gaming: $3.7bn, down 8%. PC processors rose 7% to $2.9bn, but gaming fell 40% to $773m on lower sales of console chips and graphics cards.
• Embedded: $1.1bn, up 29%, led by defence, cars and industry.
• Reported profit was lower than the adjusted figure. Net income under standard accounting was $2.4bn, or $1.46 a share, after a $1.1bn charge for the rising value of warrants AMD has issued to some customers. The warrants gain value as AMD’s share price rises.

The forecast matters more than the quarter

For the three months to December, AMD expects revenue of about $17bn, give or take 3%. That is 27% more than the quarter just reported, a faster pace than this quarter’s 16%. Revenue forecasts for the quarter came in above analysts’ estimates, CNBC reported. Su said growth would “accelerate further in the fourth quarter” as the company scales production of Helios and its “Venice” server processors.

One number points the other way. AMD expects an adjusted gross margin of about 55%, slightly below the 56% of the last two quarters.

Why the AI trade needed a breather

AI shares came into the night weak. AMD itself had fallen 23% in the previous 30 days, Investing.com noted, as investors asked whether the hundreds of billions spent on AI will pay back. As we reported in October, the AI bubble question had already hit the Nasdaq.

Then came the election. Investors fear a big Democratic win could mean more restrictions on data centres, CNBC reported, and in Texas the Democratic governor-elect, Gina Hinojosa, has pledged a moratorium on new ones. Texas holds about 27% of US data-centre capacity, measured in gigawatts, by a Wells Fargo estimate cited by CNBC. Nasdaq 100 futures initially fell between 1% and 2.5%, Investing.com reported. We explain the wider result in what the Democrats’ win means for markets.

AMD’s numbers pushed back on both worries. The print “helped clear some recent concerns over AI demand and spending”, Investing.com wrote. By 3:23am in New York, Nasdaq 100 futures were up 0.3% and S&P 500 futures up 0.2%, CNBC reported, with AMD 5% higher after first jumping by double digits.

A breather, not an all-clear

The relief has limits. After-hours and overnight moves are thin trading, and the real test is Wednesday’s session. The election risk also works more slowly than a quarterly forecast: any new limits on data centres would take months to write and longer to bite.

AMD is also one company. The next tests for the AI trade come quickly: Qualcomm reports after the close on Wednesday, and so does Arm, and Nvidia, the largest AI chipmaker, on 17 November. Our view: AMD shows the spending on AI chips is still accelerating this quarter. Whether it lasts depends on the buyers’ own returns, which no single chipmaker’s results can show.