Chipmaker Advanced Micro Devices beat Wall Street's targets for the third quarter but missed with its outlook for the current period. However, AMD also forecast higher-than-expected sales of its new artificial intelligence chips for data centers. That news buoyed AMD stock on Wednesday.
The Santa Clara, Calif.-based company late Tuesday said it earned an adjusted 70 cents a share on sales of $5.8 billion in the September quarter. Analysts polled by FactSet had expected AMD earnings of 68 cents a share on sales of $5.7 billion. On a year-over-year basis, AMD sales and earnings both rose 4%.
Heading into the Q3 report, AMD had posted four straight quarters of declining earnings on a year-over-year basis. Sales had dropped for two straight quarters amid a downturn in demand for personal computers and traditional servers.
For the fourth quarter, AMD expects to generate sales of $6.1 billion, up 9% from the same period last year. However, analysts were looking for Q4 sales of $6.39 billion.
AMD Stock Rises After Report
AMD tempered its soft Q4 outlook with a prediction of robust sales for its MI300 AI accelerators. The company expects to exceed $2 billion in sales of the new product in 2024. It also forecast $400 million in sales in the fourth quarter as production ramps. AMD officially plans to launch its MI300 accelerators at a Dec. 6 event.
The MI300 sales forecast "stole the show," Susquehanna Financial Group analyst Christopher Rolland said in a client note. He had been modeling for less than $1.5 billion in sales next year. Rolland rates AMD stock as positive with a price target of 130.
Wall Street estimates for MI300 sales next year had ranged from $1 billion to $1.5 billion.
With the MI300, AMD has positioned itself as a clear alternative to market leader Nvidia in AI chips, Wedbush Securities analyst Matt Bryson said in a client note. He reiterated his outperform rating on AMD stock but cut his price target to 130 from 155.
Analysts Cut Price Targets On AMD Stock
On the stock market today, AMD stock jumped 9.7% to close at 108.04.
Meanwhile, at least 15 Wall Street analysts cut their price targets on AMD stock after the company's Q4 guidance miss.
"In the fourth quarter, we expect to see strong growth in Data Center and continued momentum in Client, partially offset by lower sales in the Gaming segment and additional softening of demand in the embedded markets," Chief Financial Officer Jean Hu said in a news release.
Chief Executive Lisa Su credited strong sales of Ryzen 7000 series PC processors and record server processor sales for its Q3 beat.
"Our data center business is on a significant growth trajectory based on the strength of our Epyc CPU (central processing unit) portfolio and the ramp of Instinct MI300 accelerator shipments to support multiple deployments with hyperscale, enterprise and AI customers," Su said in a statement.
AMD Ranks Fourth In Industry Group
Last week, rival Intel delivered a beat-and-raise third-quarter report thanks to an improving PC market.
Advanced Micro Devices ranks a strong fourth out of 37 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. AMD stock has an IBD Composite Rating of 91 out of 99.
Meanwhile, Intel ranks seventh out of 32 stocks in IBD's semiconductor manufacturing industry group. Intel has an IBD Composite Rating of 62.
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