AMD Rides the AI Wave to Beat Earnings Expectations

AMD has announced its second quarter 2024 profits, and one of the highlights was that roughly half of the company’s sales are now data center products. The results surpassed analysts’ expectations on revenue and profit and provided better-than-expected guidance for the third quarter.

Like its competitor Nvidia, AMD is benefiting from the current enthusiasm for AI, which is driving sales of its data center graphics processing units (GPUs) and central processing units (CPUs). For the quarter, AMD announced an adjusted earnings per share (EPS) of $0.69 and revenue totaling $5.8 billion. Wall Street had predicted an adjusted EPS of $0.68 and revenue of $5.7 billion, according to consensus estimates by Bloomberg. In the same period in 2023, AMD reported an adjusted EPS of $0.58 on revenue of $5.4 billion.

AMD CEO Lisa Su commented on the developments:

Our AI business continued accelerating, and we are well positioned to deliver strong revenue growth in the second half of the year, led by demand for Instinct, EPYC, and Ryzen processors. The rapid advances in generative AI are driving demand for more computing in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business.

AMD CEO Lisa Su

AMD Data Center Revenue Soars

AMD’s Data Center revenue, which includes its GPU and CPU sales, reached $2.8 billion, surpassing expectations of $2.75 billion. This marks a 115% increase compared to the same quarter last year when AMD reported Data Center revenue of $1.3 billion.

Following the report, AMD’s shares rose by as much as 5%, while shares of rival Nvidia (NVDA) increased by 3%. Shares of Intel (INTC) remained unchanged. AMD’s top GPU is currently the MI300X. At the Computex event in Taiwan in June, AMD announced that partners and customers, including Microsoft, Meta, Dell, HPE, and Lenovo, are already adopting the chip. The company also revealed that its next-generation MI325X will be available in Q4, while the MI350X is set to hit the market in 2025. AMD plans to release the MI400 in 2026.

However, AI is not AMD’s only important area. The Client segment, which includes sales of chips for PCs, remains a significant part of its business. For the quarter, AMD reported revenue of $1.5 billion, exceeding expectations of $1.45 billion and up from $998 million in the same period last year. The Client segment’s success comes from the PC industry recovering from a significant slowdown after the explosive growth at the onset of the pandemic.

That was four years ago, and consumers are now starting to replace the PCs they bought at the start of the pandemic. According to IDC, this has led to a 3% increase in worldwide PC shipments year-over-year in the second quarter, marking the second consecutive quarter of growth following eight quarters of declines.

Gaming Revenue Declines

Gaming revenue reached $648 million in Q2, down 59% year-over-year from $1.5 billion but still beating estimates of $646 million.

Similar to the PC industry, the gaming industry has faced a slowdown compared to the high sales seen in the early days of the pandemic. Nonetheless, there is optimism for the gaming industry heading into the end of 2024 and the beginning of 2025, with Nintendo preparing to launch its next console and Take-Two set to release the highly anticipated “Grand Theft Auto VI” later next year.

AMD is the first of the big three chip companies to report its earnings this quarter. Intel is scheduled to report on Aug. 1, while Nvidia will announce its earnings on Aug. 28.