AMD sales jump 45%, forecast tops estimates as AI chip demand surges

The AI engine: AMD's data-center business, which sells the Instinct AI chips that compete with Nvidia's and the EPYC processors that run servers, brought in a record $8.55 billion, up 97% and above the $8.20 billion analysts expected, Reuters reported. That unit now makes up 64% of AMD's revenue, up from 47% a year ago, CNBC said. "Demand for our Instinct and EPYC products continued to strengthen, and we expect growth to accelerate further in the fourth quarter," CEO Lisa Su said in the release.

The forecast: AMD expects about $17 billion in revenue for October through December, plus or minus 3%, or roughly $16.5 billion to $17.5 billion. Analysts had expected $16.23 billion. The midpoint would be about 27% more than the quarter just reported. On a call with analysts, Su said AMD expects total revenue to rise more than 80% in 2027, above the 77% analysts expect, according to Reuters.

Where it was weaker: Sales in AMD's PC and gaming unit fell 8% to $3.72 billion, a bit below the $3.79 billion estimate. Gaming revenue, which includes the custom chips AMD makes for game consoles, fell 40% to $773 million. AMD also expects its adjusted gross margin, the share of sales left after production costs, to slip to about 55% this quarter from 56%, roughly in line with estimates.

Results vs. expectations: Revenue $13.38 billion vs. $13.09 billion expected. Adjusted earnings $2.09 a share vs. $1.95. Data-center revenue $8.55 billion vs. $8.20 billion. PC and gaming revenue $3.72 billion vs. $3.79 billion. Fourth-quarter revenue forecast about $17 billion vs. $16.23 billion. Fourth-quarter adjusted gross margin forecast about 55% vs. 55.27%. Estimates are LSEG figures as reported by Reuters and CNBC.

What's still unknown: Whether AMD can get enough of the scarce high-bandwidth memory its AI chips need, given a global memory shortage that Reuters noted is squeezing the industry; how fast it can ramp production of its new Helios rack systems and "Venice" server chips, which Su said will drive the fourth quarter; and whether the after-hours gain holds when regular trading opens Wednesday.

Results and the fourth-quarter outlook come from AMD's earnings release. Analyst estimates are LSEG consensus figures as reported by Reuters and CNBC; Investing.com cited slightly different consensus numbers ($13.06 billion in revenue, $1.94 a share). After-hours stock moves can change by the next morning. The hero is a 2020 file photo of the Santa Clara, Calif., building that then housed AMD's headquarters.