Advanced Micro Devices (AMD) exceeded Wall Street’s expectations for the third quarter, although its outlook for the current period fell short. However, the company predicted higher-than-expected sales for its new artificial intelligence chips for data centers. This positive news boosted AMD stock on Wednesday.
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In the September quarter, the Santa Clara-based company reported adjusted earnings of 70 cents per share on sales of $5.8 billion, surpassing analysts’ expectations of 68 cents per share on sales of $5.7 billion. Year-over-year, both sales and earnings for AMD increased by 4%.
Prior to the Q3 report, AMD had experienced four consecutive quarters of declining earnings on a year-over-year basis. Sales had also dropped for two consecutive quarters due to decreased demand for personal computers and traditional servers.
In the fourth quarter, AMD projects sales of $6.1 billion, a 9% increase from the same period in the previous year. However, analysts had anticipated Q4 sales of $6.39 billion.
AMD Stock Soars After Positive Forecast
To offset its soft Q4 outlook, AMD predicts strong sales for its MI300 AI accelerators. The company expects sales of the new product to exceed $2 billion in 2024. Additionally, AMD forecasts $400 million in sales for the fourth quarter as production ramps up. The official launch of the MI300 accelerators is scheduled for December 6.
Analyst Christopher Rolland from Susquehanna Financial Group said that the MI300 sales forecast “stole the show.” He had previously estimated sales of less than $1.5 billion for next year. Rolland rates AMD stock positively with a price target of 130.
Wall Street’s estimates for MI300 sales in 2024 ranged from $1 billion to $1.5 billion.
According to analyst Matt Bryson from Wedbush Securities, with the introduction of the MI300, AMD has positioned itself as a strong competitor to market leader Nvidia in AI chips. Bryson maintains his outperform rating on AMD stock, but has reduced his price target from 155 to 130.
Analysts Lower Price Targets for AMD Stock
AMD stock jumped 5.9% to 104.33 in morning trades on the stock market today.
Following the company’s Q4 guidance miss, at least 15 Wall Street analysts have lowered their price targets for AMD stock.
“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,” said Chief Financial Officer Jean Hu in a news release.
Chief Executive Lisa Su attributed the Q3 beat to strong sales of the Ryzen 7000 series PC processors and record server processor sales.
“Our data center business is on a significant growth trajectory based on the strength of our Epyc central processing unit (CPU) portfolio and the ramp-up of Instinct MI300 accelerator shipments to support multiple deployments with hyperscale, enterprise, and AI customers,” stated Su.
AMD Ranks Fourth in Industry Group
Last week, Intel reported better-than-expected results for the third quarter due to an improving PC market.
According to IBD’s Stock Checkup, Advanced Micro Devices ranks fourth out of 37 stocks in the fabless semiconductor industry group. AMD stock has an IBD Composite Rating of 91 out of 99.
Meanwhile, Intel ranks seventh out of 32 stocks in the semiconductor manufacturing industry group. Intel has an IBD Composite Rating of 62.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software, and semiconductor stocks.
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