Advanced Micro Devices said third-quarter revenue rose 45% to $13.38 billion, driven by a 97% increase in data center sales, and forecast fourth-quarter revenue of about $17 billion, above the $16.2 billion to $16.3 billion analysts had expected.
The results, released after markets closed on Tuesday, sent shares up about 4% in premarket trading Wednesday, though the stock had fallen roughly 24% over the previous month on concerns about the sustainability of AI-related capital spending.
The Santa Clara, California, chipmaker reported non-GAAP diluted earnings per share of $2.09, compared with a consensus estimate of $1.95, according to LSEG data cited by CNBC.
GAAP diluted EPS was $1.46. Data center revenue reached a record $8.5 billion, representing about 64% of total company revenue, up from 47% a year earlier.
The segment’s operating income rose 168% to $2.9 billion, and its operating margin expanded to 34% from 25%.
“We delivered a record quarter with revenue exceeding the high end of our guidance as Data Center segment sales nearly doubled year-over-year,” Chief Executive Lisa Su said in a statement.
On the earnings call, she added:
“The third quarter was the largest and most profitable in our history as we began ramping our next-generation data center products”.
AMD said it began volume shipments of its MI455X accelerators during the quarter.
Anthropic, Meta, Microsoft, OpenAI and Oracle Cloud Infrastructure are running models and workloads on the first Helios rack-scale systems, which combine Instinct MI450 series GPUs with sixth-generation EPYC processors.
The company expects Helios deployments to increase substantially in the fourth quarter as production ramps and original equipment manufacturers begin shipping systems.
Su said original design manufacturers have committed more than 240 Venice server platforms, about 20% more than for the prior generation.
The client and gaming segment told a different story.
Revenue fell 8% to $3.7 billion. Client revenue rose 7% to $2.9 billion on Ryzen mobile processor sales, but gaming revenue dropped 40% to $773 million because of lower semi-custom and graphics sales.
Su said personal computer sell-through slowed late in the quarter as higher memory and component costs pressured demand, and AMD is planning for global PC unit shipments to decline by a double-digit percentage in 2027.
The company expects the client and gaming segment to decline by more than 20% sequentially in the fourth quarter.
Embedded revenue rose 29% to $1.1 billion, the fourth consecutive quarter of accelerating growth, led by aerospace and defense, automotive, communications and industrial markets.
For the fourth quarter, AMD expects data center revenue to grow about 50% sequentially, with the data center AI business surpassing the server CPU business in dollar terms for the first time.
Su said server revenue should roughly double year over year in 2027, and data center AI revenue should grow “significantly more than double” that year.
The company expects data center to represent more than 80% of total revenue in 2027.
AMD ended the quarter with $15.8 billion in cash, cash equivalents and short-term investments, and $7.1 billion in total debt. Inventory rose by about $3 billion sequentially to $11.5 billion as the company prepared for expected data center demand.
Free cash flow was $554 million. The company also disclosed $48.8 billion in purchase commitments as of September 26, a measure of its confidence in future AI chip demand and a potential risk if that demand slows.
Morgan Stanley analyst Joseph Moore wrote that AMD showed “strength in [its] data center [vertical], with the biggest upward revision from server [central processing units], [which] allows AMD to power through weakness in PCs”.
The quarter’s results make clear that AMD’s growth now depends on AI infrastructure spending by a handful of large cloud and model-development customers.
The 40% decline in gaming revenue and the planned double-digit drop in PC shipments in 2027 show that the company’s consumer-facing businesses are contracting as it directs resources toward data center products.
The $48.8 billion in purchase commitments and the rapid buildout of Helios systems will be tested against whether those customers sustain their spending at the pace AMD has forecast.
