AMD shares fall as first-quarter forecast comes in light

AMD reported fourth-quarter earnings on Tuesday that were in line with analyst expectations, while the company’s revenue beat estimates, but AMD offered a first-quarter forecast that came short of expectations.

AMD stock fell more than 2% in extended trading.

Here’s how the company did versus LESG (formerly Refinitiv) consensus estimates for the quarter ended in December:

• EPS: $0.77 per share, adjusted, versus $0.77 per share expected
• Revenue: $6.17 billion, versus $6.12 billion expected

For the first quarter, AMD said it expects about $5.4 billion in sales, plus or minus $300 million, while analysts were looking for revenue of $5.73 billion. AMD added that it expected all of its major businesses, including server and PC chips, to decline sequentially during the quarter.

Net income in the fourth quarter was $667 million, or $0.41 per share, versus $21 million, or $0.01 per share a year ago.

AMD makes graphics processing units, or GPUs, which are needed to train and deploy generative artificial intelligence models. While that market is currently dominated by Nvidia, AMD has said that its new AI chips introduced last year will challenge Nvidia’s H100 GPUs for some applications, and investors are looking for significant growth in the company’s data center segment over the next few years.

In October, AMD said it expected $2 billion in server GPU sales in 2024.

But historically, AMD’s main business has been central processors, or CPUs, for PCs and servers. Compared to AI chips, that part of the semiconductor industry has been flat or shrinking over the past few years, as PC sales have suffered post-pandemic.

Data center, which includes server CPUs and AI chips, rose 38% on an annual basis to $2.28 billion in sales. It’s now firmly AMD’s largest business and the company said that much of the increase in revenue was attributable to “strong growth” for sales of its Instinct graphics processors, which are used for AI.

However, AMD’s overall performance in the business was in line with a $2.29 billion FactSet estimates for the Data Center business.

AMD’s client group, which is comprised mostly of chips for PCs and laptops, rose 62% year-over-year to $1.46 billion in sales, which the company said was boosted by recent chip launches.

Sales in AMD’s gaming segment, which includes “semi-custom” processors for Microsoft Xbox and Sony Playstation consoles, fell 17%. AMD blamed slower console sales, and said it expected semi-custom revenue to decline by a “significant” double-digit percentage in the current quarter.

AMD’s embedded segment, which includes chips for networking, reported $1.1 billion in sales, down 24% on an annual basis.