Despite strong growth in the AI industry, AMD's share price drops due to unimpressive forecasts.

• On Tuesday, AMD reported third-quarter earnings that were in line with forecasts and slightly higher revenue than expected.
• AMD reported a 100% increase in sales for its data center business in the second quarter, but its revenue forecast for the fourth quarter is in line with market predictions.

On Tuesday, the company reported third-quarter results that met earnings forecasts and slightly exceeded revenue expectations.

How did the company perform in comparison to LSEG's estimates for the quarter ending Sept. 28?

• Earnings per share: 92 cents adjusted vs. 92 cents expected
• Revenue: $6.82 billion vs. $6.71 billion expected

AMD reported that its data center sales doubled in the second quarter, but its revenue guidance for the fourth quarter was in line with analyst predictions.

AMD shares fell 6% on Tuesday in extended trading.

AMD anticipates $7.5 billion in sales in the current quarter, in line with analyst predictions of $1.16 in adjusted earnings per share on $7.54 billion in revenue. This represents a 22% year-over-year decline for the December quarter.

The chipmaker's net income increased by 152% year-over-year, to $771 million, or 47 cents per share, from $299 million, or 18 cents per share, in the previous year. Additionally, the company's revenue grew by 18% annually.

Despite having only gained about 20% in value so far in 2024, AMD shares have been outperformed by their rivals Nvidia and Broadcom, who have experienced much greater gains due to the growing demand for AI chips. AMD is the second-largest vendor of data center GPUs, which are used for training and deploying large generative AI models.

In October, AMD unveiled a new AI chip called the MI235X and predicted that the AI GPU market would reach $500 billion by 2028. Additionally, the company forecasted that it would generate approximately $4 billion in sales from AI chips this year, which accounts for about 15% of its total revenue.

AMD's data center segment, which includes AI chips, experienced a 122% increase in revenue to $3.5 billion in total sales. The growth was mainly attributed to the strong sales of Instinct-branded GPUs for AI.

Due to higher revenue from data centers, AMD's gross margin increased to 54%.

AMD's client segment, which includes central processing chips for laptops and servers, reported a 23% growth in PC sales during the quarter, totaling $1.9 billion. Additionally, AMD's chips were featured in high-end laptops marketed by Microsoft as "Copilot+" machines, which can run advanced AI included with Windows.

AMD's gaming sales decreased by 68% year over year, which the company attributed to a decline in "semi-custom revenue," including custom chips for game consoles like the Sony PlayStation 5.

The sales of the company's embedded business, which comprises low-cost chips for various industries and uses, decreased by 25% annually to $927 million.