AMD stock rises 3% after earnings beat, CEO predicts ‘multiple winners’ in AI race

Santa Clara, Calif.-based AMD forecast revenue for the third quarter of $5.4 billion to $6 billion on adjusted gross margins of about 51%. Analysts are forecasting adjusted third-quarter earnings of 73 cents a share from AMD on revenue of $5.82 billion, a 4.6% increase on the top line.

AMD Chief Executive Lisa Su told analysts on the conference call that the better-than-expected results in PC sales, following pandemic highs and then inventory write-downs, stems from “the strength of our product portfolio.”

In the second quarter, AMD’s data-center revenue declined 11% to $1.3 billion, while the Street expected $1.37 billion; PC sales fell 54% to $998 million, while analysts expected $843.3 million; gaming sales declined 4% to $1.6 billion, compared with a Street estimate of $1.6 billion; and embedded sales rose 16% to $1.5 billion, while the Street forecast $1.49 billion.

The company reported second-quarter net income of $27 million, or 2 cents a share, compared with $447 million, or 27 cents a share, in the year-ago period. Adjusting for stock-based compensation and other one-time items, AMD reported earnings of 58 cents a share, compared with $1.05 a share last year.

Second-quarter revenue fell to $5.36 billion from $6.55 billion a year ago, and gross margins fell to 50% from 54% a year ago. Last quarter, AMD forecast a strong showing from its AI and data-center products for the second half of the year but admitted it will take a rebound in the PC market to improve gross margins.

Analysts surveyed by FactSet expect adjusted second-quarter earnings of 57 cents a share on revenue of $5.32 billion. AMD had forecast $5 billion to $5.6 billion in revenue and second-quarter gross margins of about 50%.

Read: Will AI do to Nvidia what the dot-com boom did to Sun Microsystems? Analysts compare current hype to past ones.

On a conference call with analysts, Jean Hu, AMD’s chief financial officer, forecast that client, or PC-related, sales will rise year over year, data-center sales will be “flattish” and that both gaming and embedded sales will decline year over year. Analysts forecast a 7.3% rise in data-center sales to $1.73 billion in the third quarter from a year ago, and a 2.6% rise PC sales to $1.05 billion.

Sequentially, Hu said the company expects client and data-center sales to grow by double-digit percentages, and a decline in gaming and embedded sales, compared with the second quarter.

Read: Nvidia gets more good news from Big Tech, even as AI spending ‘may not lift all boats’

When asked how AMD will stand out against competition from the likes of Nvidia Corp.
NVDA,
-4.50%
in the AI field, CEO Su told analysts on the call that many AI-centric organizations, like Meta Platforms Inc.
META,
-2.94%
spinoff PyTorch and Onyx, are working closely with the company to optimize higher-level AI models.

“The key is we’re getting significant real-time feedback from some of these lead customers so we’re learning at a very fast pace,” Su told analysts.

Read: Nvidia ‘should have at least 90%’ of AI chip market with AMD on its heels

“I think there will be multiple winners and we will be first to say that there are multiple winners, but we think our portfolio is actually a fairly unique in the sense that we do have CPUs, GPUs, we have the accelerator technology with Ryzen AI on the PC side as well as in the embedded side with our Xilinx portfolio,” Su said. “I think it’s a pretty broad and capable portfolio.”

Read: Open-source AI: AMD looks to Hugging Face and Meta spinoff PyTorch to take on Nvidia

Year to date, AMD shares have gained 81.6%, while the PHLX Semiconductor Index
SOX,
-3.45%
has surged 52.4%, the S&P 500 index
SPX,
-1.15%
 has risen 19.2%, and the tech-heavy Nasdaq Composite 
COMP,
-1.98%
has gained 36.5%.