AMD experiences a drop in stock value following a less-than-anticipated first-quarter forecast.

AMD announced its fourth-quarter earnings, aligning with analyst predictions. Although the company exceeded revenue estimates, the stock witnessed a more than 6% decline in after-hours trading due to a first-quarter forecast that fell short of expectations. Despite AMD’s positive update on the swift sales of its new AI chips, concerns arose.

Here’s a breakdown of AMD’s Q4 performance against LSEG’s consensus estimates:

  • Earnings Per Share (EPS): 77 cents per share (adjusted), meeting the expected 77 cents per share.
  • Revenue: $6.17 billion, surpassing the anticipated $6.12 billion.

Looking ahead to the first quarter, AMD projected sales of approximately $5.4 billion, plus or minus $300 million, whereas analysts had expected revenue to reach $5.73 billion. AMD acknowledged an expected sequential decline in major businesses, including PC chips, and predicted flat data center revenue. This projection factored in declines in server CPUs, offset by GPU sales crucial for training and deploying generative artificial intelligence models.

AMD CEO Lisa Su commented on the outlook for 2024, expressing expectations of a mixed demand environment. In the fourth quarter, net income reached $667 million, or 41 cents per share, a substantial increase from $21 million, or 1 cent per share, in the previous year.

While Nvidia dominates the GPU market, AMD aims to challenge its position with new AI chips introduced in the previous year. The company provided a positive update on AI chip sales, revising its 2024 server GPU sales projection from $2 billion to $3.5 billion under its “Instinct” brand. AMD highlighted collaborations with major cloud customers like Microsoft, Oracle, and Meta in deploying Instinct GPUs for internal AI workloads and external offerings.

AMD’s data center business, comprising server CPUs and AI chips, experienced a 38% YoY increase, reaching $2.28 billion in sales and becoming the company’s largest segment. The growth was attributed to robust sales of Instinct graphics processors used in AI applications.

AMD’s traditional focus on CPUs for PCs and servers has faced challenges, with the semiconductor industry experiencing flat or shrinking growth. However, the client segment, featuring chips for PCs and laptops, saw a notable 62% YoY rise to $1.46 billion in sales. The gaming segment, including processors for Microsoft Xbox and Sony PlayStation consoles, witnessed a 17% sales decline, with expectations of a significant double-digit percentage decline in the current quarter. The embedded segment, covering networking chips, reported $1.1 billion in sales, marking a 24% YoY decrease.