AMD forecasts US$17 billion quarter as data center sales near-double

By Priya Raman

Advanced Micro Devices on Tuesday forecast fourth-quarter revenue of US$17 billion, plus or minus 3 percent. That figure topped the average analyst estimate of US$16.3 billion and offered fresh evidence that AI infrastructure spending is not collapsing.

The company reported the numbers amid a weeks-long selloff in chip stocks, driven by fears of a bubble in AI infrastructure. AMD's own shares have more than doubled this year, and its valuation crossed US$1 trillion in September.

What did the third quarter deliver?

Sales rose 45 percent year-on-year to US$13.4 billion. Profit reached US$2.09 a share, excluding certain items. Analysts had expected US$13.1 billion in revenue and US$1.97 in earnings per share.

Data center revenue nearly doubled to US$8.5 billion, beating the US$8.2 billion analysts predicted. PC and gaming-related sales shrank 8 percent to US$3.7 billion.

What is the catch?

Gross margin (revenue left after production costs) will narrow to about 55 percent in the fourth quarter, from 56 percent in the previous period. The company did not say when that pressure eases.

The PC business faces a structural problem. AI servers consume massive amounts of memory, which has cut supply for laptops and desktops and pushed prices up. Chief executive officer Lisa Su said on the conference call that the total PC market will decline by a double-digit percentage next year. That slump has already hurt Intel, which suffered its worst stock decline in decades after a downbeat report last week.

AMD also remains well behind Nvidia in AI accelerators (chips used to train and run AI models). Nvidia, the world's most valuable company, is updating its product line at a fast pace and expanding into software, networking and complete computers. AMD is debuting new CPU and accelerator ranges and confronting Nvidia more directly with its Helios server design.

What did Lisa Su promise?

Su said AMD has become more optimistic about long-term growth. The company expects revenue to rise more than 80 percent next year, above the 75 percent expansion Wall Street projects. Data center sales will more than double, reaching as much as 80 percent of total revenue.

The company "has strong confidence in our ability to sustain exceptional revenue growth for years to come, with earnings growing even faster," Su said. A promise of years of exceptional growth deserves scrutiny; the margin forecast already points in the other direction.

Emarketer analyst Jacob Bourne framed the stakes in a note. "AMD's earnings are simultaneously a test of its own performance and of the broader AI trade," he said, adding the results "will give investors encouragement given the recent tech and semiconductor selloff, as investors increasingly scrutinize AI spending and its returns."

Under Su, AMD has become a key supplier of processors for AI facilities. Its sales are now twice what they were two years ago, and it continues to outperform Intel in central processing units (CPUs).

Elsewhere in Taiwan's chip sector

Two adjacent developments from Tuesday's news cycle frame AMD's report:

• MediaTek said it secured a second customer for its customized data-center AI accelerator, a customer it stressed is not from China. Volume production of a second-generation chip for an existing customer is on track for early 2028. The remarks dismissed speculation that ByteDance, TikTok's parent, was the second buyer.
• ASE Technology Holding, the world's largest chip packaging and testing provider, raised its annual capital expenditure budget for the third time, to US$11.5 billion from US$10.5 billion. About 60 percent of a US$500 million equipment budget goes to leading-edge advanced packaging used in AI chips. Chief financial officer Joseph Tung said space remains the company's biggest bottleneck and ASE is scouting existing factories to acquire.

Broader pressure persists. TSMC American depositary receipts fell 5.95 percent on Friday, tracking a US tech selloff. The NASDAQ Composite dropped 2.86 percent, the Philadelphia Semiconductor Index plunged 7.20 percent and the S&P 500 fell 1.8 percent, breaching its 100-day moving average. Analysts expect the TAIEX to face heavy downward pressure. AMD's beat may soothe investors; it does not settle the debate on AI returns.