AMD shares rise on strong data center results and AI demand

Advanced Micro Devices reported third-quarter financial results on Tuesday that surpassed Wall Street forecasts, prompting a 7 percent jump in the company's stock during extended trading. The chipmaker saw its total revenue increase by 45 percent to 13.38 billion dollars, a figure that exceeded the LSEG consensus estimate of 13.09 billion dollars. Adjusted earnings per share came in at 2.09 dollars, also beating the expected 1.95 dollars.

The primary driver of this growth was the data center segment, which accounted for 64 percent of AMD's overall revenue, up from 47 percent in the same period last year. CEO Lisa Su stated in a press release that the company expects growth in data center processors to accelerate further. She expressed confidence in AMD's ability to sustain strong revenue growth and expanding profitability, citing the company's leadership product portfolio and deep relationships with customers and the supply chain.

The resurgence in AMD's central processing units is largely attributed to the rise of agentic AI applications, such as Meta's Muse. These applications require CPUs that can power virtual machines and operate autonomously for extended periods. This demand pushed AMD shares to a record high in October, although the stock experienced three consecutive days of losses prior to Tuesday's rally amid broader industry concerns about AI overspending.

AMD's results follow a recent report from rival Intel, which also highlighted significant data center growth with revenue in that segment up 78 percent. However, Intel's stock dropped 29 percent on Friday due to concerns regarding weak guidance and its capacity to meet demand. Both companies are navigating a challenging PC market, which Intel recently cited as a reason for its poor outlook. Global PC shipments declined 4 percent in the second quarter compared to the previous year, according to Counterpoint Research, largely due to rising costs for memory and other components.

In its combined segment for PC and gaming chips, AMD reported revenue of 3.7 billion dollars, an 8 percent decrease from a year earlier. Gaming revenue specifically fell by 40 percent. Despite this, the company provided optimistic guidance for the fourth quarter, projecting revenue of approximately 17 billion dollars, which exceeds the average analyst estimate of 16.2 billion dollars. AMD also expects a gross margin of 55 percent for the quarter, slightly below the average estimate of 55.3 percent.

The company is expanding its presence in the artificial intelligence hardware market with its Helios rack-scale systems, which compete directly with Nvidia's Grace Blackwell and Vera Rubin products. Major tech firms including Meta, Microsoft, Anthropic, OpenAI, and Oracle are beginning to utilize AMD Helios in their data centers. Meta confirmed last week that its Helios racks are operational, while AMD agreed to invest 1 billion dollars in Meta's equity offering.

Additionally, AMD has committed to investing up to 5 billion dollars in Anthropic, which recently unveiled its prospectus as it prepares for a potential initial public offering. During a visit to Taiwan in October, Lisa Su indicated plans to substantially increase supply in 2027. Both Su and Nvidia CEO Jensen Huang have made multiple trips to Taiwan and South Korea this year to meet with key suppliers, including Taiwan Semiconductor Manufacturing Company, SK Hynix, and Samsung.

In a separate strategic move, AMD announced in September that it would acquire World Labs for 8.2 billion dollars in an all-stock deal. Founded by Fei-Fei Li, the San Francisco-based AI lab is developing a world model that simulates 3D environments to assist in the creation of robots and other physically grounded AI applications.