Advanced Micro Devices (AMD 2.37%) stock missed analyst estimates on revenue and earnings. Declines in the PC market have hit AMD hard as the stock suffers through a bear market.

But despite that bad news, the semiconductor stock is on the rise following the report. Is that a reason to buy? Let's take a closer look.

AMD's earnings conundrum

On the surface, AMD's results appear robust. Revenue for the third quarter of 2022 came in at $5.6 billion, climbing by 29% year over year. Non-GAAP net income of $1.1 billion rose 23%. A higher cost of goods sold reduced margins. AMD also spent heavily on both research and development and marketing, general, and administrative expenses.

Despite the increases, revenue fell short of expectations, since analysts expected revenue of $5.62 billion. Moreover, AMD increased its share count by 34% to over 1.6 billion to fund its Xilinx acquisition. Thus, non-GAAP earnings per share fell 8% to $0.67 per share, just below the $0.68 per share estimate.

AMD forecast 2022 revenue of $23.5 billion at the midpoint, which requires a considerable downward revision from the previously estimated $26.3 billion it predicted after the second quarter.

CEO Lisa Su blamed slowing PC sales, reflecting the struggles of Intel, which reported a similar decline in its Q3 earnings report. Lockdowns in China further pressured revenues.

Consequently, AMD stock has dropped by almost 65% since reaching an all-time high of nearly $165 per share almost one year ago. But that level of decline is not unusual, given the drop in its closest peers and the tech sector in general.

Shifting perspectives

Investors may have begun to adjust their perspective, returning to a pre-pandemic view of the PC market. Since the advent of Apple's iPhone, the smartphone has started to replace many functions performed by the PC. Hence, investors and companies had focused less on that market by the end of the last decade.

Admittedly, PC demand rose during the pandemic as many workers had to purchase a PC to work from home. But many of these workers have now returned to the office. And considering that PCs last up to 10 years, that market will likely remain sluggish for years to come.

AMD has also increasingly emphasized the data center and embedded segments. In these areas, AMD's sales remained robust.

In Q3, data center revenue came in at $1.6 billion, a 45% increase year over year. Embedded segment revenue jumped to $1.3 billion, up from $100 million in the year-ago quarter. The embedded segment's growth surged thanks to the acquisition of Xilinx in February.

Valuation could have also influenced the buying decision. Currently, AMD stock sells for about 25 times earnings. That exceeds the price-to-earnings ratios of rival Intel and one of its principal fabs, Taiwan Semiconductor.

However, that is the lowest P/E ratio for AMD since Su became CEO in 2014. Moreover, the valuation may have fallen too far, considering that Q3 non-GAAP income growth was 23% despite a slowdown in the business.

Consider AMD

At these levels, investors should consider adding AMD shares. From a macro perspective, investors should have expected the PC market to cool off following the end of lockdowns.

Growth numbers in the data center and embedded markets indicate those segments can carry AMD. Given the likelihood that the drop in AMD stock prices in its recent struggles, investors should feel safe adding shares at current levels.