Shares of Rambus (RMBS 9.52%) closed 9.5% higher on Tuesday after the chip interface technology company announced better-than-expected quarterly results.
Revenue declined 6.1% year over year to $105.3 million, including a 10.9% decrease in product sales to $52.2 million, a 3.3% drop in royalties to $28.9 million, and 2.1% growth in contract and other revenue to $24.2 million. Licensing billings arrived at $57.9 million, down from $62.2 million in last year's third quarter. But each metric arrived well above the midpoints of Rambus' previous guidance ranges.
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Key Data Points
How Rambus is benefiting from the rise of AI
On the bottom line, that translated to net income of $103.2 million, or $0.93 per share, up sharply from $0.01 in the same year-ago period. And though that profit was bolstered primarily by a one-time $90.8 million gain on the divestiture of Rambus' PHY IP business during the quarter, adjusted earnings of $0.56 per share still handily exceeded expectations for $0.41.
CEO Luc Seraphin lauded the company's strong execution despite challenging macroeconomic conditions, adding that Rambus remains well positioned to benefit from increasing requirements for data-center memory performance given the adoption of artificial intelligence (AI) and other advanced workloads.
What's next for Rambus shareholders?
For the fourth quarter, Rambus expects revenue ranging from $117 million to $123 million, with licensing billings of $56 million to $62 million, product revenue of $52 million to $58 million, and contract (and other) revenue of $17 million to $23 million.
During the subsequent conference call, management also called for fourth-quarter adjusted earnings per share to be between $0.32 and $0.39 -- technically below Wall Street's consensus estimate for $0.45 per share.
Nonetheless, management understandably praised its execution in spite of the uncertain macroeconomic environment. Time will tell if this rally holds up, given current market volatility (I'm personally content watching this story play out from the sidelines). But for now, investors seem to be celebrating Rambus' status as a key beneficiary of the rise of AI and growing data center workloads.
