Shares of Advanced Micro Devices (AMD 3.46%) rose 7.6% in Tuesday's after-hours trading following the chipmaker's release of its second-quarter 2024 report.
The stock's rise is attributable to several factors, including the quarter's revenue and earnings, along with third-quarter revenue guidance, all beating Wall Street's expectations. No doubt, investors were also pleased that management increased its guidance for 2024 data center artificial intelligence (AI)-enabling graphics processing unit (GPU) chip revenue. It now expects this metric to exceed $4.5 billion, up from its guidance of $4 billion in April, CEO Lisa Su shared on the earnings call.
AMD's year-over-year growth was driven by strong performances by the data center and client segments.
Advanced Micro Devices' key numbers
| Metric | Q2 2023 | Q2 2024 | Change YOY |
|---|---|---|---|
| Revenue | $5.36 billion | $5.84 billion | 9% |
| GAAP operating income | ($20 million) | $269 million | Flipped to positive from negative. |
| Adjusted operating income | $1.07 billion | $1.26 billion | 18% |
| GAAP net income | $27 million | $265 million | 881% |
| Adjusted net income | $948 million | $1.13 billion | 19% |
| GAAP earnings per share (EPS) | $0.02 | $0.16 | 700% |
| Adjusted EPS | $0.58 | $0.69 | 19% |
Data source: Advanced Micro Devices. GAAP = generally accepted accounting principles. YOY = year over year.
Investors should focus on the adjusted numbers, as they exclude one-time items.
Wall Street was looking for adjusted EPS of $0.68 on revenue of $5.72 billion, so AMD surpassed both expectations. The company also beat its own revenue guidance of $5.7 billion. (It doesn't issue a profit outlook.)
In the quarter, AMD generated cash of $593 million running its operations, up 56% from the year-ago period. It ended the quarter with cash, cash equivalents, and short-term investments of $5.34 billion, down from $6.04 billion in the prior quarter.
The main reason for the modest decline in cash and liquid investments is that AMD used cash to retire $750 million in debt. It also used cash of $352 million to repurchase shares of its stock. The company ended the period with long-term debt of $1.72 billion.
NASDAQ: AMD
Key Data Points
AMD's segment performance
| Segment | Q2 2024 Revenue | Change YOY | Change QOQ |
|---|---|---|---|
| Data center | $2.83 billion | 115% | 21% |
| Client | $1.49 billion | 49% |
9% |
| Gaming | $648 million | (59%) | (30%) |
| Embedded | $861 million | (41%) | 2% |
| Total | $5.84 billion | 9% | 7% |
Data source: Advanced Micro Devices. YOY = year over year. QOQ = quarter over quarter.
The data center's revenue recorded its third consecutive quarterly high, driven largely by increasing sales of Instinct MI300 GPUs. MI300 quarterly revenue exceeded $1 billion for the first time. AMD introduced these chips in the fourth quarter of 2023 to compete with Nvidia's market-leading data center GPUs for accelerating the processing of artificial intelligence (AI) and high-performance computing (HPC) workloads.
Along with the steep production ramp-up of Instinct MI300 GPUs, the company attributed this segment's year-over-year growth primarily to strong sales of its fourth-generation AMD Epyc central processing units (CPUs). The data center's robust sequential growth was driven by the MI300 ramp-up.
The client segment's year-over-year and sequential growth was primarily driven by sales of AMD Ryzen processors. The client segment sells chips for personal computers (PCs).
Gaming's poor year-over-year and sequential performances were primarily due to lower semi-custom revenue. This is revenue derived from processors for consoles, including Microsoft Xbox and Sony PlayStation.
The embedded segment's year-over-year decline was driven by customers continuing to reduce their inventory levels because of slowdowns in end markets, namely auto and industrials. It's promising that revenue edged up 2% from the prior quarter, suggesting a rebound could be starting.
AMD's third-quarter guidance
For Q3, management guided for:
- Revenue of $6.7 billion, which equates to growth of 16% year over year.
- Adjusted gross margin of 53.5%. For context, this metric was 51.1% in the year-ago quarter and 53.1% in the just-reported second quarter.
Going into the report, Wall Street had been modeling for Q3 revenue of $6.61 billion, or 14% growth, so AMD exceeded this estimate.
A good report
Investors are rightly pleased with Advanced Micro Devices' report. The second-quarter's results were robust and the third-quarter guidance suggests management is confident that even better results are likely coming.
Nvidia stock remains my favorite AI stock, but the AI chip and related technology space is growing so rapidly that there is room for more than one big winner. AMD's results since launching its Instinct GPUs late last year are very promising.
