What drove the third-quarter beat?

  • AMD’s third-quarter revenue was 13.377 billion dollars, up 44.7% year over year, exceeding the market consensus of 13.114 billion dollars and slightly above Goldman Sachs’ forecast of 13.268 billion dollars.
  • Data center revenue was 8.546 billion dollars, above the market forecast of 8.249 billion dollars; gaming revenue was 773 million dollars, also above the market forecast of 674 million dollars. Data center revenue was the main reason Goldman Sachs judged the results strong.
  • The client business was weaker: revenue of 2.949 billion dollars was below the market forecast of 3.077 billion dollars and Goldman Sachs’ forecast of 3.126 billion dollars.

How did revenue growth translate into profitability?

  • Third-quarter gross margin was 55.9%, slightly below the market forecast of 56.1%; operating margin was 29.3%, above the market forecast of 28.0%.
  • Non-GAAP earnings per share were 2.09 dollars, above the market forecast of 1.95 dollars and Goldman Sachs’ forecast of 2.03 dollars.

How much stronger than expected was fourth-quarter guidance?

  • The midpoint of the company’s fourth-quarter revenue guidance was 17 billion dollars, above the market consensus of 16.29 billion dollars but below Goldman Sachs’ forecast of 17.592 billion dollars. At the guidance midpoint, revenue would rise 65.5% year over year and 27.1% quarter over quarter.
  • Non-GAAP gross margin guidance was 55%, below the actual third-quarter figure of 55.9% and roughly in line with the market forecast of 55.3%. Earnings per share implied by the guidance were 2.92 dollars, above the market forecast of 2.65 dollars but slightly below Goldman Sachs’ forecast of 2.97 dollars.

Which developments is Goldman Sachs watching?

  • Goldman Sachs expects the share price to rise following the release of the results and guidance, and believes Intel’s earlier weak guidance had already significantly lowered investor expectations. The bank maintained its buy rating and its 12-month price target of 700 dollars.
  • Goldman Sachs is watching the pace of the MI450 ramp-up at major customers in the fourth quarter and in 2027, the sustainability of server CPU growth in 2027, and trends in gross margin and PC demand. Downside risks cited by the bank also include slower-than-expected deployment of AMD GPUs associated with the Meta deal and insufficient operating leverage.