Research Note: AMD Earnings and Managing AI Growth Expectations

January 31, 2024 / Ben Bajarin

AMD released strong earnings for the quarter and strong optimism on growth for the year. Investors were hoping for more growth, which outlines the current challenge of many companies to manage investor expectations around AI as a whole, not just their company’s outlook.

Key Takeaways

  • AMD raised its MI300 AI chip forecast from $2 billion to $3.5 billion, a move considered slightly optimistic but still above expectations, amidst a quarter affected by weaker game console sales.
  • Despite a mixed quarter, AMD’s focus remains strong on AI and the data center segments, with the data center business expected to account for more than 50% of AMD’s revenue this year
  • The company anticipates a conservative guidance for the upcoming March quarter with expected revenue of $5.4 billion, indicating a sequential decline, yet with an improvement in gross margins to 52%
  • AMD is positioned favorably against competitors like Intel in market share gains across PCs, servers, and FPGAs, even as it faces revenue growth headwinds from the gaming console segment
  • AMD is optimistic about gaining traction in AI, supported by realistic year-one AI expectations and its ongoing execution on its product roadmap, signaling a strong potential for future growth in AI and data center markets


While the quarter was strong and all signs point to optimistic growth for AMD in 2024, investors were hoping for an even stronger growth projection.  Which highlights the delicate situation in the market where a company like Nvidia that has outsized expectations but will likely meet those expectations is being applied to many companies in the AI conversation.  Essentially, investors have more lofty expectations of growth, which was currently priced in to many stocks, and the rebalancing of those expectations is what is drawing AMD down today, and other names like Microsoft, Google, Nvidia, etc.

Rebalancing of expectations as a whole is a good thing but it demonstrates the balance many of these companies executives have to strike to remain bullish but not let investor expectation get out of a control.  A very difficult needle to thread to be sure.



AMD experienced a mixed quarter but managed to meet outsized AI expectations. The company’s financials included highlights such as a raised forecast for its MI300 AI chip from $2 billion to $3.5 billion. This adjustment, while slightly disappointing to some, still exceeded expectations. The first quarter showed a slight downturn mostly attributed to weaker game console sales.

Despite challenges in the gaming sector, leading to a bigger than anticipated 1H:24 reset, AMD’s data center business is tracking to be more than 50% of its revenue this year. This is significant as the data center and AI opportunities are viewed as the main drivers of AMD’s investment case.

Guidance and Outlook:
AMD’s guidance for the upcoming quarters remains conservative with realistic targets, especially concerning the MI300 chip which has just started shipping and is still building ecosystem support. Concerns remain about the choppy server environment as well as pressures from weaker video game consoles sales.

For AI, AMD has adjusted its revenue target upward for the year, reflecting growing momentum in this segment. The company sees AI as a significant growth opportunity in the coming years, given the sizable markets for AI silicon solutions. AMD is expected to exit the year with earnings per share (EPS) potentially annualizing around $6, indicating a stronger second half, with projections for 2025 still on track.

AI Focus:
The raised forecast for the MI300 AI chip to $3.5 billion from $2 billion underscores AMD’s optimistic outlook on its AI potential. This adjustment points to a more substantial role for AI in AMD’s revenue mix, especially as the company has already suggested having supply well in excess of this number. Market analysis suggests significant upside to AMD’s new AI revenue targets, reinforcing the growing importance of AI to AMD’s strategy.

Market Position and Competition:
AMD remains in a strong market position despite a mixed quarter and sits in a share-gain position against competitors like Intel in several key areas including PCs, servers, and FPGAs. The outlook for AMD is strengthened by more realistic AI revenue expectations and the company’s ongoing execution on its product roadmap.

In summary, AMD has navigated a challenging quarter with strategic foresight, particularly in its AI segment. The company’s adjustment of its AI revenue forecast reflects confidence in its MI300 product and its broader AI strategy. Despite headwinds in its gaming segment, the strong momentum in its data center business, coupled with the AI opportunity, paints a positive outlook for AMD’s financial performance and market position.

The Print

  • AMD reported quarter-on-quarter (Q/Q) revenue growth of 6.3% and year-on-year (Y/Y) growth of 10.2%, with the reported top-line results being $6.168 billion. This exceeded both the Street’s expectations of $6.126 billion and the estimate of $6.092 billion.
  • In the Data Center segment, revenue was $2.282 billion, marking a significant increase of 42.8% Q/Q and 37.9% Y/Y.
  • The Client segment reported revenue of $1.461 billion, showing a modest increase of 0.6% Q/Q and a substantial growth of 61.8% Y/Y.
  • Gaming segment revenue faced a downturn, reported at $1.368 billion, which is a decrease of 9.2% Q/Q and 16.8% Y/Y.
  • The Embedded segment also saw a decline, with revenue reaching $1.057 billion, down 15.0% Q/Q and 25.0% Y/Y.
  • Gross Margin (GM) for the quarter stood at 50.8%, which is below the Street’s expectations of 51.5% and the estimate of 51.4%.
  • Earnings per Share (EPS) was reported at $0.77, aligning with the Street and operational estimates of $0.77 and $0.76, respectively.
  • The company provided guidance for the March quarter with anticipated revenue of $5.4 billion at the midpoint, indicating a sequential decline of 12.5% and falling below Street expectations of $5.738 billion.
  • Gross margins for the forthcoming quarter are expected to rise to 52.0%, an increase of 120 basis points (bps) Q/Q and 218bps Y/Y, which is above the Street’s forecast of 51.3%.
  • Changes to estimates now forecast $5.466 billion in revenue for the March quarter, with 52.0% non-GAAP gross margins and 20.5% non-GAAP operating margins, resulting in an EPS of $0.61.
  • For the full Fiscal Year 2024 (FY24), the revised forecast is for:
  • $25.692 billion in revenue, which is mostly unchanged from the prior forecast of $25.957 billion.
  • 53.7% non-GAAP gross margins, slightly up from the previous 52.5%.
  • A non-GAAP EPS of $3.60, adjusted from a prior $3.49.


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