AMD reported third-quarter results that beat Wall Street expectations, with data center sales nearly doubling from a year earlier. The company guided fourth-quarter revenue to about $17 billion, but free cash flow fell as it built inventory and took on debt.
AMD reported third-quarter revenue growth of 45% and a near doubling of data center sales from a year earlier. The stock jumped 7% in extended trading on Tuesday.
Data center drives the beat
Revenue reached $13.38 billion against $13.09 billion expected, according to LSEG consensus estimates. Adjusted earnings per share came in at $2.09 versus $1.95 expected.
The data center unit now makes up 64% of overall revenue, up from 47% a year ago. Meanwhile, the segment that combines PC and gaming chips fell 8% to $3.7 billion, and gaming revenue was down 40% from a year ago.
CEO Lisa Su said she expects growth in data center processors to accelerate further. According to AMD's statement: "we are confident in our ability to sustain very strong revenue growth", Su said.
AMD guides fourth-quarter revenue to about $17 billion
For the fourth quarter, AMD expects about $17 billion in revenue, above the $16.2 billion average analyst estimate from LSEG. The company sees gross margin at 55%, slightly below the 55.3% average estimate from StreetAccount.
The stock had sold off for three consecutive days before Tuesday's rally, amid an industrywide sell-off tied to fears about overspending on AI.
Cash lags profits
However, free cash flow fell. It was $554 million, down from about $1.5 billion, according to The Motley Fool's review of the results.
AMD added about $3 billion of inventory in the quarter as it builds Helios rack systems and Venice chips for its fourth-quarter ramp. The Motley Fool notes that AMD also more than doubled its debt since June.
The Motley Fool says investors should track whether fourth-quarter revenue lands near the guided $17 billion and whether inventory starts turning into cash.
Sources: CNBC, The Motley Fool
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