AMD Q3 Earnings Preview: Can Data Center Revenues Continue to Set Records?

Insights - AMD (AMD.US) is set to release its Q3 FY2024 earnings on October 29. As one of the few companies capable of genuinely capturing market share from NVIDIA, AMD’s earnings report will be a focal point for the market.

Analysts' Projections Align with AMD’s Q3 Guidance

According to analyst estimates tracked by FactSet, AMD’s Q3 revenue is expected to reach $6.71 billion, with earnings per share (EPS) of $0.92 and net income of $333 million.

Previously, AMD’s Q3 revenue outlook had exceeded market expectations. The company projected Q3 FY2024 revenue to be around $6.7 billion, with a $300 million variance either way. At the midpoint, this would represent a year-over-year growth of approximately 16% and a quarter-over-quarter growth of around 15%. AMD also expects a non-GAAP gross margin of about 53.5%.

Can Data Center Growth Continue to Set Records?

The market remains focused on the performance of AMD’s Data Center and Client segments. In Q2, the Data Center segment posted record revenue of $2.8 billion, representing a 115% year-over-year growth, driven by strong shipments of the Instinct MI300 GPU and solid double-digit growth in EPYC CPU sales.

Analysts suggest that if AMD's AI chip sales, especially the MI300 series, exceed expectations and gain ground against NVIDIA, it could boost investor confidence and drive up the stock price. However, if sales disappoint, concerns about AMD's competitiveness could lead to a decline in stock value.

Wedbush analysts maintain an "Outperform" rating on AMD with a price target of $200, citing the company’s lack of updates on AI sales guidance or announcements of any new major customers. Bank of America analysts also retain a "Buy" rating with a price target of $180. However, Piper Sandler is more optimistic, raising AMD's price target from $175 to $200 and reaffirming its "Overweight" rating on the stock.