AMD expects to outsell Intel for the first time after a record quarter

AMD expects about $17 billion in revenue this quarter. If it gets there, it will sell more than Intel in a quarter for the first time. The forecast came with record third-quarter results. Its data centre business nearly doubled, while gaming sales fell by 40%.

Revenue rose 45% to $13.4 billion in the quarter to 26 September, AMD said on Tuesday. The Intel comparison first appeared in Tom’s Hardware. Intel expects $15 billion to $16 billion for the same quarter. That forecast sent its shares into their steepest fall in decades.

“We delivered a record quarter with revenue exceeding the high end of our guidance as Data Center segment sales nearly doubled year-over-year.” Lisa Su, AMD chair and CEO

Both numbers beat Wall Street. Analysts had expected $13.09 billion for the third quarter and $16.2 billion for the fourth. Those are LSEG estimates, cited by CNBC. Going into the results, AMD needed a big quarter after a week of AI chip selling.

Data centres are now most of AMD

Data centre revenue rose 97% to a record $8.5 billion, about 64% of the total. AMD credited demand for its EPYC server processors and the launch of its Instinct MI450 GPUs. The unit’s operating income rose to $2.9 billion from $1.1 billion a year earlier.

Anthropic, Meta, Microsoft, OpenAI and Oracle are running workloads on AMD’s first Helios racks, the company said. Meta said last week that its racks were running, as AMD agreed to invest $1bn in Meta.

Su told analysts on the earnings call that she expects much more next year:

“We have said the overall company will grow greater than 80 percent, and for the data center CPU business, we will about double, and for the data center AI business, it will significantly more than double.” Lisa Su, on the earnings call

Chief financial officer Jean Hu said on the call that she expects data centres to make up more than 80% of revenue in time. Su also said AMD had secured the wafers, packaging, memory and other parts it needs for that growth.

Gaming falls 40%

The rest of the business moved the other way. Gaming revenue fell 40% to $773 million, which AMD put down to lower semi-custom and graphics sales. Semi-custom chips are the processors it supplies for game consoles. Su said on the call that AMD expected the drop at this stage of the console cycle.

Client revenue, mostly Ryzen PC processors, rose 7% to $2.9 billion on sales of mobile chips. Memory prices are squeezing the wider PC market. Su said she expects it to shrink by a double-digit percentage next year. Embedded revenue rose 29% to $1.1 billion.

Cash lags profit

Operating income more than doubled to $2.8 billion and net income rose 95% to $2.4 billion. Cash did not keep pace. Free cash flow fell to $554 million from $1.53 billion a year earlier, AMD’s tables show. Inventories took $3 billion, and capital spending more than doubled to $648 million.

AMD also expects its gross margin to narrow slightly to about 55% this quarter, from 56% in the third. The shares rose about 8% after hours on Tuesday, CNBC reported. They gave back part of the gain as US election results came in.

The Intel milestone depends on AMD landing inside its own forecast. The range runs from about $16.5 billion to $17.5 billion. Even the bottom of that range sits above the top of Intel’s.