According to CNBC, AMD reported fiscal third-quarter revenue that jumped 36% year-over-year, with net income climbing to $1.24 billion. For the crucial fourth quarter, the company expects about $9.6 billion in revenue, which beats estimates, but its adjusted gross margin guidance of 54.5% only meets StreetAccount’s consensus. The stock slipped in extended trading following the report, despite shares being up a staggering 107% so far this year. The company’s data center business, which includes AI chips, generated $4.34 billion, while client revenue surged 46% to $2.75 billion. AMD also confirmed its guidance does not include revenue from shipments of its Instinct MI308 chips to China, a recurring theme. Executives will discuss these results on a conference call starting at 5 p.m. ET.
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The AI Gold Rush is Real
Look, there’s no denying AMD is riding the AI wave hard. A 36% revenue pop isn’t something you see every day, and the data center segment pulling in over $4 billion shows the demand for AI infrastructure is absolutely insane. The recent deal with OpenAI to deploy 6 gigawatts of AMD’s Instinct GPUs is a massive vote of confidence. It basically tells the market that Nvidia isn’t the only game in town anymore. But here’s the thing: when you’re growing this fast, why are margins just… meeting expectations?
The Margin Problem
So the stock dipped. It’s a classic “buy the rumor, sell the news” scenario, but it’s deeper than that. Investors have priced in perfection for AMD, and a margin guide that’s merely ‘in-line’ feels like a letdown. They want to see the company not just selling a ton of chips, but making a ton of money on each one. The fact that the expanded partnership with Oracle and other cloud giants isn’t translating into fatter margins yet might be giving some people pause. Is AMD having to compete on price more aggressively than we thought?
The Amazon Question
This one is interesting. According to an SEC filing spotted by CNBC, Amazon sold its entire AMD stake of over 822,000 shares by September 30th. Now, is this a strategic move by Amazon, or a signal? Amazon is a huge cloud customer, so it’s not like they’re ditching the hardware. But selling the investment stake right before a strong earnings report? That timing makes you wonder what they know that the rest of us don’t. It’s definitely a data point that adds a layer of complexity to an otherwise bullish story.
The Bottom Line
AMD is executing brilliantly in a red-hot market. The numbers are undeniably strong. But the market’s reaction tells you everything. When you’re valued for hyper-growth, good isn’t good enough—you need to be spectacular. The margin guidance, while solid, wasn’t spectacular. And in this AI arms race, where every basis point is scrutinized, that was enough to take the air out of the room, at least for an evening. The real test will be if they can turn this explosive revenue growth into even more explosive profitability next quarter.
