AMD Q3 2024 Earnings Preview: 3 Key Metrics Investors Should Watch

TradingKey - Semiconductors are what drives the world of technology and, increasingly, everyday life. One of the world’s most prominent designers of chips is Advanced Micro Devices Inc (NASDAQ: AMD), otherwise known as AMD.

Unlike foundries that manufacture the semiconductors, such as TSMC, Intel or Samsung, AMD is focused on designing chips. AMD does this for chips that go into PCs, data centres, and gaming devices. It has built up a formidable presence in a few of these key markets.

Under the guidance of its CEO Lisa Su, AMD has managed to record exception longer-term share price growth. Over the past five years, for example, its share price is up 378%. However, so far during the AI revolution, it has lagged Nvidia given the latter’s dominance of AI semiconductors. 

That hasn’t stopped AMD from developing AI chips and challenging Nvidia’s position. Investors will be on the lookout for more updates from AMD on its progress when the company reports its Q3 2024 earnings after the market closes on Tuesday (29 October). Here are three key metrics that investors should be looking out for. 

Data centre revenue growth

Given the scale of computing power for AI, many semiconductors are used in the large-scale data centres that process AI algorithms. AMD has its own data centre business, which has seen strong growth in recent quarters.

Despite posting overall revenue growth of only 9% year-on-year (to US$5.84 billion) in Q2 2024, AMD’s data centre segment was a key outperformer. During the same quarter, its data centre segment posted revenue of US$2.8 billion, up 115% year-on-year while the operating margin for the segment was 26%, versus just 11% in Q2 2023.

This huge jump in data centre revenue was driven by demand for its AI chips and in July, CEO Su stated that AMD expects to deliver strong revenue growth in the second half of the year led by demand for its latest processors – like the AMD Instinct GPU.

Investors should be watching how much data centre revenue AMD posts in the upcoming quarter and whether this strong growth momentum can continue.

Updated guidance or AI-related news

Only two weeks ago, AMD released that its latest MIX325X chip will start rolling out to customers in the fourth quarter of this year. It also revealed that its next-generation MI350 chip will aim to compete with Nvidia’s new Blackwell series.  

Any news on new clients or updates on demand for its latest AI products will be closely watched. AMD has already managed to get both Microsoft Corporation (NASDAQ: MSFT) and Meta Platforms Inc (NASDAQ: META) to adopt its current generation of MI3000 AI GPUs. 

With any news of updates on these initiatives, or visibility on demand, shares of AMD could move sharply in response.

Indications of PC update cycle

Given the big boom of individuals updating their PCs during the start of the Covid-19 pandemic, and work-from-home trend, investors will also be on the lookout for any updates on whether companies are ready to refresh their PC lineups.

This is relevant because AMD has a large PC-focused business with its CPU business and the company is starting to release more AI-capable CPUs that go into PCs. With computing power on PCs set to catchup in the AI revolution, investors will be closely watching any indications from management that the PC market is bottoming out and a refresh cycle could be coming.

Furthermore, how much more market share AMD takes from Intel in this space, which has been lagging in both CPUs and GPUs, will be a metric for investors to monitor. 

Overall, AMD is guiding for Q3 2024 revenue of between US$6.4 billion and US$7.0 billion and a gross margin of approximately 53.5%. So far in 2024, AMD shares are up 12.7%, underperforming the S&P 500 Index’s return of 22.5% over the same timeframe.