AMD data-center sales surge as company forecasts high AI growth

Beating expectations on AI demand

AMD recently reported third-quarter results that significantly exceeded market expectations, providing a boost to investor confidence. The company's data-center revenue jumped 97 percent to reach a record US$8.55 billion. This figure surpassed the US$8.20 billion that analysts had predicted for the period.

The strong performance comes at a time when some observers feared the artificial intelligence boom might be losing momentum. This news served as a direct contrast to a weak outlook issued by rival Intel just a week prior. Following the report, AMD's shares rose 8 percent in extended trading as the market reacted to the robust numbers.

The company also outperformed in its overall revenue and profit metrics. Total third-quarter revenue rose 45 percent to US$13.38 billion, while adjusted profit reached US$2.09 per share. These figures suggest that the demand for high-end computing power remains a primary driver for the semiconductor giant.

Ambitious 2027 growth targets

During a conference call with analysts, AMD CEO Lisa Su shared a highly optimistic forecast for the company's future. She stated that the company expects its overall revenue to rise by more than 80 percent in 2027. This projection is notably higher than the 77 percent growth that analysts had estimated based on current data.

Su highlighted that data-center chips will be the primary engine for this expansion. She told analysts that 80 percent of sales next year will come from these chips, which will "drive the majority of our revenue and earnings growth." This focus underscores the company's commitment to the infrastructure required for large-scale AI operations.

The leadership team noted that they have been planning for this specific pace of growth for several years. While other parts of the business face different trends, the data-center AI business is the clear priority. This strategy positions AMD to capture a larger share of the market as companies continue to build out their AI capabilities.

Expanding into rack-scale systems

To compete more directly with Nvidia, AMD is moving beyond selling individual chips to offering full rack-scale systems. These systems are designed to house multiple processors and components in a single unit for large-scale data centers. This shift allows the company to provide more integrated solutions for complex AI workloads.

One specific product in production is the Helios rack, which combines the MI455X accelerator with new "Venice" server chips. The company is preparing for a larger ramp-up of these systems in the fourth quarter. Currently, the initial systems are undergoing testing at Meta to evaluate their performance in real-world environments.

This move is intended to benefit from the massive buildout of AI infrastructure across the globe. By offering complete systems, AMD aims to make it easier for customers to deploy their models. This strategy targets the growing need for high-performance computing in both research and practical applications.

Mixed results in other segments

While the data-center side of the business is thriving, other segments of AMD's portfolio showed more varied results. The client and gaming segment, which includes PC chips and console processors, saw an 8 percent revenue decline to US$3.72 billion. This figure fell slightly short of the US$3.79 billion that analysts had expected.

AMD warned that PC unit shipments are expected to see a double-digit percentage decline next year. Despite this expected cooling in the consumer market, CEO Lisa Su expressed confidence that the company would outperform the broader market. The company is navigating a complex environment where different hardware categories are moving at different speeds.

Additionally, the semiconductor industry is currently dealing with a global memory shortage. High-bandwidth memory, which is essential for AI processors, remains in scarce supply as manufacturers work to increase production. These supply chain issues continue to be a factor as the industry races to meet the growing demand for advanced hardware.