AMD’s Weak Q4 Guidance Leads To 7% Share Price Drop In Aftermarket Trading

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AMD shares sank by 7% in after market after the firm's fourth quarter guidance added to investor fears of tight supply constraining semiconductor designers' ability to meet lofty profit and revenue expectations. The firm earned $6.82 billion in revenue and $0.92 in adjusted EPS for its third quarter, both of which beat analyst estimates. Analysts had penned AMD's revenue and earnings at $6.7 billion and $0.70, respectively making the third quarter results a strong beat. However, AMD's Q4 revenue guidance of $7.2 billion to $7.8 billion, with a midpoint of $7.5 billion, missed analyst estimates of $7.54 billion.

AMD Data Center Revenue Continues To Soar But Tepid Guidance Hurts Stock

While AMD's fourth quarter guidance fell short of analyst estimates, the firm's data center business continued to perform as it benefited from the growing rise in high performance computing. During Q3, the firm raked in $3.5 billion in revenue, which marked a 122% annual growth. At the same time, AMD's data center operating margin, which measures the profit that the division earns after direct and indirect costs are accounted, for sat at 29% for a ten percentage point annual growth from the year ago quarter's 19%.

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However, even though AMD's Data Center revenue grew by nearly $2 billion, the gains were overshadowed by a sharp drop in Gaming revenue. The firm's Gaming division measures AMD's GPU and gaming GPU sales, and during Q3, Gaming revenue sat at $462 million for a stunning $1 billion drop over last year's $1.5 billion. In its investor presentation, AMD attributed the drop to "lower semi-custom revenue," implying that weak console sales were to blame for some of its woes.

Despite the tepid guidance, a key metric that Wall Street will be on the watch out for