AMD's Gaming Disaster: Revenue Plummets by 70% Despite Data Center Boom

AMD, the multinational semiconductor company, has just announced its Q3 2024 financial results, revealing a mixed bag of good and bad news. On the one hand, AMD's Data Center business has been going gangbusters, with revenue surging by an impressive 122%. This stellar performance is largely driven by strong sales of AMD's EPYC server processors, which continue to gain traction in the industry.

On the other hand, the picture is quite gloomy for AMD's Gaming business, where revenue took a drastic nosedive of nearly 70%. Adding insult to injury, the division's operating margins have shrunk to a razor-thin 2%. This means AMD is barely scraping by in terms of profitability from its Gaming business. The decline in Gaming revenue can be attributed to various factors, including softer demand for graphics cards and the ongoing price competition with rival NVIDIA.

While the gaming market downturn has certainly taken a toll on AMD's financials, the company's Data Center success has largely offset the shortfall. For instance, in the Q3 2023 quarter, Data Center contributed to a relatively smaller 56% of AMD's total revenue. In contrast, during this quarter, Data Center comprised a substantial 77% of the company's overall revenue.

Chief Executive Officer, Dr. Lisa Su, expressed her pride in AMD's Data Center performance, while also emphasizing the importance of continuous innovation to fuel long-term growth and success. According to Su, 'AMD continues to execute well in our core businesses and drive strong momentum across our portfolio.'

On a more optimistic note, AMD's management expects higher demand for Gaming products in the upcoming Q4 quarter, primarily driven by the arrival of new gaming titles, including Call of Duty: Modern Warfare and Starfield, as well as better product positioning for its graphics cards. Coupled with healthy demand from datacenter customers, AMD appears to be on track to meet its gross margin target of 52% by the end of 2024.