Advanced Micro Devices, Inc. (NASDAQ:AMD) shares are trading lower by 14% to $142.44 since Wednesday's open after the company reported third-quarter results. The company posted revenue of $6.8 billion, which exceeded analyst expectations of $6.71 billion. Earnings per share aligned with projections at 92 cents.

What To Know: AMD's data center segment was the driving force behind the company's growth, achieving a 122% increase to $3.5 billion. The company also saw a 29% rise in client segment revenue, totaling $1.9 billion.

However, gaming revenue experienced a steep decline of 69% to $462 million, and embedded revenue fell 25% to $927 million, though embedded revenue saw an 8% sequential quarterly increase.

CEO Lisa Su attributed AMD's results to high demand for the company's EPYC and Instinct data center products, as well as Ryzen processors in the PC segment. She also projected further growth opportunities across data center, client and embedded business sectors, driven by escalating demand for computing power.

Looking ahead, AMD forecasts fourth-quarter revenue of $7.5 billion, representing a 22% year-over-year increase at the midpoint. Adjusted gross margins for the fourth-quarter are expected to remain consistent at 54%.

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Analyst Reactions: The company's expansion in artificial intelligence (AI) and data center solutions has drawn positive reactions from analysts, who suggest AMD could increasingly challenge its main competitor, NVIDIA, in the AI domain.

KeyBanc analyst John Vinh noted the importance of AMD's MI300 chip, which is projected to generate $5 billion in revenue by 2024.

Vinh believes that this chip could broaden customer adoption across cloud and AI applications, despite conservative fourth quarter guidance.

Cantor Fitzgerald analyst C.J. Muse pointed out that AMD's AI progress with the MI300 may eventually generate $12 billion in revenue, supporting potential earnings growth by 2025 or 2026, even though he anticipates a short-term trading range for AMD shares.

Other analysts provided mixed assessments. Oppenheimer's Rick Schafer commended AMD's rapid establishment of a competitive AI franchise, projected to surpass $5 billion in annual revenue, though he suggested that investor expectations might be overly ambitious.

Meanwhile, Piper Sandler's Harsh Kumar highlighted strong GPU execution but acknowledged challenging guidance, noting that while AMD's GPU and server segments are promising, gaming and embedded segments pose risks.

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