Last night, we had a double feature in the world of artificial intelligence. After the closing bell on Wall Street, two companies driven by exactly the same demand reported their earnings. Data centers. AMD and Super Micro.
Both delivered record quarters. Both beat expectations. In fact, AMD's stock had lost 26% in the month leading up to earnings. So the market was holding its breath. But the real story isn't the quarter that just ended. It's what comes next.
AMD BREAKS RECORDS
Let's start with AMD. Quarterly revenue reached $13.4 billion, up 45% year over year and a new company record. Adjusted earnings per share came in at $2.09, compared with analyst expectations of $1.97. Net income nearly doubled, increasing by 95%.
Before these results, AMD had beaten revenue expectations for 15 consecutive quarters. And it did it again.
"Where did all this growth come from?" you might be wondering.
Data centers.
The Data Center segment generated $8.5 billion, compared with $4.34 billion in the same period last year. In other words, it nearly doubled in just one year. This was driven by record sales of EPYC processors and Instinct GPUs, the company's chips designed for artificial intelligence.
Of course, not everything was perfect. Gaming revenue fell 40% to $773 million. Meanwhile, the Client segment, which includes processors for personal computers, generated $2.9 billion, slightly below the $3.06 billion Wall Street had expected.
And this is where things get even more interesting.
For the next quarter, AMD expects revenue of approximately $17 billion. Yes, you read that correctly. That would represent 66% growth compared with the same period last year, while analysts had been expecting an average of $16.3 billion.
And the reason has a name: Helios.
The company's new AI systems only began shipping in September, meaning the previous quarter did not include their full contribution. Shares rose more than 4% in after-hours trading.
SUPER MICRO ALMOST QUADRUPLES REVENUE
Now let's move on to the second company.
Super Micro manufactures the servers that fill data centers, powered by Nvidia chips. And its numbers are literally impressive.
Revenue reached $19.9 billion. The previous quarter it was $11.1 billion. And in the same period last year? Just $5 billion.
Yes. ALMOST FOUR TIMES HIGHER IN JUST ONE YEAR.
Net income climbed to $1.594 billion, up from $168 million a year earlier. Adjusted earnings per share came in at $1.81, compared with analyst expectations of $1.23.
Now, you might ask: Was this expected?
To some extent, yes.
On October 20, the company had already announced that quarterly revenue would reach between $18.5 billion and $19.5 billion, significantly above its original forecast of $14.5 billion to $15.5 billion.
The reason? Increased demand for AI platforms.
And it ultimately exceeded even its own revised forecast.
However, there is one major catch.
Gross margin was 12.7%, compared with 17.5% in the previous quarter. Meanwhile, operating activities consumed $434 million in cash.
In simple terms, the company is growing so rapidly that it is burning through cash to keep up with orders.
For the next quarter, Super Micro expects revenue of $19.5 billion to $21.5 billion, compared with analyst expectations of $17.14 billion.
It also raised its full-year revenue forecast to $72 billion to $82 billion, up from its previous range of $65 billion to $72 billion.
To understand just how significant this is, back in August analysts were expecting annual revenue of only $52.5 billion.
WHAT THEY HAVE IN COMMON
Put the two companies side by side and the pattern is clear.
Same growth engine: artificial intelligence.
Both beat expectations. Both issued forecasts that were higher than what the market had anticipated.
"So everything is perfect?" you might be wondering.
Not exactly.
Because the market is no longer focused primarily on the quarter that just ended. It's looking at what comes next.
Remember what happened in August. AMD beat expectations for its second quarter. And yet, its shares fell nearly 9% in after-hours trading.
Why?
Because the market wanted an even more impressive forecast for Helios.
And let's not forget the warning signs.
Super Micro's margins have declined, and cash is flowing out of the business. AMD's Gaming segment is struggling. Even the gross margin AMD expects for the next quarter, around 55%, is slightly below the 56% reported in the quarter just completed.
None of this takes away from the record-breaking results. But it reminds us that even during the strongest periods of growth, things are never entirely perfect.