AMD's Q2 2024 earnings analysis: The 'runner-up' is still catching up with the 'champion'

After the market closed on July 30th Eastern Time, chip/graphics card manufacturer Advanced Micro Devices (AMD.US) released its Q2 2024 financial report for the period ending June 30th. For the quarter, the company reported revenue of $5.84 billion, up 9% year-over-year and 7% quarter-over-quarter. Q2 gross margin was 53%, increasing 3% and 1% year-over-year and quarter-over-quarter, respectively. Non-GAAP net profit was $1.13 billion, up 19% year-over-year.

For those familiar with graphics cards, AMD has always been the "old friend" trailing behind NVIDIA (NVDA.US), with "A-cards" serving as a popular second choice. However, as the AI era dawned and NVIDIA emerged as one of the "Magnificent Seven" of computing power, AMD seems to have lagged behind in valuation.

As of July 31st, AMD's year-to-date stock price decline was 1.99%, far behind NVIDIA's 136.35% surge. AMD's market cap stood at $223.5 billion, a far cry from NVIDIA's $2.88 trillion.

Despite being in the same industry, their performance gaps are stark. The reason? AMD's "industry second" position is both its spotlight and its shackle. How has AMD performed recently? Is its catch-up with NVIDIA on track? This article provides a brief analysis.

01

MI Series Drives Revenue Growth, Gaming Recovery Takes Time

Breaking down the business, AMD's segments overlap significantly with NVIDIA's: Data Center, Client, Gaming, and Embedded. Product-wise, these cover GPUs, CPUs, and computing power. As of Q2 2024, Data Center was the primary revenue driver, generating $2.8 billion (up 115% YoY).

In the AI era with infinite computing demand, Data Center growth hinges only on supply. AMD attributed Q2 growth to accelerated shipments of its new MI300 GPU series. Per disclosures, MI300 revenue surpassed $1 billion for the first time. Cloud and enterprise demand for Instinct MI300X also drove double-digit growth for 4th-gen EPYC CPUs.

Without delving into GPU specs, AMD's MI300X rivals NVIDIA's H100 in memory, bandwidth, and training performance—key to beating revenue forecasts. AMD plans to follow NVIDIA's playbook, launching new MI325X in Q4 2024 and CDNA4-based MI350 in 2025, proving "technology is the top productivity driver."

Beyond computing, AMD's Client (PC) business rebounded with the market. IDC reported global PC shipments at 65 million in Q2 2024 (up 5.4% YoY). However, Gaming revenue fell 59% YoY to $648 million, while Embedded dropped 41% to $861 million.

Q2 was a tale of two halves: Data Center and Client growth masked Gaming/Embedded weakness. This reflects industry shifts—AI drives computing and AI PC demand, while traditional GPU/Embedded segments face inventory cycles.

For Q3, AMD guides Data Center/Client strength, Embedded recovery, and Gaming pressure. Revenue is projected at $6.4–7 billion with 53.5% non-GAAP gross margin.

02

The Road to Catching Up Is Long, but the Direction Is Right

AMD entered GPUs by acquiring ATI for $5.4 billion in 2005. As of Q4 2023, it held 19% of the discrete GPU market (vs. NVIDIA's 80%).

In CPUs, AMD is also the "industry second." By end-2023, Intel's share fell to 69% from 97%, while AMD rose to 17.6%.

AMD's gaps to leaders (Intel/NVIDIA) exceed its leads over third-place rivals. Wall Street sees it as a secondary pick but doubts it can dethrone either. Yet its direction is sound—Data Center is now its largest segment, and it surpassed Intel's valuation in 2022.

Long-term, AMD's GPU position ensures AI chip order growth. Supply chain risks aside, 2024 performance looks strong. Overtaking NVIDIA in scale/valuation remains distant, but maintaining its "industry second" spot seems secure. If it can't feast first, at least the soup is plentiful.

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