AMD beats on top and bottom lines, so why is the stock shrugging it off?

Core Insights - AMD reported strong earnings, beating expectations on revenue and earnings per share across various segments including data center, client, and gaming [1][5][9] - Despite the positive results, the stock did not react favorably due to high pre-existing market expectations and a significant run-up in stock price prior to the earnings report [2][7][8] Financial Performance - Q3 adjusted EPS was $1.20, beating the street estimate of $1.17 [5] - Q3 revenue reached $25 billion, exceeding the estimate of $24 billion [5] - Q3 adjusted operating margins were 24%, slightly below the consensus of 24.8% [6] - For Q4, AMD guided revenue between $9.3 billion and $9.9 billion, above the street estimate of $9.21 billion [6] Segment Performance - Gaming revenue increased by 181% year-over-year, driven by the refresh of Sony and Microsoft gaming systems [10] - Client revenue rose by 50% annually, while server revenue grew by 22%, indicating continued market share gains against Intel [10] Strategic Partnerships - AMD's recent deals with OpenAI and Oracle are expected to enhance its position in the AI market, although the financial impact of these deals will not be reflected until future quarters [3][12] - The new MI400 platform and Helios rack scale system are set to compete directly with Nvidia's offerings, marking a significant strategic move for AMD [12][13] Market Outlook - The company is seen as a primary alternative to Nvidia in the AI space, with potential for incremental growth as AI investments continue to rise [18][21] - Concerns regarding AMD's business in China were noted, with current guidance excluding this market due to uncertainties [14][15] Investor Sentiment - Despite strong performance, initial after-hours trading saw AMD's stock slip by approximately 2.5%, reflecting investor disappointment in not meeting elevated expectations [8]