06:51 AM EDT, 10/30/2024 (MT Newswires) -- Advanced Micro Devices ( AMD ) shares dropped early Wednesday as the chipmaker issued a downbeat fourth-quarter revenue outlook at the midpoint despite reporting higher third-quarter results on a year-over-year basis.

The company expects fourth-quarter revenue of about $7.5 billion, plus or minus $300 million. The mid-point of the range implies year-over-year growth of about 22%, the company said late Tuesday. The consensus on Capital IQ is for $7.55 billion. The stock fell 8.4% in premarket activity.

The chipmaker projects "strong growth" in its data center and client segments to "more than offset" declines in the gaming and embedded operations during the fourth quarter, Chief Financial Officer Jean Hu said during an earnings call, according to a Capital IQ transcript. The company is on track to deliver "record" annual revenue in 2024, Hu said in the earnings statement.

For the three months through Sept. 28, AMD's revenue advanced to $6.82 billion from $5.8 billion the year before, ahead of the Street's view for $6.71 billion. Adjusted earnings jumped 31% year over year to $0.92 a share, matching analysts' estimate for the quarter.

"We delivered strong third-quarter financial results with record revenue led by higher sales of EPYC and Instinct data center products and robust demand for our Ryzen PC processors," Chief Executive Lisa Su said in the statement. "We see significant growth opportunities across our data center, client and embedded businesses driven by the insatiable demand for more compute."

Revenue in the data center division surged 122% to $3.55 billion buoyed mainly by a strong ramp of Instinct GPU shipments and growth in EPYC central processing unit sales, according to the company. "We have built significant momentum across our data center (artificial intelligence) business with deployments increasing across an expanding set of cloud, enterprise and AI customers," Su said on the call. Client revenue climbed 29% to $1.88 billion amid strong demand for the company's Zen 5 AMD Ryzen processors.

Gaming sales fell 69% to $462 million amid lower semi-custom revenue as Microsoft (MSFT) and Sony "reduced channel inventory," Su told analysts. Revenue in the embedded segment fell 25% to $927 million as gradual recovering demand was offset by ongoing softness in the industrial market, the CEO added.

Adjusted gross margin improved by 3 percentage points year over year to 54%. Adjusted operating expenses rose to $1.96 billion from nearly $1.7 billion in the prior-year quarter.

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