AMD & Microsoft Release Results As SMCI Hits Controversy

The latest news coming out of the tech sector may be giving a lot for investors to chew on, with earnings releases from AMD and Microsoft holding surprises, and controversy shaking SMCI’s market outlook. Keep reading to get up-to-date:

AMD Undershoots Expectations

Advanced Micro Devices (AMD) reported third-quarter earnings on 29 October that, while showing growth, missed some investor expectations, leading to an over 10% drop in share price by market close on 30 October. AMD’s revenue for the quarter increased by 18% year-over-year, reaching $6.82 billion, slightly surpassing analyst forecasts. Net income rose to $771 million, or 47 cents per share, up from $299 million or 18 cents per share the previous year.

AMD’s growth was primarily driven by its data centre division, where revenue more than doubled to $3.5 billion, supported by a surge in demand for Artifical Intelligence chips. Recently, AMD unveiled its next-generation AI chips during its Advancing AI event. However, the company refrained from raising its AI sales outlook or announcing major new customers, dampening investor enthusiasm. For the fourth quarter, AMD projected revenue between $7.2 billion and $7.8 billion, compared to $6.2 billion a year ago. This fell short of analyst expectations, which were closer to the high end of the range at $7.6 billion.

CEO Lisa Su emphasised AI’s transformative potential, projecting the AI accelerator market to reach $500 billion by 2028, with data centre AI demand growing over 60% annually. AMD remains a clear power in AI accelerators, second only to Nvidia (NVDA), with its MI300 and Instinct series, though analysts believe supply constraints could hinder rapid gains. While AMD’s data centre performance is promising, slower growth in its gaming and embedded segments tempers its immediate outlook. Looking forward to the current quarter and beyond, many experts expect the stock's growth prospects to remain constrained until the company delivers consistent AI chip sales revenue.

SMCI Hit By Controversy

Super Micro Computer (SMCI) shares dropped by over 32% following the announcement that Ernst & Young would no longer be serving as the company’s auditor. In its resignation letter, the latter firm cited concerns about information that came to light, causing it to lose confidence in Super Micro’s management and audit committee. The firm noted it could no longer provide audit services “in accordance with applicable law or professional obligations.” Super Micro, for its part, openly expressed its disagreement with Ernst & Young's statement and has begun the search for a replacement.

This development follows a report made public in August which alleged accounting manipulation, undisclosed related-party transactions, and other compliance issues at Super Micro. These accusations led to a near 20% drop in SMCI shares when the company delayed its annual report filing. Additionally, the U.S. Department of Justice has reportedly opened an investigation into the company, including inquiries regarding alleged irregularities by a former employee.

Despite earlier gains as an AI-driven data centre player, Super Micro’s stock has faced significant price volatility in the wake of these repeated controversies. The company plans to provide a business update on 5 November, although whether its share price slide can be halted is an open question at this point.

Microsoft’s Strong Finish

On 30 October after the bell, Microsoft (MSFT) reported strong fiscal Q1 results, surpassing market forecasts, largely driven by the growth of its cloud services. For the quarter, the Big Tech leader reported earnings per share of $3.30 on revenue of $65.6 billion, ahead of analyst forecasts of $3.10 EPS and $64.5 billion in revenue. This represents a significant increase from the $2.99 EPS and $56.5 billion in revenue recorded in the same quarter last year. Key to these gains was Microsoft’s Intelligent Cloud division, which saw revenue of $24.1 billion, a 20% increase year-over-year, with AI services boosting growth by 12 percentage points.

Microsoft’s commercial cloud revenue also performed well, reaching $38.9 billion, surpassing the expected $38.1 billion. Its Productivity and Business Processes segment, which includes Microsoft 365, grew by 12%, while the More Personal Computing division reported a 17% rise, reflecting resilience in the recovering PC market.

Despite Microsoft’s steady gains, competitive pressure remains high, as industry rivals such as Amazon (AMZN) and Alphabet (GOOG) continue to advance their AI offerings. With initiatives like AI-powered “Copilot+ PCs,” Microsoft is positioning itself to capture new growth opportunities as AI reshapes the tech landscape. However, it's anyone's guess whether this momentum will be maintained as the 31 October trading day proceeds. (Source: Yahoo Finance)

Conclusion

The latest earnings updates reveal a dynamic tech sector facing both opportunities and challenges. Microsoft continues to excel with robust cloud growth, while AMD’s potential in AI is tempered by supply concerns and competitive pressures. SMCI, on the other hand, must navigate controversy as it works to resolve issues impacting investor confidence. With the sector as a whole facing both challenges and successes, traders will have to wait and see how it all plays out on the stock market.