AMD lowers revenue forecast to $23.5 billion

Advanced Micro Devices (AMD) has reported revenue of $5.6 billion (+29 percent), gross margin of 42 percent, operating loss of $64 million and net income of $66 million for the third quarter of 2022.
AMD revenue in recent quarters“Third quarter results came in below our expectations due to the softening PC market and substantial inventory reduction actions across the PC supply chain,” said AMD Chair and CEO Dr. Lisa Su.

Revenue of $5.6 billion increased 29 percent driven by growth across the Data Center, Gaming and Embedded segments.

AMD’s Data Center revenue rose 45 percent to $1.6 billion, driven by demand for strong sales of EPYC server processors. Operating income was $505 million, or 31 percent of revenue, compared to $308 million or 28 percent a year ago.

AMD’s Client segment revenue fell 40 percent to $1 billion, due to reduced processor shipments resulting from a weak PC market and a significant inventory correction across the PC supply chain. Client processor ASP increased driven primarily by a richer mix of Ryzen desktop processor sales. Operating loss was $26 million, compared to operating income of $490 million or 29 percent a year ago.
AMD Q3 revenueAMD’s Gaming revenue rose 14 percent to $1.6 billion, driven by higher semi-custom product sales partially offset by lower graphics revenue. Operating income was $142 million, or 9 percent of revenue, compared to $231 million or 16 percent a year ago.

AMD’s Embedded revenue was $1.3 billion, up 1,549 percent driven primarily by the inclusion of Xilinx embedded product revenue. Operating income was $635 million, or 49 percent of revenue, compared to $23 million or 30 percent a year ago.

AMD forecast

AMD forecast some strength in its data center business and promised to be careful with spending.

While AMD has been growing its market share quickly in the datacenter, rival Intel has seen its share slip even in its latest earnings reported.

“We expect AMD’s share gains to continue, as the company’s upcoming, next-generation server CPUs are expected to outperform Intel’s lineup across price and performance metrics,” said Nathaniel Harmon, analyst at YipitData.

Still chip analyst Dean McCarron at Mercury Research cautioned AMD is not immune to the slowdown in the data center market, noting the 8 percent quarter-to-quarter growth in the third quarter compared with the growth rate a year ago in the same period of 36 percent.

AMD executives said on the earnings call they were controlling expenses and slowing down hiring to cope with the macroeconomic headwinds.

AMD, which makes CPUs and graphics processors for PCs and data centers, has also been hit hard as inflation hurt consumer demand for laptops and other gadgets, prompting electronics makers to cut orders for its chips.

That led AMD to lower its forecast for third-quarter revenue by about $1 billion last month.

According to Counterpoint Research, PC shipments will decline 13 percent this year.

AMD Chief Executive Lisa Su told analysts that 2023 PC business outlook should be modeled on a 10 percent drop of total PC unit sales.

Su said the North American cloud market was the most resilient of the data center market segments, though she did not expect significant recovery of the China data center market in 2023.

The company expects current-quarter revenue to be $5.5 billion.

For the full year 2022, AMD expects revenue to be approximately $23.5 billion, up 43 percent from 2021, as against the previous guidance of $26.3 billion.