Advanced Micro Devices reported Tuesday quarterly revenue ahead of consensus, AMD however guided lower for the quarter ahead by over $150 million. Analysts and investors were excited that AMD is gaining further ground on Intel. The stock traded higher on AMD making up for a personal-computer slump with gains in the lucrative data center market. The company’s data center business revenue grew 42% in the quarter, compared with the 33% decline recorded at INTC’s data center and artificial intelligence unit in the same period.
At least 11 analysts raised their ratings on AMD, reasoning it defied the “historic collapse” over at rival Intel all highlighting expectations for further gains in the server market this year.
AMD is seen as having a significant market opportunity as its primary rival for PC and server processors, Intel continues to disappoint.
AMD Q4 2022 Earnings
Highlights
The company saw a 98% decline in net income for the fourth quarter with operating expenses more than doubling and sales linked to its PC clients cut in half. The company said the decline was mostly linked to its acquisition of semiconductor company Xilinx Inc.
- Net income fell to $21 million, or 1 cent a share, from $974 million, or 80 cents a share, for the same period a year earlier.
- EPS: $0.69, adjusted, versus $0.67 per share expected
- Revenue: $5.6 billion, versus $5.5 billion expected, up from $4.83 billion a year earlier.
- AMD’s fourth-quarter operating expenses leapt to $2.56 billion from $1.22 billion a year earlier.
- Revenue for its client segment dropped 51% to $903 million due to lower processor shipments from weaker demand in the PC market.
- Revenue from its gaming segment declined 7% to $1.6 billion.
- Growth could be seen in its data center revenue, which jumped 42% to $1.7 billion.
Margin are pressured from this combination of lower client processor unit shipments, falling ASPs, and charges related to inventory. The company also said it expected its adjusted gross margin to be about 50%, a key metric for chipmakers.
The boost in its Embedded business, which is primarily the result of acquiring Xilinx earlier this year, generated about $1.3 billion.
AMD Stock Market Reaction
- $80.39 ▲ +5.24 (+6.97%) Pre-Market
- $80.39 ▲ +14.01 (+21.9%) YTD
- $80.39 ▼ -36.1 (-30.91%) Over year
- $80.39 ▲ +69.37 (+613.35%) Over 5 years
- 52wk High $132.96
- 52wk Low $54.57
Outlook
Market conditions led AMD to warn investors about an anticipated sales decline for its first quarter of 2023. Advanced Micro’s warning shows how quickly things are unraveling with demand collapsing.
AMD CEO Lisa Su told analysts that the company expects the total PC market to be down about 10% in 2023 and said the PC environment was “weak.”
“Although the demand environment is mixed, we are confident in our ability to gain market share in 2023 and deliver long-term growth based on our differentiated product portfolio,” Su said in a statement.
AMD said it expected $5.3 billion in sales in the current quarter, slightly lower than a Refinitiv estimate of $5.47 billion, a 10% decline in sales in the current quarter. Analysts polled by FactSet had forecast revenue of $5.5 billion for the first quarter. AMD’s sales rose 44% in 2022. Sales across its client and gaming segments are expected to continue falling.
AMD and peers such as Intel Corp. have reported weaker demand amid a worldwide slump in PC sales that’s expected to last until 2024. What has hurt INTC and AMD is it doesn’t have the buffer that companies like Texas Intruments saw with strength in the auto industry. The automotive end market with the electrification and autonomous driving trends continue to evolve. Qualcomm (QCOM), Texas Instruments (TXN), and NXP Semi (NXPI) are a few chip companies that should benefit from robust demand from auto OEMs.
AMD stronger data center revenue is illustrating that enterprises and hyper-scalers haven’t been smashed as macro-related risks increase. This data point is a positive for companies like NVDA (data center 57% of 2Q23 revenue), Marvell (MRVL), and MU. In saying that AMD’s growth is helped by its acquisition of Xilinx, which closed last February.
AMD’s fourth-quarter results come shortly after the Biden administration said it would consider cutting off Chinese chip maker Huawei Technologies Co. from U.S. suppliers due to security concerns, according to people familiar with the matter.
Very clearly like the whole market the severity of the destruction has been underestimated in the PC/laptop market. The work-from-home trend created a massive pull forward in demand as people upgraded their devices and electronics, leaving a void in demand that’s expanding as macroeconomic fears intensify.
We will get to see how resilient large enterprises and government entities to economic volatility as Fed and White House seem determine to smash the economy and inflation. Spending on data center investments is ongoing but with liquidity and credit drying up deals are taking longer to close.
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