AMD reports fourth-quarter profit amid slowing gaming graphics chips and PC sales – AI News Update

Advanced Micro Devices posted a slight net profit in the fourth quarter, with strong performance in data centers but weaker sales of chips for graphics games and consumer PCs.

AMD said growth was driven by the embedded chip and data center segments, offset by slower sales of client PCs and gaming chips. In its gaming segment, sales of semi-custom console chips increased, but PC gaming graphics chips weakened.

AMD began to feel the effects of a slowdown in October, when it noted that demand in the PC market was waning. Last week rival Intel said it saw the effects a macroeconomic slowdown in the fourth quarter and was taking steps to reduce costs.

AMD’s stock is up 3% in after-hours trading at $77.80 per share. On a GAAP basis, AMD reported net income of 1 cent per share, or $21 million, down 98% from $974 million a year ago.

Non-GAAP net income was 69 cents per share, or $1.1 billion, flat with the same period a year ago. Non-GAAP revenue was $5.59 billion, up 16% from $4.83 billion a year ago.

Overall, AMD had a strong 2022, with revenue up 44% as it took market share from Intel.

“2022 was a strong year for AMD as we delivered best-in-class growth and record revenue despite a weak second-half PC environment,” AMD CEO Lisa Su said in a statement. . “We accelerated our data center momentum and completed our strategic acquisition of Xilinx, significantly diversifying our business and strengthening our financial model. Although the demand environment is mixed, we are confident in our ability to gain market share in 2023 and generate long-term growth based on our differentiated product portfolio. »

On an analyst call, Su said AMD now powers more than 100 of the world’s fastest supercomputers and 15 of the world’s 20 most energy-efficient supercomputers. She said AMD’s latest Epyc server processors are 80% more energy efficient than chips that rival Intel.

She said more than 600 publicly available instances among hyperscalers use AMD Epyc processors. Su said the company has more than 250 wins designing ultra-thin commercial and gaming laptops with Ryzen 7000-series processors.

While games were weak overall, due to slower demand for PC graphics chips, she said demand for game consoles was strong over the holidays. AMD is also releasing graphics chips for PC right now, as a new generation of Radeon chips are ready.

AMD said earlier that it expects fourth-quarter revenue to be around $5.5 billion, plus or minus $300 million, an increase of around 14% over the same period a year ago and stable sequentially. The embedded and data center segments are expected to grow year-over-year and sequentially for the fourth quarter of 2022.

Intel has more than 70% of the server processor market, according to Mercury Research. But Intel lost share as it was slow to introduce new products in the recent past. The big difference between the companies is that Intel manufactures its own chips in-house, while AMD uses contract manufacturers like TSMC. This strategic difference has served AMD well of late.

In the fourth quarter, AMD’s GAAP gross margin was 43%, down 7% from a year earlier, in part due to amortization of intangible assets associated with the Xilinx acquisition. Non-GAAP gross margin was 51%.

AMD posted an operating loss of $149 million, compared with an operating profit of $1.2 billion a year earlier. AMD had $5.9 billion in cash and short-term investments in the quarter.

Data center revenue totaled $1.7 billion in the quarter, up 42%. Segment operating profit was $444 million, compared to $369 million a year ago.

Client PC revenue was $903 million, down 51% from a year ago due to reduced shipments from a weak PC market and a correction inventory in the PC supply chain. Average selling prices were flat year over year, but AMD reported an operating loss of $152 million compared to an operating profit of $530 million a year ago.

Gaming segment revenue was $1.6 billion, down 7% from a year ago. Lower gaming graphics card sales were partially offset by higher revenue from semi-custom products. Operating profit was $266 million, compared to $407 million a year ago.

Embedded segment revenue was $1.4 billion, up 1,868% from a year ago, thanks to the inclusion of embedded revenue acquired from Xilinx. Operating profit was $699 million, compared to $18 million a year ago.

AMD Outlook

For the first quarter of 2023 (ending March 31), AMD forecasts revenue of $5.3 billion, plus or minus $300 million. This is 10% less than a year ago.

Year-over-year, the consumer and gaming segments are expected to decline, partially offset by growth in the in-vehicle and data center segments. AMD expects non-GAAP gross margin to be around 50% in the first quarter of 2023.

Su said there were high inventory levels at some cloud customers and that could lead to a weak first half and a stronger second half. Su predicts that the PC market will be down 10% in 2023.

“Over the next few years, one of our biggest growth opportunities is in AI, which is in the early stages of transforming virtually every industry service and product,” Su said.