AMD revenue beats targets, Wall St relieved after Intel’s bleak outlook

AMD revenue beats targets, Wall St relieved after Intel’s bleak outlook

Jan 31 (Reuters) – U.S. chipmaker Advanced Micro Devices Inc (AMD.O) reported revenue above Wall Street targets on Tuesday and said it expected business to improve in the second half, giving excitement investors who saw the company win over rival Intel.

The shares rose about 1.5% after hours trading. Although AMD’s predictions lagged behind expectations, they weren’t as low as some had worried. Recent earnings reports from Intel and AMD show that the once fast-growing data center business will be more difficult for all chipmakers as companies adjust spending.

“AMD remained resilient and even made gains in its data center chips…against Intel,” said CCS Insight analyst Wayne Lam.

Chief executive Lisa Su said she was confident AMD would continue to gain market share this year and the second half would be stronger than the first.

While Intel Corp. (INTC.O) still dominates the PC and server processing chip markets with a share of more than 70%, up from more than 90% in 2017, according to technology research firm IDC. Much of that share was taken by AMD.

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Revenue from AMD’s data center segment rose 42% to $1.7 billion in the fourth quarter, offsetting a 51% drop in revenue from the customer segment that includes PCs to $903 million.

PC shipments fell 16.5% to 292.3 million units in 2022, according to data from research firm IDC.

Su said AMD expects the PC market this year to be down 10% and will “continue to ship below consumption in the first quarter to reduce inventory downstream.”

“The first quarter should be the lowest for us in PC, then move into the second quarter, then into the second half,” Su said on the earnings call.

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The PC business slump weighed on Intel’s Q1 outlook and Intel Chief Executive Pat Gelsinger said he was seeing “some of the largest inventory corrections we’ve had. never seen in the industry”.

“I think we’ll still see the pain in the industry for at least a few more quarters before things turn around,” said Anshel Sag, an analyst at Moor Insights & Strategy.

“We believe AMD’s earnings continue to be weak in the PC and gaming markets,” said CFRA Research analyst Angelo Zino. “We also expect revenue levels in both segments to bottom out in the first half of this year.”

AMD had already started to underdeliver last year in response to falling demand for processors.

The decline led chipmakers to cut their revenue forecasts, triggering a sell-off in chip inventory. AMD’s stock fell 55% last year, underperforming the Philadelphia SE Semiconductor Index (.SOX) during an industry downturn

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Fourth quarter adjusted revenue increased 16% to $5.60 billion. Analysts on average had expected revenue of $5.50 billion, according to Refinitiv data.

The company forecasts revenue of $5.3 billion for the current quarter, plus or minus $300 million. Analysts on average had expected revenue of $5.48 billion, according to Refinitiv data.

Reporting by Chavi Mehta in Bengaluru Jane Lanhee Lee in Oakland, California; Editing by Anil D’Silva, Jonathan Oatis and David Gregorio

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