AMD Reports Weaker-than-expected Earnings Results. Revenue Was, However, Up 29 Percent YoY

AMD shares were up as high as 6 percent in Tuesday’s extended trading after the company’s quarterly report indicated that its server chip business shows potential for growth in the imminent quarters. Its fiscal third-quarter earnings, as well as its guidance for the next quarter, failed to meet Wall Street’s estimates. 

The company reported adjusted earnings of 67 cents per share for its fiscal third quarter, below the estimate of adjusted earnings of 68 cents per share that analysts had projected, according to Refinitiv. The company’s fiscal third-quarter revenue stood at $5.57. Analysts had estimated revenue to come in at $5.62, according to Refinitiv.

According to a statement, the company’s total revenue grew by 29 percent year-over-year for the fiscal third quarter which ended on the 24th of September. Net income for the quarter dropped $93 percent to $66 million. This was majorly a result of the company’s $49 billion acquisition of Xilinx back in February. Xilinx makes chips referred to as field-programmable gate arrays. 

The company highlighted fewer chip shipments induced by the weak demand for PCs, as one of the reasons for its weak results. While speaking with analysts on an earnings call, CEO Lisa Su said that AMD has been preparing for the PC market to be dull in the fiscal fourth quarter. 

The company has also reviewed its guidance. It now expects $23.5 billion in revenue for the full year, below the $26.3 billion forecast the company issued back in August. According to a Refinitiv poll, analysts expect revenue to come in at $23.88 for the full year. The company also reviewed its adjusted gross margin outlook from 54 percent it issued in August to 52 percent. 

The company’s Data Center segment raked in revenue of $1.61 billion in the fiscal third quarter. This was up 45 percent and below analysts’ estimate of $1.64 billion, according to StreetAccount. 

“We’ve had very good progress at the North American cloud vendors and we continue to believe that although there may be some near-term, let’s call it optimization, of, let’s call it individual footprints and efficiencies at individual cloud vendors, over the medium term. As we go into 2023, we expect growth in that market, particularly customers moving more workloads to AMD, just given the strength of our product portfolio and overall general coming forward,” AMD’s CEO Lisa Su said. 

She also added that cloud revenue more than doubled and grew sequentially, while revenue from server makers targeting big companies was down sequentially. Enterprise customers are taking more time to make decisions and are being strategic with their capital expenditures, she said. 

AMD’s gaming segment generated revenue of $1.63 billion. It was up 14 percent and in line with analysts’ estimates, according to StreetAccount. 

The company reported revenue of $1.3 billion for its Embedded segment, up from the $79 million it reported a year ago. Revenue from this segment was in line with analysts’ estimate of $1.3 billion, according to StreetAccount. 

Its Client Unit generated revenue of $1.02 billion, down almost 40 percent. According to a StreetAccount poll, analysts estimated $1.17 billion. 

“We will continue to invest in our strategic priorities around the data center, embedded and commercial markets while tightening expenses across the rest of the business,” CEO Lisa Su said. The company will control operating expenses and headcount growth, the company’s CFO Devinder Kumar added.