Components & Peripherals News
AMD Revenue Hit By PC Nosedive, Slowing Data Center Sales
While Wall Street analysts were disappointed with AMD’s second-quarter financial guidance, CEO Lisa Su promised in an earnings call that the company is “well positioned” to seize on the growing demand for AI applications with chips across its client computing, data center and embedded segments.
AMD’s quarterly revenue declined year-over-year for the first time in nearly four years due to a nosedive in sales for client CPUs and slowing demand for data center and gaming chips.
The Santa Clara, Calif.-based chip designer on Tuesday reported $5.4 billion in revenue for the first quarter, a nine percent decline from the same period last year. The last time the company’s revenue declined year-over-year was in the second quarter of 2019.
[Related: North America Channel Chief Terry Richardson Is Leaving AMD]
Lisa Su, AMD’s CEO, said the company’s revenue and earnings per share of 60 cents were “better than expected” in a “mixed demand environment.” In turn, these financial measures beat Wall Street’s expectations, by $40 million and 4 cents, respectively.
However, AMD’s stock price declined more than 6 percent in after-hours trading Tuesday as the company’s second-quarter financial guidance fell short of what Wall Street analysts were hoping to see. The chip designer expects revenue of roughly $5.3 billion, plus or minus $300 million, and a 50 percent gross margin for the period.
“In the near-term, we continue to see a mixed demand environment based on the uncertainties in the macro environment,” Su said in AMD’s earnings call on Tuesday.
“Based on customer demand signals, we expect second quarter revenue will be flattish sequentially with growth in our client and data center segments offset by modest declines in our gaming and embedded segments,” she added.
Things look brighter for AMD in the second half of the year due to the company’s growing portfolio of chips with the Zen 4 architecture, “improving demand trends in our client business,” and an early ramp of its Instinct MI300 accelerators for high-performance computing and AI workloads, according to Su.
“Looking longer term, we have significant growth opportunities ahead based on successfully delivering our roadmaps and executing our strategic data center and embedded priorities, led by accelerating adoption of our AI products,” she said.
Intel also suffered from a slump in demand for PC and data center chips in the first quarter. However, the decline in client CPU sales for AMD’s top rival was less pronounced while its data center processor sales experienced a much greater slowdown.
AMD ‘Well Positioned’ To Seize On AI Boom
The growing demand for AI applications is a major reason why Su believes the company has big growth prospects in the future, calling it “our number one strategic priority.” She mentioned AI 20 times in her opening remarks and outlined how AMD sees opportunities across the data center, client computing and embedded segments.
“AMD is very well positioned to capitalize on this increased demand for compute based on our broad portfolio of high-performance and adaptive compute engines, the deep relationships we have established with customers across a diverse set of large markets, and our expanding software capabilities,” Su said.
The company expects to expand AI-driven sales with its upcoming Instinct MI300 accelerators, Ryzen 7040 CPUs with embedded AI acceleration for laptops, Alveo V70 data center inference accelerators as well as the Versal AI adaptive data center and edge chips.
Su said the AI computing era is in the “very early stages” but said growth in the area is “faster than any other technology in recent history.”
“And as the recent interest in generative AI highlights, bringing the benefits of large language models and other AI capabilities to cloud, edge and endpoints require significant increases in compute performance,” she said.
Su promised that AMD will share more about its AI progress later this year.
PC Chip Sales Nosedive, Data Center CPU Demand Slows
AMD’s first-quarter revenue was mainly dragged down by its client CPU business, which declined 65 percent year-over-year in revenue to $739 million.
Su said this was “significantly below” by how many PCs were sold in the period as OEMs and channel partners continued to focus on clearing out their existing chip inventories.
The company expects client CPU sales to “grow in the second quarter and in the seasonally stronger second half of the year,” Su said.
This confidence is based on AMD’s growing portfolio, which includes the new Ryzen 7000X3D CPUs that improve gaming performance with extra cache, Ryzen 7045 CPUs for high-powered laptops, and Ryzen 7040 CPUs, the latter of which have more than 250 laptop design wins.
AMD reported that sales were flat year-over-year for its data center business, which includes the company’s EPYC server CPUs and Instinct accelerators. This resulted in a revenue of $1.3 billion, “with higher cloud sales offset by lower enterprise sales,” according to Su.
What hurt AMD with enterprise customers was similar to its PC story: Some of the chip designer’s large OEM partners had “elevated inventory levels.”
But Su said she expects AMD’s data center business to improve in the second half of the year due to the company’s fourth-generation EPYC processors, which launched late last year, as well as its upcoming cloud-native CPUs, code-named Bergamo, and its forthcoming EPYC CPUs optimized for technical computing, known under the name Genoa-X.
“Although we expect server demand to remain mixed in the second quarter, we are well-positioned to grow our cloud and enterprise footprint in the second half of the year based on the strong customer response to the performance and TCO advantages of ‘Genoa,’ ‘Bergamo’ and ‘Genoa-X,’” Su said.
AMD’s gaming revenue fell 6 percent year-over-year to $1.8 billion, with lower gaming graphic sales offsetting higher semi-custom sales for devices like Sony’s PlayStation 5.
Su said channel sell-through of AMD’s Radeon 6000 and Radeon 7000 GPU products did increase sequentially from the previous quarter. She added that the new flagship GPU, the Radeon 7900XTX, saw “strong sales,” and said there are plans to launch “new mainstream Radeon 7000 series GPUs this quarter.”
As for AMD’s embedded segment that includes products from its Xilinx acquisition, revenue grew 162.5 percent year-over-year to a record $1.6 billion.
“We saw strength across the majority of our embedded markets led by increased demand from industrial, vision and healthcare, test and emulation, communications, aerospace and defense, and automotive customers,” Su said.
“Demand for our adaptive computing solutions continues to grow as industrial, vision and healthcare customers actively work to add more advanced compute capabilities across their product lines,” she added.