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Advanced Micro Devices reported third quarter revenue of $5.6 billion for the three months ended September 30, up 29% from the same quarter a year ago.
The company had said on Oct. 6 that earnings would be lower than earlier expectations. Customer segment revenue declined $1 billion as a result of declining PC demand and inventory reductions in the PC supply chain.
AMD was the latest tech company to say it would have a weak quarter, following Nvidia’s announcement that demand in China fell off a cliff and that it was delaying shipping to free up inventory channels. But AMD has gained market share in microprocessors against Intel.
“The third quarter results were below our expectations due to the declining PC market and substantial inventory reduction efforts across the PC supply chain,” AMD CEO Lisa Su said in a statement. “Despite
in the challenging macro environment, revenue grew 29% year-over-year, driven by higher sales of our data center, embedded and game console products. We are confident that our industry-leading product portfolio, strong balance sheet and continued growth opportunities in our data center and embedded businesses position us well to navigate the current market dynamics.”
AMD had previously said it expected revenue of $5.6 billion in the third quarter, down from earlier expectations of $6.7 billion. Shares of AMD are up 2.5% in after-hours trading to $61.17 a share. On a GAAP basis, AMD reported net earnings of 4 cents per share, or $66 million, down 93% from a year ago.
Non-GAAP net income was 67 cents per share, or $1.01 billion, down 8% from the same period a year ago. Non-GAAP revenue was $5.6 billion, up 29%.
Analysts lowered expectations were earnings per share of 68 cents on revenue of $5.62 billion.
For the fourth quarter, analysts expected earnings per share of 79 cents on revenue of $5.85 billion.
In the third quarter, gross margin was 42%, down 6 percentage points year on year, primarily due to the amortization of intangible assets related to the Xilinx acquisition. Non-GAAP gross margin was 50%, up 2 percentage points year over year, primarily due to higher revenues from the Embedded and Data Center segments. Gross margin and non-GAAP gross margin include $160 million in inventory, pricing and related reserves costs in the graphics and customer operations. AMD said R&D costs were higher in the quarter. AMD has $5.6 billion in cash.
Data center segment revenue was $1.6 billion, up 45% year-over-year thanks to strong sales of Epyc server processors. Operating income was $505 million, or 31% of sales, compared to $308 million or 28% a year ago.
“We delivered record server processor sales for the tenth consecutive quarter, driven by strong demand for third-generation Epyc processors and the first shipments of our next-generation Genoa CPU to select customers,” Su said in an analyst call.
She said AMD will publicly launch Genoa processors next week and ramp up production to support initial cloud deployments and the introduction of fourth-generation Epyc processor platforms.
She noted that cloud revenue more than doubled from a year ago and increased sequentially as multiple hyperscale companies expanded their deployments of Epyc processors. But OEM revenue declined in business as server OEMs did as the pace slowed. AMD has 2023 processors for telco and cloud applications.
Customer segment revenue was $1.0 billion, a 40% year-over-year decline due to lower processor shipments due to a weak PC market and a significant inventory adjustment in the PC supply chain. Client processor ASP rose year over year, mainly due to a richer mix of Ryzen desktop processor sales.
Operating loss was $26 million, compared to operating income of $490 million or 29% a year ago. The decrease was mainly due to lower revenues.
Gaming segment revenue was $1.6 billion, up 14% year-over-year, driven by higher sales of semi-custom products, partially offset by lower graphics revenue. Operating income was $142 million, or 9% of sales, compared to $231 million, or 16% a year ago. The decline in graphics was primarily due to lower graphics revenues and inventories, prices and related costs in the graphics business. Operating margin was lower, mainly due to lower graphics revenues and higher operating expenses.
Gaming demand saw its sixth straight quarter of record sales of semi-custom chip ads for game consoles, remained strong as Sony and Microsoft geared up for the holiday season. Gaming graphics sales declined in the quarter based on weak consumer demand and AMD’s focus on reducing GPU inventory, Su said.
Su said the company is preparing to launch its RDNA 3 GPUs later this week, combining its high-end graphics architecture and 5-nanometer chiplet designs.
Embedded segment revenue was $1.3 billion, up 1.549% year-over-year, primarily driven by the inclusion of Xilinx’s embedded product revenue. Operating income was $635 million, or 49% of sales, compared to $23 million or 30% a year ago. Operating profit and margin increases were mainly due to higher revenues.
All other operating losses were $1.3 billion, compared to $104 million a year ago, primarily due to amortization of intangible assets largely related to the Xilinx acquisition.
During the quarter, AMD launched its Ryzen 7000 Series processors for desktop, which deliver dominant performance and industry-leading power efficiency, the company said. Powered by the new “Zen 4” architecture, the Ryzen 7000 Series processors feature up to 16 cores and 32 threads and are built on an optimized, high-performance 5 nanometer fabrication process node.
“We are well positioned to navigate current market dynamics based on our industry-leading product portfolio, strong balance sheet and growth in our data center and embedded segments,” said Su.
expectations
AMD said it expects fourth quarter revenue to be about $5.5 billion, plus or minus $300 million, up about 14% from the same period a year ago and flat in succession. The Embedded and Datacenter segments are expected to grow year over year and sequentially.
The non-GAAP gross margin is expected to be approximately 51%. For the full year ending December 31, 2022, the company expects revenue of $23.5 billion, plus or minus $300 million, up 43% from 2021, led by growth in Embedded and Data Center. Non-GAAP gross margin is expected to be approximately 52% for the full year.
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