AMD Posts First Loss in Years as Client Chip Gross sales Plummet by 65%

AMD on Tuesday posted its first quarterly loss in years attributable to weak gross sales of processors for shopper PCs. General, AMD’s chip gross sales dropped 64%. AMD’s knowledge middle and gaming {hardware} shipments remained robust and had been flat year-over-year, which is sort of an achievement given the slowing purchases of servers and weak demand for gaming {hardware} amongst customers. Whereas AMD’s administration expects the CPU market to begin recovering within the second half of the yr, the corporate’s outlook for Q2 shouldn’t be that optimistic.

Blended Bag

Within the first quarter of FY2023, AMD’s income amounted to $5.353 billion, which is a 9% lower in comparison with the identical interval within the earlier yr and a slight lower in comparison with the earlier quarter. Sadly, the corporate slipped into the pink with a $139 million internet loss as in comparison with a $786 million internet earnings in Q1 FY2022. Moreover, AMD’s gross margin decreased from 48% in Q1 FY2022 to 44% in Q1 FY2023.

“We executed very effectively within the first quarter as we delivered higher than anticipated income and earnings in a combined demand atmosphere,” mentioned AMD Chair and CEO Dr. Lisa Su.

Certainly, AMD’s outcomes had been a combined bag as the entire firm’s enterprise items besides its Consumer Computing enterprise remained kind of flat in comparison with the primary quarter of FY2022, and even remained worthwhile. Actually, AMD’s Information Middle unit even managed to modestly improve its income, but its profitability declined.

“Our strategically necessary Information Middle and Embedded segments contributed greater than 50% of income within the first quarter,” mentioned AMD EVP, CFO, and Treasurer Jean Hu. 

Client CPU Gross sales Nosedive, Information Middle {Hardware} Stays Robust

AMD’s Consumer Computing enterprise unit earned $739 million in income in Q1 FY2023, a 65% drop from the identical quarter within the earlier yr. The unit misplaced $172 million, which is in stark distinction to the $625 million revenue it posted in the identical quarter a yr in the past. For years, AMD’s predominant income was from promoting CPUs and chipsets for shopper PCs, however for the second quarter in a row, this unit suffered from a income decline and bled cash. Because it seems, AMD’s shopper PC enterprise suffered extra from the tender PC market than Intel’s shopper computing group, which Q1 gross sales dropped 36% year-over-year.

“As we said on our final earnings name, we consider the primary quarter was the underside for our shopper processor enterprise,” mentioned Su. 

In contrast, AMD’s Gaming Enterprise unit’s income within the first quarter reached $1.757 billion, down 6% year-over-year, which seems to be like a robust consequence given the continuing turmoil. System-on-chips for Microsoft’s and Sony’s recreation consoles accounted for the lion’s share of AMD’s gaming enterprise and elevated YoY. In the meantime, gross sales of discrete Radeon graphics processors dropped year-over-year. Nonetheless, they grew quarter-over-quarter as the corporate ramped up shipments of its Radeon RX 7900-series graphics choices and supplied its earlier era Radeon RX 6000-series merchandise at aggressive costs. Regardless of challenges, the division remained worthwhile and posted a internet earnings of $314 million (down 12% YoY). 

“Semi-custom SoC income grew year-over-year as demand for premium consoles stay robust following the vacation cycle,” mentioned Su. “In gaming graphics channels promote by means of over Radeon RX 6000 and Radeon RX 7000 sequence GPUs elevated sequentially. We noticed robust gross sales of our high-end Radeon RX 7900 XTX GPUs within the first quarter, and we’re on monitor to broaden our RDNA 3 GPU portfolio with the launch of recent mainstream Radeon RX 7000- sequence GPUs this quarter.”

In Q1 2023, AMD’s Information Middle Enterprise generated $1.295 billion, which is nearly flat in comparison with the identical quarter within the earlier yr ($1.293). In the meantime, the profitability of the unit decreased 65% year-over-year and totaled $148 million, which isn’t stunning as giant cloud providers suppliers are reconsidering their server purchases nowadays, and subsequently AMD and different gamers have to supply them higher pricing to maintain volumes excessive.

It’s noteworthy that when in comparison with Intel’s knowledge middle and AI group, AMD’s server enterprise carried out considerably higher because it remained flat. In contrast, the blue firm posted a 39% income drop for its knowledge middle components. 

AMD’s Embedded Enterprise, which largely sells merchandise developed by Xilinx and a few CPUs designed by AMD, reported earnings of $1.562 billion and income of $798 million, a optimistic spotlight in AMD’s monetary report. 

Cautious Outlook

AMD expects its income within the second quarter to remain kind of flat with the primary quarter and complete round $5.3 billion ± $300 million. 

Such a cautious outlook is a bit stunning as AMD is ramping up manufacturing and gross sales of its Ryzen 7000-series processors for laptops, with its Phoenix chips already on the best way to OEMs, and these items are typically bought at a premium, so the corporate expects its shopper PC income to be up quarter-over-quarter. As well as, the corporate is on monitor to launch its new Radeon 7000-series graphics processors in Q2, that are additionally anticipated to spice up gross sales of the corporate’s gaming {hardware}, however this is perhaps offset by weaker gross sales of console SoCs.

Moreover, AMD plans to formally introduce its EPYC ‘Bergamo’ CPUs for cloud knowledge facilities and EPYC ‘Genoa-X’ for high-performance technical computing functions. Whereas ramps of server CPUs are typically sluggish, these components will nonetheless enable AMD to extend its gross sales of knowledge middle {hardware} barely.