Daily Management Review

AMD Revenue Exceeds Expectations, And Wall Street Is Relieved Following Intel's Bleak Outlook


AMD Revenue Exceeds Expectations, And Wall Street Is Relieved Following Intel's Bleak Outlook
Advanced Micro Devices Inc, a US chipmaker, reported revenue that exceeded Wall Street expectations and said it expected business to improve in the second half, enthusing investors who saw the company gaining on rival Intel.
After-hours trading saw a 1.5% increase in shares. Although AMD's forecast fell short of expectations, it was not as bad as some had feared. Recent earnings reports from Intel and AMD show that the once-hot data center market will become more difficult for all chip makers as companies adjust their spending.
"AMD remained resilient and even made gains in their datacenter chips...against Intel," said Wayne Lam analyst at CCS Insight.
AMD CEO Lisa Su expressed confidence that the company will continue to gain market share this year, and that the second half will be stronger than the first.
According to IDC, Intel Corp. still dominates the PC and server processing chip markets with a market share of more than 70%, down from more than 90% in 2017. AMD took a sizable portion of that market share.
AMD's Data Center segment revenue increased 42% to $1.7 billion in the fourth quarter, offsetting a 51% drop in client segment revenue, which included PCs, at $903 million.
According to IDC data, PC shipments will fall 16.5% to 292.3 million units in 2022.
Su said that AMD is anticipating a 10% slowdown in the global PC market in 2023 and expects that it would "continue to ship below consumption in the first quarter to reduce downstream inventory".
"First quarter should be the bottom for us in PCs and then grow from there into the second quarter and then into the second half," Su said on the earnings call.
The slumping PC market slashed Intel's first-quarter forecast, and Intel CEO Pat Gelsinger said he was seeing "some of the largest inventory corrections literally that we've ever seen in the industry."
"I think we will still see pain across the industry for at least another few quarters before things turn around," said Anshel Sag, analyst at Moor Insights & Strategy.
"We believe AMD’s results continue to show softness across the PC and gaming markets," said Angelo Zino, analyst at CFRA Research. "We also expect revenue levels in both segments to trough in the first half of this year."
AMD began under-shipping last year in response to falling processor demand.
As a result of this decline, chipmakers reduced their revenue forecasts, causing chip stocks to fall. AMD's stock dropped 55% last year, trailing the Philadelphia SE Semiconductor index during an industry slump.
Revenue increased 16% year on year to $5.60 billion in the fourth quarter. According to Refinitiv data, analysts expected revenue of $5.50 billion on average.
Revenue for the current quarter is expected to be $5.3 billion, plus or minus $300 million. According to Refinitiv data, analysts expect revenue of $5.48 billion on average.