Home Uncategorized Weak client segment revenues hurt AMD’s third-quarter revenue growth

Weak client segment revenues hurt AMD’s third-quarter revenue growth

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Advanced Micro Devices AMD projected revenue for the third quarter of 2022 will be approximately $5.6 billion, an increase of 29% year-over-year, below the previously expected increase of approximately 55%.

AMD’s preliminary results reflect lower-than-expected client segment revenues as a result of reduced processor shipments due to lower demand in the PC market and significant inventory corrections across the PC supply chain.

AMD expects non-GAAP gross margin to be approximately 50%, down 400 basis points due to lower client segment revenues.

AMD expected PC sales to fall in the third quarter, which was reflected in the drop in demand for PCs in previous quarters. trans International Data CorporationPC sales fell 15.3% year-over-year to 71.3 million units in the June quarter, which was higher than the first quarter (5.1%) and the worst drop in years.

In addition, rising geopolitical tensions between the United States and China, problems in the global supply chain that have hurt the semiconductor industry, the ongoing Russian-Ukrainian war that has led to a sharp rise in natural gas prices across Europe, rising inflation worldwide and in USA. The Federal Reserve’s interest rate hike is expected to weigh on AMD’s third-quarter revenue growth.

Unstable macroeconomic conditions have led to a decline in the broader technology sector, particularly reflected by AMD’s semiconductor peers NVIDIA NVDA and Intel, which also bore the brunt of the situation.

In the year-to-date period, shares of AMD, NVDA and Intel have underperformed the S&P 500, falling 56.9%, 52.9% and 43.5%, respectively. The S&P 500 fell 19.1% over the same period. AMD currently has a Zacks Rank #5 (Strong Sell).

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However, AMD expects significant growth in its fast-growing business segments, such as data centers and gaming, in line with previous guidance. The data center and gaming businesses are expected to grow 45% and 14%, respectively, year-over-year.

Click here to see how AMD’s overall results are likely to be in the third quarter.

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A diversified product portfolio contributed to growth in the 3rd quarter

AMD’s third-quarter results are expected to improve as the company diversifies its product portfolio to address trending high-growth markets such as cloud, gaming, data centers and electric vehicles.

The company is constantly improving the performance of its Ryzen processors to help cope with the growing adoption of artificial intelligence (AI) and machine learning in areas such as the cloud, gaming and data centers.

However, entering new markets, the company faces increased competition from NVIDIA.

NVIDIA, one of the founders of the AMD PyTorch Foundation, collaborates with Metaplatforms PURPOSE build a research supercomputer with artificial intelligence, helping META AI researchers create various AI models essential to the creation of the metaverse.

To beat the growing competition and drive revenue growth in the third quarter, AMD also partnered with Meta to enter the meta universe. The AMD Xilinx Zynq UltraScale RFSoC radio chip will be used to develop the Evenstar Multiple Radio Units (RU) to expand the 4G/5G mobile network infrastructure that is critical to the meta universe.

AMD’s collaboration with Meta will help the company exit the slowing PC market and focus on the semi-custom chip business, which will help it expand into high-growth markets such as AI and ML.

AMD is also involved in high-performance computing (HPC) in partnership with Hewlett Packard Company HPE and the US Department of Energy’s Oak Ridge National Laboratory to build the Frontier supercomputer, which can perform 1,000,000,000,000,000,000 calculations per second.

AMD’s partnership with HPE bodes well, having helped the former build the world’s fastest supercomputer.

AMD’s third-quarter results are expected to benefit from its entry into the HPC market, as AMD operates five of the 10 most powerful and eight of the 10 most energy-efficient supercomputers in the world. CSC’s LUMI supercomputer, based on AMD EPYC and AMD Instinct MI200 systems, ranks third in the Top500 and third in the Green500.

The Top500 and Green500 lists show AMD’s growing adoption of the HPC ecosystem, which is expected to positively impact AMD’s revenue growth in the third quarter.

Stay tuned for future earnings announcements with help Zacks Earnings Calendar.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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