AMD saw sales of chips for PCs drop drastically in the fourth quarter, while data center chip revenues were up dramatically. AMD is pitted against Intel in both PC and server categories as both companies expect inventory corrections into 2023.
On Tuesday, AMD reported fourth quarter revenues of $5.599 billion, exceeding analyst estimates by a fraction, but saw operating income plummet by 112% from a year earlier and earnings per share of a cent, down by 99%.
CEO Lisa Su reported a weak PC environment in the second half of the year even as the full year 2022 provided record revenues of $23.6 billion, a 44% improvement over 2021.
She also reported data center momentum, up by 42% in the fourth quarter over a year earlier, reaching to $1.7 billion.
The weak PC market led to a 51% revenue drop in the PC segment for the fourth quarter, with revenues at $903 million. AMD saw the a significant inventory correction in that segment across the supply chain. Even game revenue was down by 7% for the quarter, reaching $1.6 billion.
PC shipments globally fell 28% in the fourth quarter of 2022, compared to a year earlier after a 15% decline in the third quarter, according to IDC.
Embedded was a strong category for AMD with the acquisition of Xylinx nearly one year ago. "Embedded is a major growth driver for AMD," Su said. Xilinx brought an "industry leading adaptive product" with 6,000 customers to benefit from AMD's scale and broad product portfolio, she noted. Embedded revenue was $1.4 billion in 4Q, up by 1,868% from a year earlier.
She termed the demand environment for AMD chips as “mixed” adding that AMD remains confident it will gain market share in 2023.
AMD said its outlook for the current first quarter is revenue of $5.3 billion, plus or minus $300 million, putting it within the range of analyst estimates of $5.5 billion. Client and gaming will decline, partially offset by embedded and data center growth. In 2023, AMD's largest growth driver is "certainly in data center," Su said. "We're very bullish about our data center business...Cloud customers appreciate the execution on our roadmap." She said AMD will see a softer first hald and a stronger second half, however.
After Intel’s dismal fourth quarter report last week, the AMD results appeared to have pleased investors. Shares were up by nearly 4% at market close to $75.15. The overall Nasdaq index was also up 1.6% for Tuesday. AMD stock had fallen 30% over the past 12 months, however.
AMD’s attempt to gain market share from Intel in data center server chips could be working, as AMD Genoa chips are popular thus far even if more expensive than Intel Sapphire Rapids chips for severs, according to analysts. Analyst Dylan Patel at SemiAnalysis said despite the higher cost, Genoa on paper provides a better price-to-performance ratio than Sapphire Rapids resulting in a better total cost of ownership for corporate and cloud customers.
In other earnings reports, Samsung Electronics this week said its fourth quarter profits sank to an 8-year low on low demand for smartphones and PCs. Revenue was $57.3 billion, down 8%, while operating profit was $3.5 billion, down 69% from a year ago.
“The business environment deteriorated significantly in the fourth quarter due to weak demand amid a global economic slowdown,” the company said in a statement. “For 2023, while the macroeonomic uncertainties are expected to persist, the company anticipates demand to begin recovering in the second half."
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