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After beating analysts’ revenue estimates yesterday, chipmaker Advanced Micro Devices, Inc (AMD) could see slower growth this year, according to research and financial firms. AMD’s earnings saw the company post $5.6 billion in revenue in the fourth quarter, marking a small annual growth of 1%. That helped the company beat analysts’ estimates by $80 million, with earnings per share of $0.69 also beating estimates of two cents. At the report’s earnings call, AMD chief Dr. Lis Su explained that the growth of his company’s embedded and data center segments led it to increase revenue in the fourth quarter by 16% annually, with the pair accounting for 50% of AMD’s overall revenue during the quarter.
AMD confident in data center sales growth this year thanks to new products
Heading into the results, analysts speculated that AMD’s data center segment would do well this year as new product launches put the company in an advantageous position against its larger Intel rival. This also held true for the previous quarter, as the data center was the only division that generated organic revenue growth for AMD.
Other segments, such as client computing and gaming, saw annual declines of 51% and 7%, and while in-vehicle computing revenue grew, AMD explained that this 1,868% growth was due to its massive acquisition of Xilinx. AMD absorbed more costs from the deal in its fourth quarter, which saw the company post a GAAP operating loss of $149 million and a massive 99% decline in net income.
AMD chief Dr. Lisa Su said sales to North American hyper scalers in the cloud computing segment have more than doubled each year, especially as AMD-based instances become more common among users. major vendors such as Amazon and Microsoft.
Dr. Su added that his company continued to manage inventory during the fourth quarter as it shipped fewer units than was consumed in the personal computing industry. This contrasts sharply with Intel, which is shipping more units to maximize product visibility, according to Bernstein. AMD’s customer segment, which covers PC sales, was its worst-performing segment in the quarter, as it saw a massive 51% drop in annual revenue. Commenting on the gaming division, the executive explained that revenue fell as AMD slowed shipments, but channel sales of the new Radeon RX graphics processing units (GPUs) were higher compared to the previous quarter.
Commenting on AMD’s results, research firm Summit Insights said AMD’s outlook for the first quarter hints at a slowdown in its personal computing and gaming markets. He believes the company’s financial performance, which has seen AMD increase its schedule and net profit for fiscal year 2022 by another 60%, will ease this year. Unlike others, like KeyBanc, which estimates AMD will end the year with a 30% market share in data centers, Summit Insights estimates AMD’s market share gains will be “less significant” in 2023.
On the other hand, research firm Jefferies is more optimistic about AMD. He is excited by AMD’s belief that the data center and personal computing markets may bottom out by the end of the current quarter. AMD also expects to ship less product than is consumed this quarter as the company aggressively targets inventory buildup at retailers. Like Intel, AMD also did not provide a full-year guidance in its earnings call, saying macroeconomic uncertainty influenced the decision.