U.S. chip maker Advanced Micro Devices Inc (AMD.O) on Tuesday reported revenue that topped Wall Street targets and said it expected business to pick up in the second half, exciting investors who saw the company catching up with rival Intel.
Shares gained about 1.5 percent in after-hours trading. Although AMD’s forecast fell short of expectations, it was not as weak as some feared. Recent earnings reports for both AMD and Intel show the once booming data center business will be more challenging for all chip makers as firms adjust their spending.
“AMD remained resilient and even made gains in their data center chips…against Intel,” said Wayne Lam analyst at CCS Insight.
Chief Executive Lisa Su said she was confident AMD will keep capturing market share in 2023 and that the second half would be stronger than the first.
While Intel Corp. (INTC.O) still commands the PC and server processing chip markets with a share surpassing 70%, which is a drop from more than 90% in 2017, according to tech research firm IDC. A huge chunk of that share was taken by AMD.
AMD’s Data Center segment revenue rose 42% to $1.7 billion during the December quarter, canceling out a 51% fall in revenue of the client segment that includes PCs at $903 million. PC shipments dropped 16.5% to 292.3 million units last year, data from research firm IDC showed.
Su said that AMD was expecting the PC market in 2023 to fall 10% and 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 imploping PC business battered Intel’s first-quarter outlook and Intel Chief Executive 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 had already begun under-shipping in 2022 in response to plunging processor demand.
This drop led chipmakers to lower revenue forecasts, sparking a sell-off in chip stocks. AMD’s stock slipped 55% in 2022, trailing behind the Philadelphia SE Semiconductor index (.SOX) during an industry slowdown.
Adjusted fourth-quarter revenue increased 16% to $5.60 billion. Analysts on average were projecting revenue of $5.50 billion, Refinitiv data showed.
The company predicted current-quarter revenue of $5.3 billion, plus or minus $300 million. Analysts on average estimate revenue of $5.48 billion, based on Refinitiv data.