AMD 3Q22 result shows server, gaming biz growth offsets PC weakness

AMD announced 3Q22 revenue of US$5.6 billion on November 1, up 29% year-on-year. Analysts remain optimistic about its ability to continue growing market shares in the server market.

Thanks to growth across the Data Center, Gaming and Embedded segments offset the 40% fall of the client segment, which bore the brunt of the personal computer market slump. Its 3Q inventory ballooned to US$3.37 billion from US$2 billion reported in December 2021.

AMD CEO Lisa Su pledged to be careful of spending and cautioned an even weaker PC environment in 4Q, as customers cut inventory and suppliers ship even fewer parts. However, some analysts cautioned that AMD may not be immune to the slowdown of the server market, either.

Reuters quoted Mercury Research chip analyst noting the global server market's 8% quarter-to-quarter growth in the third quarter compared with the growth rate a year ago in the same period of 36%.

AMD issued preliminary results in early October, warning its 3Q performance would fall short of previous forecasts. However, AMD continued to increase market shares in data center server market, while its competitors including Intel and Nvidia saw double-digit retreats.

An analyst quoted by Yahoo Finance said AMD appears better prepared for the PC market slump, and it is rolling out next-generation chips in the next couple of quarters ramping up its 5 nm technology on the CPU data center servers. "And from what we're seeing in terms of the guidance in Q4 and what we expect into 2023, we do think AMD continues to incrementally take more share from Intel here," said CFRA Research Senior Equity Analyst Angelo Zino.

AMD 3Q gross margin slid 6 ppt to 42% from a year ago, primarily due to amortization of intangible assets associated with the Xilinx acquisition.

Operating loss of $64 million, compared to operating income of $948 million, or 22% of revenue, a year ago. The loss was primarily due to the amortization of intangible assets associated with the Xilinx acquisition and increased R&D investments.

Net income of $66 million and diluted earnings per share of $0.04, compared to $923 million a year ago primarily due to the amortization of intangible assets associated with the Xilinx acquisition and increased R&D investments, partially offset by a $135 million tax benefit in the quarter. On a non-GAAP basis, gross margin was 50%, operating income was $1.3 billion, net income was $1.1 billion and diluted earnings per share was $0.67.

Source: AMD, compiled by DIGITIMES Asia, Nov 1, 2022

Performance by segments:

Data Center segment revenue was $1.6 billion, up 45% year-over-year driven by strong sales of EPYC server processors. Operating income was $505 million, or 31% of revenue, compared to $308 million, or 28% a year ago. The operating income and margin increases were primarily driven by higher revenue, partially offset by higher operating expenses.

Client segment revenue was $1.0 billion, down 40% year-over-year due to reduced processor shipments resulting from a weak PC market and a significant inventory correction across the PC supply chain. Client processor ASP increased year-over-year driven primarily by a richer mix of Ryzen desktop processor sales. Operating loss was $26 million, compared to operating income of $490 million or 29% a year ago. The decrease was primarily due to lower revenue.

Gaming segment revenue was $1.6 billion, up 14% year-over-year driven by higher semi-custom product sales partially offset by lower graphics revenue. Operating income was $142 million, or 9% of revenue, compared to $231 million, or 16% a year ago. The decrease was primarily due to lower graphics revenue and inventory, pricing, and related charges in the graphics business. Operating margin was lower primarily due to lower graphics revenue and higher operating expenses.

Embedded segment revenue was $1.3 billion, up 1,549% year-over-year driven primarily by the inclusion of Xilinx embedded product revenue. Operating income was $635 million, or 49% of revenue, compared to $23 million, or 30% a year ago. Operating income and margin increases were primarily driven by higher revenue. All Other operating loss was $1.3 billion as compared to $104 million a year ago primarily due to amortization of intangible assets largely associated with the Xilinx acquisition.

All Other operating loss was $1.3 billion as compared to $104 million a year ago primarily due to amortization of intangible assets largely associated with the Xilinx acquisition.

Source: AMD; compiled by DIGITIMES Asia, Nov 1, 2022