AMD lifts optimism for the chip market with upbeat earnings
AMD reported a rise in fourth-quarter revenue, along with expectations for a much-needed surge in demand for PCs in the second half of 2023.
In the wake of Intel's declining revenue reported last week, AMD offered a glimmer of hope for the semiconductor industry, with a higher-than-expected earnings report for the fourth quarter.
But even AMD sounded a cautionary note in an otherwise positive earnings report. While revenue from AMD's data center business jumped 42%, to $1.7 billion in last year's fourth quarter, company CEO Lisa Su said she expects the PC market to be down 10%, and the company will continue to ship "below consumption" in the first quarter.
AMD reported a 51% year-over-year decline in processor shipments and had an operating loss in its client segment of $152 million, compared with $530 million of income last year.
Su said that while she believes sales of PCs will continue to slump through the first half of 2023, she expects a resurgence in OEM business PC sales in the second half, as the company works through its inventory.
Xilinx, which makes chips dedicated to specific tasks, including encryption and video compression, was an important contributor to the $1.4 billion in revenue to the company's embedded division, according to Su. AMD acquired Xilinx for $35 billion and closed that deal in 2021.
Dan NewmanPrincipal analyst, Futurum Research
"AMD showed a little bit stronger result against what was moderate guidance," said Dan Newman, principal analyst of Futurum Research and CEO of Broadsuite Media. "The Xilinx margins were impressive, and the data center numbers looked pretty good. [AMD's] numbers looked good, considering Intel missed by such a wide margin."
In a briefing with financial analysts earlier this week, Su said she remains confident that AMD will continue to yank market share away from Intel over the course of the upcoming year.
While Su forecasted expectations through the end of the year, Intel offered an outlook for only the next 90 days in its briefings with financial analysts last week. Intel cited the unpredictable nature of the macroeconomic environment going forward.
"Intel has to be very careful about pushing its guidance up," Newman said. "What they need to do at this point is be conservative and make the most moderate forecast as possible and then beat it."
Despite AMD's continued market momentum in recent years, Intel remains the market leader in both PC and server chip shipments, currently holding a 70% share of those markets. That figure, however, is down from the 90% share the company held in 2017. Much of that loss comes from the share AMD yanked away, according to IDC.
Sagging PC sales has been the lead weight on the feet of all chipmakers during the past year. Overall PC shipments fell to 292.3 million units last year, from 348.8 million in 2021, market researcher IDC reported.
Responding to the dramatic downturn in revenues, Intel CEO Pat Gelsinger last month announced he is taking a 25% cut in salary, or approximately $312,000 in 2023. Other members of Intel's executive team will take 15% cuts, with midlevel managers taking between 5% and 10% cuts.
The company also cut 401(k) matching in half, from 5% to 2.5% to reduce expenses, and plans to suspend merit raises and quarterly bonuses, according to published reports.
As Editor At Large with TechTarget Editorial's News Group, Ed Scannell is responsible for writing and reporting breaking news, news analysis and features focused on technology issues and trends affecting corporate IT professionals.