AMD revenue beats targets, Wall St relieved after Intel’s grim outlook

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January 31 (Reuters) –

US chipmaker Advanced Micro Devices Inc on Tuesday posted earnings that beat Wall Street targets and said it expected business to improve in the second half, encouraging investors who saw the company gains on rival Intel.

Shares rose about 1.5% in after-hours trading. Although AMD’s forecast was behind expectations, it was not as weak as some worried. Recent earnings reports for both Intel and AMD show that the once fast-growing data center business will be more challenging for all chipmakers as the companies adjust their spending.

“AMD remained resilient and even made gains in their datacenter chips … against Intel,” said analyst Wayne Lam at CCS Insight.

CEO Lisa Su said she is confident that AMD will continue to gain market share this year and that the second half will be stronger than the first.

While Intel Corp still dominates the PC and server processing chip markets with a share exceeding 70%, that’s down from more than 90% in 2017, according to the research firm of IDC technology. A large part of that share was taken by AMD.

AMD’s Data Center segment revenue grew 42% to $1.7 billion during the fourth quarter, offsetting a 51% decline in customer segment revenue that includes PCs to $ 903 million.

PC shipments fell 16.5% to 292.3 million units in 2022, according to data from research firm IDC.

Su said that AMD was expecting the PC market this year to decline by 10% and “continue to send below consumption in the first quarter to reduce downstream inventory”.

“The first quarter should be the bottom for us in PCs and then it will grow from there in the second quarter and then in the second half,” Su said on the earnings call.

The slumping PC business pommeled Intel’s first quarter outlook and Intel CEO Pat Gelsinger said he was seeing “some of the biggest inventory corrections literally we’ve ever seen in the industry. “

“I think we’re still going to see pain across the industry for at least a few more quarters before things turn around,” said Anshel Sag, an analyst at Moor Insights & Strategy.

“We believe AMD’s results continue to show softness across the PC and gaming markets,” said Angelo Zino, an analyst at CFRA Research. “We also expect income levels in both segments to lower in the first half of this year.”

AMD had already started under shipping last year in response to declining processor demand.

The decline prompted chipmakers to cut revenue forecasts, prompting a selloff in chip stocks. AMD stock has fallen 55% in the past year, underperforming the Philadelphia SE Semiconductor index during an industry downturn

Fourth-quarter adjusted revenue rose 16% to $5.60 billion. Analysts on average were expecting revenue of $5.50 billion, according to Refinitiv data.

The company forecast current quarter revenue of $5.3 billion, plus or minus $300 million. Analysts on average expected revenue of $5.48 billion, according to Refinitiv data.

(Reporting by Chavi Mehta in Bengaluru Jane Lanhee Lee in Oakland, Calif; Editing by Anil D’Silva, Jonathan Oatis and David Gregorio)

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