AMD Q4 2023 Earnings

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AMD Q4 2023 Earnings

The Company Faces Market Headwinds as Q1 Outlook Casts Shadow Over Share Prices

Advanced Micro Devices Inc. (AMD) on 30th January reported Q4 revenue of $6.2 billion representing a year-over-year (YoY) increase of 10.2%. The revenue and earnings growth was driven by quarterly AMD Instinct GPU and EPYC CPU sales and higher AMD Ryzen processor sales. (Source: AMD)

On a segmental basis, during the quarter, the Data Center segment which includes server CPUs and AI chips revenue reached $2.3 billion, marking a 38% increase and a 43% sequential growth. This notable expansion was propelled by robust sales performance in AMD Instinct GPUs and 4th Gen AMD EPYC CPUs. (Source: AMD)

The Client segment revenue surged by 62% YoY and stood at $1.5 billion in Q4FY23. This significant increase in this segment was predominantly fueled by a rise in sales of AMD Ryzen 7000 Series CPUs. (Source: AMD)

Moreover, the Gaming segment revenue for the period stood at $1.4 billion, down by 17% YoY and on a sequential basis a decline of 9%. This dip was primarily attributed to a reduction in semi-custom revenue, although it was partially offset by a rise in sales of AMD Radeon GPUs. (Source: AMD)

Apart from this, the Embedded segment for Q4 recorded a revenue of $1.1 billion, declining 24% YoY. This drop was mainly attributed to customers actively reducing their inventory levels during the specified period. (Source: AMD)

Historically, AMD has predominantly focused on CPUs for PCs and servers. However, this sector of the semiconductor industry has faced challenges in recent years, with a relatively flat or shrinking trajectory. The decline can be attributed, in part, to the impact of the post-pandemic environment on PC sales. In contrast, the demand for AI chips has seen growth during this period.

For the fourth quarter, AMD reported a net income of $667 million and diluted earnings per share of $0.41 as compared to $21 million, and diluted earnings of $0.01, a year ago. (Source: AMD)

Full Year Performance ((Source: AMD)

For the full financial year of 2023, AMD reported revenue of $22.68 billion declining by 4% YoY.

The company posted a net income of $854 million and diluted earnings per share of $0.53 down by 35% and 27% YoY respectively.

On a segmental basis, for FY 2023, the Data Center segment revenue for AMD reached $6.5 billion, marking a 7% increase compared to the previous year. This growth was propelled by robust sales performance in AMD Instinct GPUs and 4th Gen AMD EPYC CPUs within the Data Center segment.

Additionally, the Client segment revenue for FY23 stood at $4.7 billion, down by 25% compared to the previous year. This decline was attributed to a contraction in the PC market, impacting the overall revenue generated from the Client segment.

The gaming segment reported revenue of $6.2 billion, declined by 9% YoY. The decline was primarily due to lower semi-custom sales.

Lastly, the embedded segment posted revenue of $5.3 billion, up by 17% YoY.  This growth was predominantly attributed to the inclusion of a full year of revenue related to the acquisition of Xilinx, which was completed in February 2022.          

Outlook

In the first quarter of 2024, AMD anticipates revenue to be around $5.4 billion, with a margin of error of plus or minus $300 million. In terms of segmental revenue, the Data Center segment revenue is projected to remain flat sequentially. This is due to an expected seasonal decline in server sales, offset by a robust ramp-up in Data Center GPU sales. Conversely, Client, Embedded, and Gaming segment sales are anticipated to decrease sequentially. Notably, semi-custom revenue is expected to experience a significant double-digit percentage decline. In terms of non-GAAP gross margin, AMD aims for it to be around 52%. (Source: AMD)

AMD CEO Lisa Su on an earnings call said that for 2024 the company expects the demand environment to remain mixed. (Source: AMD)

At present, Nvidia holds a dominant position in the GPU market, commanding around 80% of the market. However, AMD has expressed confidence that its new AI chips, introduced in 2022, will pose a challenge to Nvidia's H100 GPUs in certain applications. Investors are observing the potential for substantial growth in AMD's data center segment over the next few years, with the anticipation that the company's advancements in AI technology will contribute to its competitiveness in the market. (Source: AMD)

Following the release of the outlook, Shares of AMD fell 6.5% on January 30, after-hours trading. (Source: Marketwatch)

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