Advanced Micro Devices (AMD) shares jumped higher Wednesday after the chipmaker posted modestly weaker-than-expected third quarter earnings but noted solid gains in revenues for its gaming and data center businesses that partly offset further weakness expected in demand for personal computing chips.
AMD said non-GAAP earnings for the quarter came in at 67 cents per share, an 8% decline from the same period last year that missed Street forecasts by a penny. Group revenues, AMD said, rose 30% to $5.6 billion, essentially matching analysts' forecasts following the chipmaker's warning on broader market demand earlier this month, with gaming up 13.7% and data center rising 45%.
Looking into the final months of the year, however, AMD said it sees quarterly revenue in the region of $5.5 billion, plus or minus $300 million, with gross margins rising to around 51% on sequential growth for its embedded and data center units. Refinitv estimates were looking for a revenue forecast of around $5.85 billion.
AMD, which has fallen more than 42% since early August amid a surge in short-term interest rates, a rotation out of tech stocks and new U.S restrictions in technology exports to China, cautioned on October 6 that 'significantly' weaker PC demand would trim around $1 billion from its summer revenue forecast.
Texas Instruments (TXN) and Intel Corp. (INTC) echoed that concern in its third quarter update last week, with the former noting a pullback in demand for chips found in personal electronics and industrial equipment.
"If you look at the pluses and minuses in the quarter, the guidance for Q4 really is around sort of PCs and Gaming being lower,' CEO Lisa Su told investors on a conference call late Tuesday. "And again, with all the holidays in place, we're not counting on too much there Data Center, Embedded are higher, but we're not expecting that the extra week has a material impact."
"PCs will be down quite a bit, let's call it, high teens, close to 20%. As we go into next year, I think the industry is calling mid-single digits. I think that would be a good case. I think we should model down to minus 10%," she added. "I do think the PC business will recover as we go into 2023, but we'll have to work through these dynamics over the next quarter or so."
AMD shares were marked 2.4% higher in early trading Wednesday to change hands at $61.16 each, a move that would still leave the stock with a six month decline of around 29.4%.
"Both AMD and Intel guide the 2023 outlook for data center total addressable market is worsening given the slowdown in enterprise spending and, to a lesser degree, cloud market demand, especially in China," said KGI analyst Christine Wang. "In addition, AMD does not expect significant recovery of China cloud demand in 2023 (but) we believe AMD will still benefit from PC and data center market share gains next year, which could partially offset macro uncertainties."
