AMD Shares Plunge After Preliminary Third Fiscal Quarter Revenue Warning

While AMD’s data center, embedded systems and gaming market segment businesses grew as expected, the company said it is expecting to report a 53 percent drop in sales in its client device segment.

Share prices of AMD plunged by nearly 13 percent close to the end of the trading day Friday a day after AMD reported its revenue for the current fiscal quarter is expected to miss expectations by up to as much as 19 percent primarily due to an expected drop in client PC sales.

AMD Thursday reported preliminary third fiscal quarter 2022 revenue of about $5.6 billion, which was significantly lower than its prior outlook of $6.5 billion to $6.9 billion. At the midpoint of that outlook, the preliminary revenue is about $1.1 billion, or over 16 percent lower than expectations. At the high end, the projected miss of $1.3 billion is nearly 19 percent lower than expectations.

Actual third fiscal quarter 2022 results are expected to be released Nov. 1.

[Related: AMD CEO Lisa Su: Strong First Quarter Sets Stage For Year Of Big Growth]

Investors took the preliminary revenue numbers hard. AMD share prices Friday plunged by nearly $8 per share, or just shy of 12 percent, late in the trading day.

Friday was a tough day in general for semiconductor share prices. Late in the trading day, Nvidia share prices were down by just over 10 percent, Intel by 1.4 percent, Micron by 1.6 percent, Qualcomm by 4.4 percent and TSMC by 4.1 percent.

AMD in a statement blamed lower-then-expected revenue for its client segment for the drop in revenue, citing the link between PC production and the shortage of processors, of which the Santa Clara, Calif.-based company is a major supplier.

“Preliminary results reflect lower than expected Client segment revenue resulting from reduced processor shipments due to a weaker than expected PC market and significant inventory correction actions across the PC supply chain,” AMD said.

However, the company said, its data center, gaming and embedded systems businesses all grew significantly year over year as expected.

It is a tough time for PC sales. Research firm IDC Sept. 1 estimated that global shipments of traditional PCs will decline 12.8 percent in 2022 to 305.3 million units. During this time, tablet PC shipments are forecast to fall by 6.8 percent to 156.8 million units.

IDC said the drop in shipments for the year are the result of a combination of inflation, a weakening global economy and the surge in PC sales in the prior two years.

Combined desktop and tablet PC shipments in 2023 are expected to drop an additional 2.6 percent in 2023 due to an expected slowdown in consumer spending and the fact that demand from the education market has been largely fulfilled, IDC said.

AMD did not respond to a CRN request for more information by press time.

However, AMD Chairperson and CEO Lisa Su, in a prepared statement, said the PC market weakened significantly during the third fiscal quarter.

“While our product portfolio remains very strong, macroeconomic conditions drove lower-than-expected PC demand and a significant inventory correction across the PC supply chain. As we navigate the current market conditions, we are pleased with the performance of our Data Center, Embedded, and Gaming segments and the strength of our diversified business model and balance sheet. We remain focused on delivering our leadership product roadmap and look forward to launching our next-generation 5nm data center and graphics products later this quarter,” Su wrote.

AMD said that it expects its third fiscal quarter 2022 client-related revenue to fall 40 percent over revenue from its third fiscal quarter 2021. However, sales in the data center segment are expected to rise 45 percent over last year, sales in the gaming segment to rise 14 percent, and sales in the embedded market to rise by 1,549 percent.

Overall sales are slated to rise about 29 percent year over year, the company said.