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The recent fall in AMD’s share price reflects negative sentiments amongst investors as the company reported a $1.1 billion shortfall in revenues from than prior outlook for the third quarter of 2022.
AMD forecasted third-quarter 2022 revenues to be approximately $5.6 billion, an increase of 29% year over year, lower than the previously expected rise of roughly 55%. Preliminary results of the company reflect lower-than-expected client segment revenues resulting from reduced processor shipments due to weaker demand in the PC market and significant inventory correction actions across the PC supply chain.
AMD is expecting a non-GAAP gross margin of approximately 50%, down 400 basis points due to lowered client segment revenues.
AMD expected PC sales to decline in the third quarter, which was reflected by the falling PC demand in the prior quarters. Per International Data Corporation, PC sales were down 15.3% year over year to 71.3 million units during the June quarter, which was higher than the first quarter's decline rate of 5.1% and was the worst fall in many years.
Rising geo-political tensions between the United States and China, the global supply-chain challenges that adversely impacted the semiconductor industry, the ongoing Russia-Ukraine war, rising inflation and interest rate hike by the U.S. Federal Reserve caused the recent fall in PC demand as the market slips into recession.
The volatile macroeconomic situation has the broader tech sector in the doldrums as AMD’s peers in the sector NVIDIA (NVDA - Free Report) and Intel (INTC - Free Report) also bore the brunt of the situation.
NVDA and Intel shares have fallen 58.9% and 50%, respectively, in the year-to-date period compared with the Zacks Semiconductor – General industry’s decline of 50.1%.
However, the company is expecting a significant rise in its high-growth business segments like data center and gaming, in line with its previous guidance. AMD expects Data Center and gaming business to grow 45% and 14%, respectively, year over year.
AMD Addressing High-Growth Markets to Boost Top Line
AMD’s third-quarter results are expected to have benefited as the company has been diversifying its product portfolio to cater to trending high-growth markets like cloud, gaming, data center and EV.
The company has constantly been improving the performance of its Ryzen processors to help address the increasing proliferation of Artificial Intelligence (AI) and Machine Learning in industries like cloud, gaming and data center.
However, as it ventures into new markets, the company faces rising competition from the likes of NVIDIA and Intel.
NVIDIA is a dominant name in the data center, professional visualization and gaming markets, where its peers are close on its heels. NVDA has been benefiting from the rapid proliferation of AI. The company has been expanding its base in untapped markets like climate science, energy research, space exploration and digital biology.
Intel is still the leading name in the consumer PC market and is the major competitor of AMD in this segment. INTC is gradually reducing its dependence on the PC-centric business by transitioning to data-centric businesses such as AI and autonomous driving.
Nevertheless, AMD is expected to benefit from its plans to address new markets, accelerate data center growth and enter the AI and Augmented Reality spaces with its launch of various products by building strategic partnerships with companies like Dell Technologies (DELL - Free Report) and OEM partners Hewlett Packard, Acer and Lenovo.
AMD recently collaborated with Dell to launch the most powerful 17” AMD Advantage laptop — Alienware m17 r5 Gaming Laptop.
The recent collaboration with Dell will help AMD benefit from the rising gaming industry that will attain $545.98 billion by 2028, witnessing a CAGR of 13.20% between 2021 and 2028, according to Fortune Business Insights.
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AMD Preliminary Q3'22 Results Impact Share Price Negatively
Advanced Micro Devices (AMD - Free Report) has slumped 59.4% compared with the Zacks Electronics - Semiconductors industry’s and the Zacks Computer and Technology sector’s decline of 40.5% and 35.8%, respectively, in the year-to-date period.
The recent fall in AMD’s share price reflects negative sentiments amongst investors as the company reported a $1.1 billion shortfall in revenues from than prior outlook for the third quarter of 2022.
AMD forecasted third-quarter 2022 revenues to be approximately $5.6 billion, an increase of 29% year over year, lower than the previously expected rise of roughly 55%. Preliminary results of the company reflect lower-than-expected client segment revenues resulting from reduced processor shipments due to weaker demand in the PC market and significant inventory correction actions across the PC supply chain.
AMD is expecting a non-GAAP gross margin of approximately 50%, down 400 basis points due to lowered client segment revenues.
AMD expected PC sales to decline in the third quarter, which was reflected by the falling PC demand in the prior quarters. Per International Data Corporation, PC sales were down 15.3% year over year to 71.3 million units during the June quarter, which was higher than the first quarter's decline rate of 5.1% and was the worst fall in many years.
Advanced Micro Devices, Inc. Price and Consensus
Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote
Rising geo-political tensions between the United States and China, the global supply-chain challenges that adversely impacted the semiconductor industry, the ongoing Russia-Ukraine war, rising inflation and interest rate hike by the U.S. Federal Reserve caused the recent fall in PC demand as the market slips into recession.
The volatile macroeconomic situation has the broader tech sector in the doldrums as AMD’s peers in the sector NVIDIA (NVDA - Free Report) and Intel (INTC - Free Report) also bore the brunt of the situation.
NVDA and Intel shares have fallen 58.9% and 50%, respectively, in the year-to-date period compared with the Zacks Semiconductor – General industry’s decline of 50.1%.
However, the company is expecting a significant rise in its high-growth business segments like data center and gaming, in line with its previous guidance. AMD expects Data Center and gaming business to grow 45% and 14%, respectively, year over year.
AMD Addressing High-Growth Markets to Boost Top Line
AMD’s third-quarter results are expected to have benefited as the company has been diversifying its product portfolio to cater to trending high-growth markets like cloud, gaming, data center and EV.
The company has constantly been improving the performance of its Ryzen processors to help address the increasing proliferation of Artificial Intelligence (AI) and Machine Learning in industries like cloud, gaming and data center.
However, as it ventures into new markets, the company faces rising competition from the likes of NVIDIA and Intel.
NVIDIA is a dominant name in the data center, professional visualization and gaming markets, where its peers are close on its heels. NVDA has been benefiting from the rapid proliferation of AI. The company has been expanding its base in untapped markets like climate science, energy research, space exploration and digital biology.
Intel is still the leading name in the consumer PC market and is the major competitor of AMD in this segment. INTC is gradually reducing its dependence on the PC-centric business by transitioning to data-centric businesses such as AI and autonomous driving.
Nevertheless, AMD is expected to benefit from its plans to address new markets, accelerate data center growth and enter the AI and Augmented Reality spaces with its launch of various products by building strategic partnerships with companies like Dell Technologies (DELL - Free Report) and OEM partners Hewlett Packard, Acer and Lenovo.
The company currently has Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMD recently collaborated with Dell to launch the most powerful 17” AMD Advantage laptop — Alienware m17 r5 Gaming Laptop.
The recent collaboration with Dell will help AMD benefit from the rising gaming industry that will attain $545.98 billion by 2028, witnessing a CAGR of 13.20% between 2021 and 2028, according to Fortune Business Insights.