AMD Revenue Hits $5.4 Billion in Q2, Down 18% YoY, But Beats Estimates

The News: AMD revenue totaled $5.4 billion in the second fiscal quarter of 2023, down 18% from $6.55 billion one year ago, as the CPU, GPU, and AI chip vendor saw revenue affected by weaker PC and gaming markets and global supply chain inventory corrections. AMD announced its latest earnings on August 1 for the quarter ending July 1, 2023. Read the full earnings Press Release on the AMD investor relations website.

AMD Revenue Hits $5.4 Billion in Q2, Down 18% YoY, But Beats Estimates

Analyst Take: AMD’s revenue for Q2 was down due to slower PC and gaming sales and overstocked global inventories, but when viewed overall, AMD still had a solid quarter that beat analyst estimates for revenue and earnings per share (EPS).

AMD’s engagements with customers involving its coming AI accelerators are growing, AMD CEO and Chair Lisa Su said in a call with analysts, putting the company’s data center AI products on track for the fourth quarter and AMD says it is already sampling those coming AMD Instinct MI300A and MI300X accelerators with some of its biggest HPC, cloud, and AI customers. These are intriguing engagements that have us at The Futurum Group very eager to hear more about AMD’s AI product plans and progress through 2023 and beyond.

Here are the AMD Q2 fiscal year 2023 earnings by the numbers:

• Q2 2023 revenue of $5.4 billion, down 18% from $6.55 billion YoY. The revenue figure beat the $5.32 billion consensus estimate expected by analysts at Investing.com.
• Q2 2023 non-GAAP net income of $948 million, which was down 44% from $1.7 billion YoY.
• Q2 2023 non-GAAP gross profit of $2.67 billion, which is down 25% from $3.5 billion YoY.
• Q2 2023 non-GAAP gross margin of 5)%, down from 54% YoY.
• Q2 2023 non-GAAP operating income of $1.07 billion, down 46% from $1.98 billion YoY.
• Q2 2023 non-GAAP EPS of $0.58, down 45% from $1.05 one year ago. The EPS result did, however, beat analyst consensus estimates of $0.57 per share from analysts with Investing.com.

Overall, AMD’s numbers are mostly in line with its earlier conservative guidance, and we see a lot of positives in AMD’s future quarters, especially as AI demand ramps up for the company in the marketplace.

AMD Revenue by Business Segment

Helping AMD to weather lower revenue in some segments, including PCs and gaming, is its diverse product portfolio, from CPUs for laptops and desktops to graphics chips and video gaming graphics components, which serve a broad range of users in enterprise IT, supercomputing, AI, data centers, and high performance computing (HPC) markets.

Here are AMD’s Q2 revenue numbers by its business segments:

For Q2, data center revenue was $1.3 billion, down 11% from $1.49 billion YoY. Gaming revenue totaled $1.58 billion, down 4% from $1.66 billion YoY, while embedded revenue provided a bright spot, with $1.46 billion in revenue, a 16% rise from $1.26 billion YoY.

AMD’s embedded segment revenue was boosted in early 2022 with the inclusion of revenue from embedded tech specialist Xilinx, which AMD acquired in February 2022 for $49 billion. Xilinx builds and sells powerful and flexible field-programmable gate arrays (FPGAs) and high-performance, programmable data center system on chip (SoC) hardware, which are bringing additional success to AMD.

AMD’s client market segment brought in revenue of $998 million in Q2, down 54% from $2.15 billion YoY. The lower client-side sales in desktop and laptop processors continue to be fallout from the big spikes in sales the company enjoyed after the Covid-19 pandemic and work-from-home shutdowns began in March 2020. At that time, IT powerhouses like AMD and computer makers saw huge increases in their businesses as customers accelerated their equipment refresh schedules and desperately bought up laptops, desktops, and other hardware to outfit their employees to work from their homes.

But as the pandemic has been winding down, those earlier revenue and demand boosts from 2020 to 2021 have also been leveling off or dropping, leaving tech companies seeing demand slackening. We maintain that this is a natural progression in the marketplace that follows what was 2 or 3 years of demand that was squeezed into a 1 year period of major sales and revenue numbers as the pandemic began. The market will even out again in the future, we believe.

AMD, like its competitors in the tech and consumer markets, is still experiencing these lingering effects, but we do not expect these trends to remain stagnant for much longer due to the continuing growth of AI markets that is boosting the fortunes of many companies.

AMD Revenue Guidance for Q3 2023

As part of its Q2 earnings report, AMD also provided financial guidance for its third quarter. For Q3 2023, the company expects revenue of about $5.7 billion, plus or minus $300 million, and a non-GAAP gross margin of about 51%.

Conclusions and Key Takeaways

Given the still-challenging macroeconomic conditions faced by AMD and other tech companies, AMD begins its third quarter on a positive footing, with new lineups of compelling products and fresh energy that will be focusing on AI while delivering even more value to its customers.

Led by CEO Lisa Su and her experienced executive team, we see AMD continuing its reputation for bringing innovation and performance and providing technological leadership and excitement in the marketplace throughout 2023 and beyond.

Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed AMD’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.

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Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

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