AMD Sees Record Revenue In 2022 As EPYC Sales Offset Ryzen Slump

While a downturn in the PC market resulted in a sales slump for Ryzen chips, AMD more than made up the difference with soaring EPYC CPU sales in the data center, which allowed the chip designer to claim record revenue in 2022. However, AMD CEO Lisa Su warns that greater challenges are ahead: ‘As we enter 2023, we expect the overall demand environment to remain mixed with the second half stronger than the first half.’

AMD is feeling some of the financial crunch experienced by Intel from a major downturn in PC sales, but the chip designer’s soaring data center sales more than made up the difference to help it deliver record revenue last year in a significant contrast from its rival.

The Santa Clara, California-based company finished 2022 with $23.6 billion in revenue, a 16 percent increase from the previous year. This was largely driven by a 64 percent increase in data center revenue, most of which came from an upswing in EPYC CPU sales to cloud service providers.

“EPYC processors now power more than 600 publicly available instances globally following the launches of new AMD-based instances from [Amazon Web Services], Microsoft and others in the [fourth] quarter,” AMD CEO Lisa Su said on the company’s fourth-quarter earnings call Tuesday.

The chip designer also claimed a record gross margin of 52 percent and record gross profit of nearly $12.7 billion last year, but these figures were based on non-GAAP measures.

AMD’s stock price was up more than 7 percent on Wednesday.

When considering generally accepted accounting principles, AMD’s gross profit, gross margin, operating income, operating margin, net income and earnings per share were lower than their non-GAAP counterparts, mostly due to an “amortization of intangible assets associated” with the company’s $49 billion acquisition of FPGA designer Xilinx from nearly a year ago. This resulted in nearly every GAAP figure besides revenue and gross profit declining in contrast to the non-GAAP increases.

The ups and downs of AMD’s 2022 financials, which included revenue from AMD’s 2022 acquisition of DPU designer Pensando in addition to Xilinx, resulted with three of the company’s four segments coming close to each other in revenue by a few percentage points:

* Data center revenue was $6 billion, a 64 percent increase and 25.6 percent of total sales.

* Client revenue was $6.2 billion, a 10 percent decrease and 26.3 percent of total sales.

*Gaming revenue was $6.8 billion, a 21.4 percent increase and 28.8 percent of total sales.

*Embedded revenue was $4.5 billion, a 1,750 percent increase and 19.3 percent of total sales. (This major increase in sales was largely the result of new revenue contributions from Xilinx.)

Two solution provider executives told CRN it’s no surprise that AMD continues to grow EPYC CPU sales as Intel attempts to stabilize the company’s waning dominance in the data center market with its new Xeon Scalable chips.

“They really are showing some amazing results here for the [EPYC] 9000 series,” said Dominic Daninger, vice president of engineering at Nor-Tech, a Burnsville, Minnesota-based system integrator, referring to the fourth-generation EPYC chips that launched last fall.

“In high-performance computing and true compute environments, AMD is just dominating there,” said Alexey Stolyar, CTO of International Computer Concepts, a Northbrook, Illinois-based system integrator.

AMD Makes Big Data Center, Embedded Gains In Q4

As for AMD’s results for the fourth quarter of 2022, its revenue was $5.6 billion, a 16-percent increase from the same period in 2021. This surpassed the average estimate of Wall Street analysts.

Like its full-year results, AMD’s main financial figures for the fourth quarter besides revenue were lower using GAAP measures mainly due to the amortization costs of the Xilinx acquisition. Its non-GAAP earnings per share was 69 cents, beating Wall Street’s expectations by 2 cents.

For the quarter, AMD’s data center revenue grew 42 percent year-over-year to $1.7 billion, largely due to strong EPYC processor sales. While the segment saw revenue from enterprise customers decline from the same period in 2021, it was offset by more than a doubling of sales to North American hyperscalers.

“Against this backdrop, we continue expanding our pipeline and closed a number of new wins in the fourth quarter with Fortune 500 financial services, automotive, technology, energy, and aerospace companies,” Su said.

Data center GPUs were also a weak point in the quarter, with revenue “down significantly from a year ago” when multiple new supercomputers were built with AMD’s Instinct MI250 chips.

Sales for AMD’s Ryzen client CPUs were the weakest point for AMD, with client revenue dropping 51 percent year-over-year to $903 million in the quarter. The company attributed this slump to a weakening PC market and channel partners working through existing inventory.

“We continued to ship below PC consumption in the fourth quarter as we focused on further reducing downstream inventory,” Su said. “While overall PC demand remained soft, desktop channel sell-through increased sequentially during the holiday season.”

The chip designer also saw a decline in its gaming segment, whose fourth-quarter revenue was $1.6 billion, down 7 percent from the same period last year. This was due to lower sales for AMD’s Radeon discrete GPUs, which partially offset higher semi-custom sales for game consoles.

Meanwhile, AMD’s embedded revenue is much larger than it previously was, largely because of contributions from the company’s Xilinx acquisition. Embedded revenue for the quarter was $1.4 billion, up 1,868 percent.

“We had record sales across a number of our embedded markets including communications, automotive, industrial and healthcare, aerospace and defense, and test and emulation,” Su said. “In communications, we saw particular strength with expanded 5G wireless installations in India and ongoing wired infrastructure deployments with Tier 1 communications providers.”

AMD Anticipates Revenue Dip In Q1

While AMD managed to beat Wall Street’s expectations for its fourth-quarter earnings, Su warned that the company’s revenue will likely contract in the first three months of this year.

“As we enter 2023, we expect the overall demand environment to remain mixed with the second half stronger than the first half,” she said.

Accordingly, AMD expects first-quarter revenue to decline 10 percent year-over-year to $5.3 billion, plus or minus $300 million. This is because the company believes client and gaming revenue will decline too much to completely offset anticipated gains in its data center and embedded segments.

Su said she believes the company’s data center and embedded businesses are “well positioned to grow revenue and gain share in 2023.” However, she offered the caveat that the company will likely see lower demand from some cloud customers in the first half of the year as they work through excess inventory.

“We continue working very closely with our customers to navigate the dynamic market conditions, while also making the right strategic investments to exit the current cycle with an even stronger and more differentiated set of products to drive future growth,” she said.

AMD Expects Big Growth From AI In Coming Years

In the future, Su said AI represents a significant opportunity for AMD.

“Over the next several years, one of our largest growth opportunities is in AI, which is in the early stages of transforming virtually every industry, service and product,” she said.

While AMD has previously dabbled in AI opportunities with its data center GPUs, the company solidified a broader strategy last year that will incorporate technology from its Xilinx acquisition. This strategy includes using AI engines first developed by Xilinx in the company’s new Ryzen 7040 CPUs for laptops.

Su claimed that Ryzen 7040’s use of the Xilinx AI engines, rebranded as Ryzen AI, is the first time a semiconductor company has integrated an AI inference engine directly into an x86 processor.

“Ryzen AI is powered by the highly scalable XDNA architecture, which is the first integration of AMD and Xilinx IP, less than a year after closing the acquisition,” she said.

AMD is bullish on the AI opportunities for the company’s upcoming Instinct MI300 accelerator, which, for the first time, bringing together a CPU, GPU and memory “into a single, integrated design.”

Su said this will speed up HPC and AI workloads by eight times while improving efficiency five-fold compared to the company’s previous MI250 accelerator, which launched in 2021. The MI300 is expected to be used “for large model AI applications in cloud data centers” in addition to the US Department of Energy’s 2-exaflop El Capitan supercomputer that is set to be delivered at Lawrence Livermore National Laboratory this year.

The CEO also expects AMD’s broader portfolio of chips to tackle AI workloads in the future.

“We expect AI adoption will accelerate significantly over the coming years and are incredibly excited about leveraging our broad portfolio of CPUs, GPUs, and adaptive accelerators — in combination with our software expertise — to deliver differentiated solutions that can address the full spectrum of AI needs in training and inference across cloud, edge and client,” she said.

At the beginning of the earnings call, Su announced a new CFO for the company, Jean Hu. Hu was previously CFO for Marvell Semiconductor, and she’s taking over from Devinder Kumar, who is retiring from the company after working there since 1984.