AMD Looks To Control Costs, Hiring In Face Of Q3 Profit Plunge

A strong financial start to 2022 couldn’t hold up to decreased client sales as the company slips with the rest of the sector and lowers its full-year revenue guidance from $26.3 billion to $23.50 billion. But data center, gaming and embedded segments continue an upward trend.

AMD Tuesday reported third quarter 2022 results showing net income falling 93 percent to $66 million and a year-over-year operating loss of $64 million – causing the company to promise cost-cutting measures including controlling headcount growth.

“We will prioritize the key investments for product roadmaps and long-term growth while taking several near-term cost management actions, including prudently controlling operating expenses and headcount growth, while actively managing inventory in line with our revenue expectations,” said Devinder Kumar, AMD’s executive vice president, chief financial officer and treasurer, on the company’s earnings conference call with analysts Tuesday.

Asked later for clarification, a company spokesperson told CRN that “AMD is slowing its pace of hiring.”

The Santa Clara, Calif. chipmaker’s client segment revenue was $1 billion, down 40 percent year over year due to “reduced processor shipments resulting from a weak PC market and a significant inventory correction across the PC supply chain,” according to its earnings release.

AMD Chair and CEO Lisa Su said the results are due to worldwide economic headwinds including inflationary pressure, weak China business, and a struggling PC market. “Third quarter results came in below our expectations due to the softening PC market and substantial inventory reduction actions across the PC supply chain,” she said in a statement.

On the bright side, the company’s data center (especially strong in the North American cloud market), gaming and embedded segments showed 29 percent year-over-year revenue growth. Despite missing forecasts, revenue was up 29 percent year over year to $5.5 billion for the quarter. The data center segment generated $1.6 billion revenue, up 45 percent year-over-year – driven by sales of the company’s EPYC processors.

AMD also delivered its tenth straight quarter of record server processor sales, Su noted.

“We are confident that our leadership product portfolio, strong balance sheet, and ongoing growth opportunities in our data center and embedded businesses position us well to navigate the current market dynamics,” Su told investors during a call.

Last month, the company slashed its revenue guidance, warning of an expected 53 percent drop in sales in its important client device segment.

AMD shares rose more than 4 percent in after-hours trading to $62.30 Tuesday, but the stock has sunk more than 50 percent this year following much of the tech industry.

AMD’s biggest competitor, Intel, had a much worse quarter – and likely due in part to AMD’s gains in the data center business. Intel is expected to announce massive layoffs as part of a plan to cut costs by up to $10 billion by the end of 2025. AMD’s language around cutting costs was nowhere near as severe, but Su did talk about being “disciplined” and “prudent” in the fourth quarter as sluggish PC sales are expected to continue.

“Clearly, the PC business has been very volatile and underperformed for us,” she said. “Going forward, PCs will be down again in the fourth quarter. We’ll monitor the macro situation … and we’ll exit the year in a better place.”

Su said the company will approach the next quarter with discipline and continued focus around its data center business that has overperformed. “We will continue to invest in our strategic priorities around he data center, embedded and commercial markets, while tightening expenses across the rest of the business and aligning our supply chain with the current demand outlook.”

Su said North America cloud sales will continue to be strong. “What we’re seeing is … North America cloud is probably the most resilient out of the segments within the data center market,” she said. “This is where AMD is the strongest … as we go into 2023, we expect growth in that market.”