AMDs Ryzen revenue triples Xilinx chips account for most of
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AMD’s Ryzen revenue triples, Xilinx chips account for most of company earnings

Overcrowding in the customer segment could only hurt AMD’s first-quarter financial results, and the company’s total revenue fell 9% to $5.4 billion, slightly beating analysts’ expectations. That didn’t save AMD stock from a tumble as its second-quarter guidance turned out to be worse than market expectations. In the customer segment overall, revenue for the first quarter declined 65% to $739 million.

    Image source: AMD

Image source: AMD

As expected, during a speech at the quarterly reporting event, AMD management felt compelled to look for strengths in the company’s ambiguous position in the market. “We performed well in the first quarter and delivered higher than expected sales in a mixed demand environment,” CEO Lisa Su began her speech. The company’s new chief financial officer, Jean Hu, added: “Our strategically important server and embedded segments accounted for more than half of our total sales in the first quarter”. In their opinion, sales in the second quarter will grow consistently in the direction of server and client solutions, but a moderate drop in sales in the direction of gaming and embedded solutions will spoil the picture. In the second half of the year, AMD expects an increasing demand in the PC and server segment, also due to the emergence of new products.

Year over year, AMD’s non-GAAP margin fell from 53% to 50% in the first quarter. Operating expenses increased 18% to $1.587 billion and operating income decreased 40% to $1.1 billion. On a GAAP basis, the company generally ended the quarter with an operating loss of $145 million -dollars and a net loss of $139 million, but that is due to the consequences of the Xilinx acquisition. The company’s non-GAAP net income reached $970 million, although that represented a 39% decrease compared to last year’s results. AMD ended the first quarter with $5.9 billion in free cash and highly liquid assets, with $241 million returned to shareholders through share repurchases.

    Image source: AMD

Image source: AMD

In particular, the data center segment showed increasing demand from customers in the cloud, but enterprise customers did not resume their purchases in the expected volumes due to the presence of significant product inventories. The company’s server direction revenue in the first quarter was flat year-on-year, reaching $1.3 billion. Operating profit declined to $148 million from $427 million, reducing the operating profit margin from 33 reduced to 11%.

    Image source: AMD

Image source: AMD

The client segment, which includes desktop and mobile AMD Ryzen processors, showed a depressing trend, with revenue falling 65% year over year from $2.1 billion to $739 million. The company admits , it has sold far fewer CPUs than its own shipped retail partners to eliminate overstock. This imbalance has existed for three consecutive quarters. The decline in sales also resulted in an operating loss of $172 million compared to a profit of $692 million a year earlier.

According to Lisa Su, the first quarter should be the bottom for the company’s customer business in terms of changing demand for central processing units. According to AMD’s CEO, the global PC market will decline by about 10% this year to 260 million units. Demand for the brand’s client processors should already increase in the second quarter and be supported by a seasonal trend in the second half of the year. AMD expects to ship about as many processors in the second half of the year as the market demands.

    Image source: AMD

Image source: AMD

The gaming segment, in which AMD includes chips for game consoles and Radeon graphics cards, showed AMD, among other things, the largest sales in the first quarter, but also showed negative momentum. Compared to the first quarter of 2022, AMD’s revenue in this area fell by 6% to $1.8 billion. Semi-custom chips for gaming consoles increased core revenue by a double-digit percentage, according to the company presentation, but weak implementation of other gaming solutions compensated for this growth. Divisional operating income fell to $318 million from $358 million. The company notes that video card retail inventory was more actively sold in the first quarter. According to Lisa Su, the demand for premium gaming consoles remains high. In the current quarter, AMD promises to introduce new mass models of graphics cards from the Radeon 7000 family.

    Image source: AMD

Image source: AMD

The embedded solutions segment, dominated by Xilinx products, posted impressive first-quarter revenue growth of 163% to $1.6 billion, driven not only by strong demand for such solutions, but also by the small base effect in the first quarter of last year, when Xilinx was not yet fully integrated into AMD’s financial reporting structure. Operating income margin increased from 46% to 51%, operating income increased $277 million to $798 million. In fact, it was Xilinx products that gave AMD the lion’s share of enterprise-level operating income ($1.1 billion ) brought in. There were problems with it in other areas.

AMD Pins is hoping for increasing demand in the server segment in the second half of the year, due to interest in artificial intelligence systems. Consolidated revenue should come in between $5.0 billion and $5.6 billion, which is worse than market expectations and down 19% year over year. The profit margin should remain at the level of 50%, only in the second half of the year it should grow – mainly due to the customer segment. Operating expenses will reach $1.6 billion in the second quarter and for the full year should remain at prior period levels until demand picks up again.

It was AMD’s forecast for the coming months that drew a negative reaction from investors, causing the company’s share price to fall by 7%. In the second quarter, the company’s chief financial officer added, revenue in the client, game and server segments will decline compared to the same period last year. Consequently, revenue will grow in the client and server segments, but decline slightly in the gaming and embedded segments. In the data center segment, AMD’s sales could grow in the double-digit percentage range for the full year, as the company boss emphasized.

Concluding her speech at the quarterly report event, Lisa Su emphasized that the company is very excited about the possibilities that open up for it in the field of artificial intelligence. This area will be their top strategic priority. AMD actively works with partners to bring jointly developed solutions to market. “We are at the dawn of the AI ​​computing era, the pace of development in this field is faster than any other technology in recent history,” — added the head of the company.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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