Advanced Micro Devices Inc., the second-largest maker of computer processors, gave a lackluster sales forecast for the current period as it struggles to bounce back from a severe PC slowdown.
(Bloomberg) — Advanced Micro Devices Inc., the second-largest maker of computer processors, gave a lackluster sales forecast for the current period as it struggles to bounce back from a severe PC slowdown.
Second-quarter revenue will be $5.3 billion, plus or minus $300 million, AMD said in a statement Tuesday. That compares with an average analyst prediction of $5.51 billion. The company promised a rally in data center demand in the second half of the year, but that failed to win over investors who unloaded the stock in late trading.
Like larger rival Intel Corp., AMD is navigating one of the worst-ever downturns for the personal computer industry, which is suffering from a post-pandemic funk. Another challenge for AMD: The largest cloud providers are focused on buying equipment for artificial intelligence workloads — an area where the chipmaker is just starting to build a presence.
The shares slid 3.7% in extended trading following the announcement. They had closed earlier at $89.91, leaving them up 39% this year.
AMD executives see better times coming in the latter months of 2023, echoing Intel’s stance. “We remain confident in our growth in the second half of the year as the PC and server markets strengthen and our new products ramp,” Chief Financial Officer Jean Hu said in the statement.
First-quarter sales at AMD’s data-center business were little changed from a year ago, with revenue of $1.3 billion. That compares with an average estimate of $1.46 billion. Revenue at its PC unit dropped 65% to $739 million. Analysts had projected $908 million. Gaming came in at $1.76 billion, versus an estimate of $1.53 billion.
Intel’s PC unit had a 38% drop in sales, and its server business contracted 39%. Overall, first-quarter PC shipments slumped 29% to 56.9 million units, taking them back below the levels of early 2019, according to IDC.
AMD said that while its sales to cloud providers increased, some of those large buyers of chips cut back on orders to reduce their stockpiles of unused parts. Corporate buyers of data center gear reduced their ordering due to their concern about the economy, AMD said.
Its gross margin — the percentage of sales remaining after deducting the cost of production — will be 50% in the second quarter, roughly in line with estimates.
The company’s PC business probably bottomed out in the first quarter, according to Chief Executive Officer Lisa Su. The global PC market will reach about 260 million units in 2023, AMD predicted. That’s a bit less than the 270 million projected by Intel last week.
Read More: Intel Sees ‘Green Shoots’ of Recovery
AMD, long in Intel’s shadow, has made major strides under the leadership of Su — at a time when its larger rival has lost its technological prowess. AMD also competes with Nvidia Corp. in the market for graphics processors. That company has jumped ahead in selling processors for AI work, which has emerged as a major battleground. AMD looks to catch up in that area as well.
In the first quarter, AMD’s profit was 60 cents a share, excluding some items. Revenue fell 9.1% to $5.35 billion. Analysts had predicted earnings of 57 cents and revenue of $5.31 billion.
The first-quarter sales decline was the first such contraction since 2019. Analysts project the company will end 2023 with roughly the same amount of revenue as last year.
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