Advanced Micro Devices Inc (AMD) on Tuesday forecasted some strength in its data centre business and promised to be careful with spending, sending shares up despite business being hit by a deepening PC market slump.
AMD's forecast for fourth-quarter and full-year revenue was below Wall Street estimates, but Kinngai Chan, an analyst at Summit Insights Group, suggested investors had braced for worse.
"While AMD's 4Q22 sales outlook was below consensus expectations, we believe investors are somewhat relieved that AMD expects its data centre and embedded businesses to grow sequentially," Chan said.
Shares rose 6.3 percent in after-hours trade.
While AMD has been growing its market share quickly in the data centre, rival Intel Corp. has seen its share slip even in its latest earnings report.
"We expect AMD’s share gains to continue, as the company’s upcoming, next-generation server CPUs are expected to outperform Intel’s lineup across price and performance metrics," said Nathaniel Harmon, an analyst at YipitData.
Still, chip analyst Dean McCarron at Mercury Research cautioned AMD is not immune to the slowdown in the data centre market, noting the 8 percent quarter-to-quarter growth in the third quarter compared with the growth rate a year ago in the same period of 36 percent.
AMD executives said on the earnings call they were controlling expenses and slowing down hiring to cope with the macroeconomic headwinds.
AMD, which makes CPUs and graphics processors for PCs and data centres, has also been hit hard as inflation hurt consumer demand for laptops and other gadgets, prompting electronics makers to cut orders for its chips.
That led AMD to lower its forecast for third-quarter revenue by about US$1 billion (S$1.4 billion) last month.
According to Counterpoint Research, PC shipments will decline 13 pecent this year.
AMD Chief Executive Lisa Su told analysts that the PC business outlook for 2023 should be modelled on a 10 percent drop of total PC unit sales.
Su added the North American cloud market was the most resilient of the data centre market segments, though she did not expect a significant recovery of the China data centre market in 2023.
The company expects current-quarter revenue to be US$5.5 billion, plus or minus US$300 million. Analysts on average expect revenue to be US$5.85 billion, according to Refinitiv data.
For the full year 2022, AMD expects revenue to be approximately US$23.5 billion, plus or minus US$300 million, up 43 percent from 2021, versus analyst expectations of US$23.9 billion.
Revenue at its client segment, which includes chips for desktops, fell 40 percent to US$1 billion during the third quarter. While its data centre revenue was US$1.6 billion, up 45 percent year-on-year.
