AMD revenue forecast misses estimates, shares slide
CHIPMAKER Advanced Micro Devices (AMD) forecast first-quarter revenue below Wall Street estimates on Tuesday (Jan 30) but projected strong sales for its artificial intelligence (AI) processors.
As companies look to develop and operate their own generative AI applications, enterprise budgets are being funnelled into processors used in AI servers.
Large and small businesses are looking for alternatives to the advanced AI chips produced by Nvidia, which commands roughly 80 per cent market share. AMD has one of the few viable alternative products in the market.
AMD’s fourth-quarter data centre segment revenue, which includes its AI server chips, grew 38 per cent from a year ago to US$2.3 billion.
“AMD delivered an underwhelming quarter, with a notable miss on operating income and operating margins standing out the most,” said Jesse Cohn, an analyst at Investing.com.
“The company had little margin for error amid lofty expectations and investors were disappointed with the forward guidance provided for the current quarter.”
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Shares of the Santa Clara, California-based company fell nearly 6 per cent in extended trading.
AMD forecast US$3.5 billion worth of AI chip sales in 2024, above its prior forecast of US$2 billion, Su said. The company said it exceeded its expected US$400 million of fourth-quarter AI chip sales but did not quantify the figure.
The company reported overall fourth-quarter revenue of US$6.17 billion, slightly above analysts’ estimates of US$6.12 billion.
AMD logged an adjusted gross margin of 51 per cent for the quarter, compared to estimates of 51.4 per cent.
AMD said it expects revenue of US$5.4 billion, plus or minus US$300 million, for the current quarter, compared with analysts’ average estimate of US$5.73 billion, according to LSEG data.
On an adjusted basis, AMD forecast first-quarter gross margin of about 52 per cent, compared with the estimate of about 51.7 per cent.
“The forecast is light of our expectations, but data centre (and more importantly AI accelerators) are tracking ahead of our prior estimates,” said Matt Bryson, an analyst at Wedbush.
AMD’s fourth-quarter personal computer (PC) chip segment revenue surged 62 per cent to US$1.5 billion. Post-pandemic sales of PC chips slumped as consumers have not upgraded their machines. The market is slowly returning to its pre-pandemic dynamics, analysts say.
In 2024, worldwide PC shipments are set to grow about 5 per cent following according to data from research firm Canalys.
AMD’s gaming segment shrank 17 per cent to US$1.4 billion, as the company has hit its peak revenue from the chips it designs for Microsoft’s Xbox and the Sony PlayStation 5. AMD’s videogame console revenue, which represents a significant portion of the segment that also includes graphics cards for PCs, typically peaks four years after the launch of new systems.
The market for programmable chips, which can be customised to perform a variety of functions, has faltered in past quarters as industries such as automotive and industrial are being hit by a chip supply glut due to weak end-market demand.
AMD’s fourth-quarter embedded segment revenue fell roughly 24 per cent to US$1.1 billion.
Rival Intel also flagged corrections in programmable chip inventories across industries on a post-earnings call, which it said are expected to last to the first half of the year. REUTERS
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