AMD beats earnings estimates, but gives lukewarm forecast

ADVANCED Micro Devices (AMD), the second-largest maker of computer processors, topped third-quarter earnings estimates and signalled that inroads in the lucrative server chip market will continue to bolster its finances.

Profit was 67 US cents a share in the third quarter, excluding some items, the Santa Clara, California-based company said in a statement on Tuesday (Nov 1). Analysts had estimated 65 cents. Revenue was roughly in line with projections.

In the fourth quarter, sales will be US$5.5 billion, plus or minus US$300 million. Though that missed the average estimate of about US$5.9 billion, it represents an increase at a time when several of AMD's peers are suffering contractions.

Gains in servers and robust demand for custom chips will help bolster AMD's performance, the company said. The shares gained as much as 3.3 per cent in late trading after the report was released.

Chief executive officer Lisa Su said she was confident that AMD's product lineup, balance sheet and growth opportunities in markets such as data centre chips would position the company to "navigate the current market dynamics".

Underlining how important servers are becoming to AMD's finances, the company's data-centre unit posted a revenue increase of 45 per cent from a year earlier. That helped cushion the impact of a 40 per cent drop in its personal computer chip revenue. Strong demand for game-console parts - it supplies Microsoft and Sony Group with custom chips - helped boost sales for AMD's gaming division by 14 per cent.

AMD had warned in October that its third-quarter performance would fall short of projections, and other chipmakers - including Intel and Nvidia - have provided gloomy outlooks for the industry. Facing a shaky economy and soaring inflation, consumers and corporations have turned away from buying computers.

Investors have been seeking signs of whether this steep decline will continue - and take the market back to pre-Covid depths - or settle at the higher level. A rebound to the heights of the early pandemic is now looking increasingly unlikely.

In the third quarter, PC shipments fell 15 per cent to 74 million from the same period a year earlier, according to IDC. The industry had enjoyed a resurgence during the pandemic when the work-from-home trend fuelled demand for equipment.

Under Su, AMD had proven less susceptible to market fluctuations because it's taken share from larger rival Intel with new products. But in the third quarter, Intel said it took back share in PCs.

Su's biggest coup, though, has been the breakthrough in the profitable market for processors that run server machines. In that area, AMD has gone from a share of less than 1 per cent to a double-digit percentage. Su's counterpart at Intel, Pat Gelsinger, said last week he expects tough competition in servers to continue.

AMD shares closed at US$59.66 in New York on Tuesday, leaving them down 59 per cent this year. With fears of a deepening slowdown weighing on the company, AMD has been one of the worst-performing semiconductor stocks in 2022 following a four-year surge. BLOOMBERG

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