AMD Posts Q4 Earnings Growth, Despite Industry Challenges; Expects to Capitalize on AI Demand

Advanced Micro Devices Inc.’s (AMD) latest earnings report highlights the company’s impressive performance despite several challenges being faced by the PC industry

For the entire year, AMD’s yearly revenue increased by 44% to $23.6 billion. In terms of the company’s financial performance for the fourth quarter, revenue climbed 16% over the prior year to $5.6 billion. The company's sales of embedded products also grew from $3.9 billion in 2021 to $10.6 billion in 2022.

Although the fourth quarter saw a 51% decline in revenue for AMD's client segment, which includes PCs, this decline was offset by a 42% increase in revenue for AMD's data center segment. After seeing a rapid expansion during the pandemic, the PC industry as a whole is currently experiencing a significant downturn in sales.

CEO Lisa Su attributed these results to significant growth in AMD’s embedded and data center segments, which she said accounted for more than 50% of overall revenue in the quarter. The debut of a new CPU by AMD and its pandemic-era acquisition of specialty chip manufacturer Xilinx is also helping AMD's data center business thrive.

“We set annual records for revenue, gross margin and profitability driven largely by a 64% increase in our data centre segment revenue and the strong performance of our embedded segment following our Xilinx acquisition.”

Furthermore, AMD's strategic partnerships with major cloud providers have further solidified its position in the data center market, Lisa Su said on the call.

“Turning to the fourth quarter business results, starting with our data center segment. Revenue increased 42% year over year to $1.7 billion, led by increased adoption of our EPYC processors by cloud providers. In cloud, sales to North American hyperscalers more than doubled year over year as hyperscale customers continued moving more of their internal workloads and external instances to EPYC processors.”

Since being bought a year ago, Xilinx has contributed to AMD’s record sales, driven mostly by high demand for Alveo X3 series boards from the financial services industry.

Future Outlook

Bloomberg Intelligence analyst estimates that earnings for chip companies, more generally, will decrease 21% this year, but despite this widespread concern about a downturn in the chip industry, AMD is expected to be among the few semiconductor companies to experience growth in 2023.

Although AMD on Tuesday forecasted $5.3 billion in sales for the quarter ending in March, a 10% decline in revenue over the prior year, the firm anticipates a stronger second half of this year. Su expects the first quarter to be the bottom for the company in PCs and affirmed that they would grow from there into the second quarter and then into the second half

While referring to the company’s earnings for 2022, Su said:

"2022 was a strong year for AMD as we delivered best-in-class growth and record revenue despite the weak PC environment in the second half of the year.”

Despite not providing full-year forecasts for the company due to economic uncertainty, Su remained certain about the company’s performance outlook.

"Although the demand environment is mixed, we are confident in our ability to gain market share in 2023, and deliver long-term growth based on our differentiated product portfolio.”

AMD is also participating in the competition for AI. With a couple of new product releases specifically focused on powering AI engines, including the Ryzen 7000 series and MI300 accelerator, Su acknowledged, on the call, the company's focus on AI over the next years,

“Over the next several years, one of our largest growth opportunities is in AI, which is in the early stages of transforming virtually every industry service and product.”

She further expressed assurance that AMD has a robust product lineup to compete in the AI business.

“We expect AI adoption will accelerate significantly over the coming years and are incredibly excited about leveraging our broad portfolio of CPUs, GPUs and adaptive accelerators in combination with our software expertise to deliver differentiated solutions that can address the full spectrum of AI needs in training and inference across cloud, edge and client.”

Already, more than 100 of the fastest supercomputers in the world are powered by AMD. The fourth-generation EPYC uses up to 80% less energy. AMD also has 140 fourth-generation EPYC platforms for businesses that are being built by HPE, Dell, Lenovo, Super Micro, and other companies. Overall, Su maintains the stance that the company has an adaptive product portfolio that will enable them to grow revenue and gain market share in 2023.