AMD sees potential in data centers despite PC market decline

Advanced Micro Devices (AMD) Inc on Tuesday predicted some strengthening in its data center business and vowed to be careful on spending, sending its shares higher despite being hit by the deepening PC market slump.

AMD forecast revenue for the fourth quarter and full year below Wall Street estimates, but Summit Insights Group analyst Kinngai Chan suggested investors were prepared for the worse. "While AMD's 4Q22 sales outlook was below consensus expectations, we believe investors are somewhat relieved as they expect AMD's data center and embedded businesses to grow sequentially," Chan said. Anshel Sag, chip analyst at Moor Insights & Strategy, agreed that AMD's data center numbers and excitement over a new graphics chip due out later this week helped sentiment. In a conference call, executives also said the company is prudently controlling expenses and headcount growth. Shares rose 6.3% in after-hours trading. AMD, which makes CPUs and graphics processors for computers and data centers, has been hit hard as inflation has dampened consumer demand for laptops and other devices, leading electronics makers to cut chip orders. That prompted AMD last month to cut its third-quarter revenue forecast by about $1 billion. PC shipments will fall 13% this year, according to Counterpoint Research. According to research firm Gartner (NYSE:IT), they fell 19.5% in the third quarter. "Third quarter results were below our expectations due to softness in the PC market and significant inventory reductions in the PC supply chain," said AMD Chairman and CEO Lisa Su, adding that the so-called data center, game console and embedded markets are driving growth. The North American cloud market is the most resilient among data center market segments, Su said, adding that she does not expect a significant recovery in the Chinese data center market in 2023. The company expects current quarter revenue to be $5.5 billion, plus or minus $300 million. Analysts on average expect revenue to be $5.85 billion, according to Refinitiv data. For the full year 2022, AMD expects revenue to be about $23.5 billion, up 43% from 2021, plus or minus $300 million, while analysts expect $23.9 billion. Revenue in the customer segment, which includes chips for desktops, fell 40% to $1 billion in the third quarter. Data Center revenue was $1.6 billion, up 45% year-on-year. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!