AMD posts downbeat Q3 sales outlook

Advanced Micro Devices on Tuesday forecast third-quarter revenue slightly below Wall Street estimates, a signal of uncertainty that concerned some investors after the company stock made huge gains in July.

AMD continued to show strong growth in the data center business, at the expense of its rival Intel, but the company cut its market forecast for personal computer sales and shares fell more than 5 percent after hours.

"After the surprisingly challenging quarter that Intel had, a lot of eyes were closely watching to see what AMD did, and overall, the numbers were solid," said Bob O'Donnell, chief analyst at TECHnalysis Research.

"The issue is the market was looking for a better forecast, but it’s clear that the company sees a challenging market going forward.”

Runaway inflation and the reopening of offices and schools have led people to spend less on personal computers (PCs) than they did during lockdowns, hurting companies like AMD, which is among the largest suppliers of central processing units and graphics processing units.

Chipmakers also are under pressure from a spate of Covid curbs in China, an important PC market, and the Ukraine war, which have worsened supply-chain snarls and dragged demand further.

Global shipments of PCs are expected to drop 9.5 percent this year, according to IT research firm Gartner.

Those pressures led to lower-than-expected earnings and forecasts from Intel last week. Analysts had worried that Intel's sales from Datacenter and AI Group (DCAI) falling 16 percent last quarter could also spell out a slowdown in the cloud business which has been booming.

But AMD CEO Lisa Su told analysts on earnings calls that in her interactions with customers, the cloud business continued to be strong. "We're continuing to ramp new cloud instances ... we see that continuing into the second half of the year."

Su said AMD continued to gain market share in the data center business, but is coping with a slowing PC market.

Su told analysts that AMD revised its outlook on the PC market for this year to drop by the mid-teens percent from previous projections of a high single digit percent drop.

Su said AMD was focusing on the higher end PC market.

The company expects revenue of US$6.7 billion (A$9.7 billion), plus or minus US$200 million, for the current quarter compared to analysts' estimate of US$6.82 billion, according to IBES data from Refinitiv.

AMD expanded its full-year forecast to a range of US$26 billion to US$26.6 billion, compared to about US$26.3 billion earlier.