Thursday, October 6th 2022
AMD Trims Q3 Forecast, $1 Billion Missing, Client Processor Revenue down 40%, Halved Quarter-over-Quarter
AMD (NASDAQ:AMD) today announced selected preliminary financial results for the third quarter of 2022. Third quarter revenue is expected to be approximately $5.6 billion, an increase of 29% year-over-year. AMD previously expected revenue to increase approximately 55% year-over-year at the mid-point of guidance. Preliminary results reflect lower than expected Client segment revenue resulting from reduced processor shipments due to a weaker than expected PC market and significant inventory correction actions across the PC supply chain.
Revenue for the Data Center, Gaming, and Embedded segments each increased significantly year-over-year in-line with the company's expectations. Gross margin is expected to be approximately 42% and non-GAAP(*) gross margin is expected to be approximately 50%. AMD previously expected non-GAAP gross margin to be approximately 54%. The gross margin shortfall to expectations was primarily due to lower revenue driven by lower Client processor unit shipments and average selling price (ASP). In addition, the third quarter results are expected to include approximately $160 million of charges primarily for inventory, pricing, and related reserves in the graphics and client businesses.Third quarter operating expenses are expected to be approximately $2.4 billion and non-GAAP operating expenses are expected to be approximately $1.5 billion. Non-GAAP operating expenses are lower than previous expectations of $1.6 billion driven by lower variable compensation expenses in the quarter.
"The PC market weakened significantly in the quarter," said AMD Chair and CEO Dr. Lisa Su. "While our product portfolio remains very strong, macroeconomic conditions drove lower than expected PC demand and a significant inventory correction across the PC supply chain. As we navigate the current market conditions, we are pleased with the performance of our Data Center, Embedded, and Gaming segments and the strength of our diversified business model and balance sheet. We remain focused on delivering our leadership product roadmap and look forward to launching our next-generation 5 nm data center and graphics products later this quarter."
This update does not present all necessary information for an understanding of AMD's financial condition as of the date of this release, or its results of operations for the third quarter of 2022. As AMD completes its quarter-end financial close process and finalizes its financial statements for the quarter, it will be required to make judgments in a number of areas. It is possible that AMD may identify items that require it to make adjustments to the preliminary financial information set forth above and those adjustments could be material. AMD does not intend to update any financial information prior to release of its final third quarter financial statement information, which is currently scheduled for Nov. 1, 2022.
AMD Q3'22 Earnings Conference Call
AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) on Nov. 1, 2022 to discuss its third quarter 2022 financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at www.amd.com.
Revenue for the Data Center, Gaming, and Embedded segments each increased significantly year-over-year in-line with the company's expectations. Gross margin is expected to be approximately 42% and non-GAAP(*) gross margin is expected to be approximately 50%. AMD previously expected non-GAAP gross margin to be approximately 54%. The gross margin shortfall to expectations was primarily due to lower revenue driven by lower Client processor unit shipments and average selling price (ASP). In addition, the third quarter results are expected to include approximately $160 million of charges primarily for inventory, pricing, and related reserves in the graphics and client businesses.Third quarter operating expenses are expected to be approximately $2.4 billion and non-GAAP operating expenses are expected to be approximately $1.5 billion. Non-GAAP operating expenses are lower than previous expectations of $1.6 billion driven by lower variable compensation expenses in the quarter.
"The PC market weakened significantly in the quarter," said AMD Chair and CEO Dr. Lisa Su. "While our product portfolio remains very strong, macroeconomic conditions drove lower than expected PC demand and a significant inventory correction across the PC supply chain. As we navigate the current market conditions, we are pleased with the performance of our Data Center, Embedded, and Gaming segments and the strength of our diversified business model and balance sheet. We remain focused on delivering our leadership product roadmap and look forward to launching our next-generation 5 nm data center and graphics products later this quarter."
This update does not present all necessary information for an understanding of AMD's financial condition as of the date of this release, or its results of operations for the third quarter of 2022. As AMD completes its quarter-end financial close process and finalizes its financial statements for the quarter, it will be required to make judgments in a number of areas. It is possible that AMD may identify items that require it to make adjustments to the preliminary financial information set forth above and those adjustments could be material. AMD does not intend to update any financial information prior to release of its final third quarter financial statement information, which is currently scheduled for Nov. 1, 2022.
AMD Q3'22 Earnings Conference Call
AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) on Nov. 1, 2022 to discuss its third quarter 2022 financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at www.amd.com.
150 Comments on AMD Trims Q3 Forecast, $1 Billion Missing, Client Processor Revenue down 40%, Halved Quarter-over-Quarter
I posted this elsewhere last week and the kind folks politely explained how wrong I was, using 2021 data.
Intel: Alder lake-H/HX/P/U **does not include desktop model
AMD: Rembrandt (Ryzen 6000 series) and Barcelo (Ryzen 5xx5U) **Barcelo's internal code is same to Cezanne (Ryzen 5xx0U/H), both shares "CZN"
Intel has been gaining desktop market share since Q3 2020. This is one of the things I suspect a lot people don't know, but the information is out there.
Intel's Mobile share started losing share in Q2 2021, after AMD dipped a bit in 2020. That dip was probably due to insufficient supply, Intel was in its element churning out mass quantities of CPUs in 2020. Intel's server segment has been losing market share since Q3 2018.
I would speculate that AMD's market share growth in Q2 may have been due to cheap inventory clearance of older generation CPUs. A search for "New Arrival" on Amazon shows that Intel has 2/3 of the latest generation, while AMD has 2/3 of the older generation.
Amazon (US) - Laptops - Intel - Any New Arrival
116: Alder lake
59: Tiger lake
10: Atom (Gemini / Jasper lake)
6: Old generations (before 10th)
Amazon (US) - Laptops - AMD - Any New Arrival
7: Rembrandt (Zen3+)
1: Barcelo (Zen3)
8: Cezanne (Zen3)
4: Lucienne (Zen2)
5: Old generations (before Ryzen 4000)
Lisa Su said "Significant inventory correction across the PC supply chain," to explain the significant drop in sales this quarter.
The issue is the whole market is shrinking significantly. There is excess inventory, ultimately the excess demand from Covid has "gone".
Additionally, high inflation is restricting consumers budgets and pretty much no one with a modern CPU or GPU from last few years has much incentive to upgrade.
I'd expect chip sales to go below 2019 levels in the next year or two.
www.tomshardware.com/news/lowest-cpu-shipments-in-30-years-amd-intel-q2-2022-cpu-market-share
The cost is crazy to upgrade even more so when i could just pick up a 5800X3D and call it a day.
They never expected this and at the very least should of had DDR4 compatibility and actually made the IHS right in the 1st place, as i know i don't want to deal with the bad cooling with only one real option to keep it cool is to void the warranty.
I gett he feeling people are settling in on whats good enough. Even if i was to replace my other PC i still build another AM4 platform, AM5 is just not worth it.
As example, the lower end X670 motherboards don't have a PCI 5 x16 slot, they're using PCIe 4 x16 apparently to save on cost. Most of them will simply have a PCIe 4 x16 and one PCIe 5 x4 to CPU.
I'm also seeing that none of the B650 boards will have PCIe 5 x16 based on AMDs high level diagrams of B650 connectivity. It appears this is at AMDs behest since there's no technical reason I can think of why it couldn't exist as that connectivity comes from the CPU, not the chipset.
To make matters a bit worse, the bandwidth to the chipset on all of the AMD Zen 4 chipsets is half of what it is to a Z690 or Z790. You could literally saturate that chipset<->CPU bus with a single PCIe 4 x4 m.2 SSD. So all of those connections its capable of driving are nice, as long as you only use a couple of those devices at once. Meanwhile most of the PCIe 5 lanes are not used.
Basically unless you get a $450+ motherboard, a bunch of what you pay for with Zen 4 \ AM5 is going to waste.
So with that backdrop, it makes total sense that the two best selling AM5 motherboards at Microcenter are a $699 X670E Crosshair Hero and the $999 Crosshair Extreme. I pulled this up for multiple locations across the country and these are always the two most popular :
AMD's Client business missed by $1B in revenue. That means they didn't sell a bunch of Zen 3 (Ryzen 5000 series) parts: both desktop and mobile.
It might be worth noting that Intel made a loss for Q2 2022, and they will be reporting on Q3 2022 on 27 October. AMD detailed numbers for the quarter come out on 1 November. Watch this space, I guess.
Of course, there's also a major argument to be made for PCIe 5.0 being pointless in and of itself, for consumer use cases. Current GPUs are barely held back by PCIe 3.0x16, and literally nothing is limited by a PCIe 4.0x16 link. No GPU launching in the useful lifetime of these boards will be meaningfully bottlenecked by PCIe 4.0x16 compared to 5.0x16.
In any case, I don't really agree with you. There's a super common daily use for high chipset bandwidth. It's called doing a backup.
Gross margin took a dip (300-400 basis points at first glance) but it seems unlikely they would have a net loss. A deceleration in profit growth is inevitable though.
Right now there are four desktop PC builds in the house, all Ryzen (three are Zen 3 builds, my daily driver desktop PC is Zen 2, 3700X). AMD has earned plenty from me as an individual consumer.
A 335-mm^2 chip today:
vs a 366-mm^2 chip back in 2015:
Chip production isn't as simple as saying "the same die area should cost the same over time" - you need to take other factors into consideration as well, and you really can't ignore the BOM cost increases from more and more advanced componentry. That doesn't mean the last generation of GPUs isn't overpriced - it is, and it was clearly not designed for cost optimization. There is still quite a bit that can be done to bring down prices at the design and development stages (lowering PCB quality requirements through design tweaks; narrowing RAM buses, etc.), but some of that has also already been done.