AMD reports better-than-expected results even as PC market shows continued weakness

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  • AMD said revenue for the second quarter fell 18% from a year earlier, but results still topped analysts' estimates
  • The company's sales forecast for the third quarter was weaker than expected.
  • The client segment suffered a steep drop in the quarter due to a weak PC market.

AMD reported a revenue decline of 18% in its fiscal second-quarter earnings report on Tuesday, but still topped estimates for sales and profit.

Here's how the company did:

  • Earnings: 58 cents per share, adjusted, versus 57 cents per share expected by Refinitiv consensus estimates.
  • Revenue: $5.36 billion versus $5.31 billion expected by Refinitiv consensus estimates.

For the third quarter, AMD said it expects $5.7 billion in sales, while analysts were looking for revenue of $5.81 billion. The chipmaker said it expects its data center and embedded divisions to grow on a fiscal year basis.

"We are expecting a large ramp in the second half for our Data Center business, weighted towards the fourth quarter and we are still looking at a ZIP code — let's call it 50%, plus or minus, second half to first half," AMD CEO Lisa Su said on a call with analysts.

The chipmaker reported net income of $27 million, or 2 cents per share, down from $447 million, or 27 cents per share, in the year-ago period. AMD excludes certain losses on investments and acquisition-related costs from its earnings.

AMD's processor business has slowed in recent quarters, reflecting a deep slump in the global PC market. AMD's total revenue dropped from $6.55 billion a year ago, marking a second straight quarter of declines.

But AMD is one of the few companies making high-end graphics processing units (GPUs) needed for artificial intelligence, and analysts are watching to see if its server chips can take market share away from top rival Intel. Last week, Intel posted a surprise profit and reported sales that were higher than expected.

Su said on the call that the company is increasing its AI-related research and development spending, and has developed a strategy that includes AI-specific chips and software development.

"Our goal is to make this a significant growth driver for AMD," Su said.

AI could also help PC chip sales, AMD said.

"Going forward, we see AI as a significant PC demand driver as Microsoft and other large software providers incorporate generative AI into their offerings," Su said.

AMD's client group, which includes sales from PC processors, dropped a massive 54% year over year to $998 million because of a "weaker PC market," it said. AMD noted that market conditions are improving.

"We expect our client segment will grow in the seasonally stronger second half of the year based on the strength of our product portfolio," Su said.

AMD's data center segment reported a decline of 11% to $1.3 billion, which the company said was due to lower server processor sales. Some cloud providers had extra inventory during the quarter, the chipmaker said.

During the quarter, AMD announced a new chip that's intended to build and run the kind of AI models that are at the heart of applications like ChatGPT. AMD said the MI300X chip was currently being provided to customers for sampling and that production would ramp in the fourth quarter.

AMD sells less-powerful chips and networking parts in its embedded segment, which was the only sector of AMD to grow in the period. The unit's revenue jumped 16% to $1.5 billion.

AMD's gaming segment includes graphics processors for PCs as well as chips for consoles like Sony's PlayStation 5. Sales in the division dropped 4% on an annual basis to $1.6 billion, a decline that could have been worse if not for high demand for "semi-custom" chips like the ones it makes for game consoles.

WATCH: AMD needs to deliver on A.I. in the next few quarters

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