Advanced Micro Devices reported a slight net profit in the fourth quarter, with strong performance in data centers but weakening sales of chips for game graphics and consumer PCs.

AMD said growth was driven by embedded and data center chip segments, offset by slower sales of client PC and gaming chips. Among its gaming segment, semi-custom console chip sales rose but gaming graphics chips for PCs weakened.

AMD started feeling the effects of a slowdown back in October, when it noted that demand in the PC market was softening. Last week, rival Intel said it saw the effects of a macroeconomic slowdown in Q4 and was taking actions to reduce costs.

AMD’s stock is up 3% in after-hours trading to $77.80 a share. On a GAAP basis, AMD reported net income of 1 cent a share, or $21 million, down 98% from $974 million a year ago.


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Non-GAAP net income was 69 cents a share, or $1.1 billion, flat from the same period a year ago. Non-GAAP revenues were $5.59 billion, up 16% from $4.83 billion a year ago.

Overall, AMD had a strong year in 2022, with revenues up 44% as it took market share from Intel.

“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,” said AMD CEO Lisa Su, in a statement. “We accelerated our data center momentum and closed our strategic acquisition of Xilinx, significantly diversifying our business and strengthening our financial model. 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.”

In an analyst call, Su said that AMD now powers more than 100 of the world’s fastest supercomputers and 15 of the 20 most energy-efficient supercomputers in the world. She said that AMD’s latest Epyc server processors are 80% more energy efficient than the chips that rival Intel just introduced.

She said more than 600 publicly available instances among hyperscalers are using AMD Epyc processors. Su said the company has more than 250 ultra-thin gaming and commercial notebook design wins with the Ryzen 7000 Series CPUs.

While gaming was weak overall, due to slower demand for graphics chips for PCs, she said that game console demand was strong during the holidays. AMD is also launching PC graphics chips right now as it has a new generation of Radeon chips ready.

AMD said earlier it expected Q4 revenue to be approximately $5.5 billion, plus or minus $300 million, an increase of approximately 14% from the same period a year ago and flat sequentially.  The embedded and data center segments were expected to grow year over year and sequentially for Q4 2022.

Intel has more than 70% of the market for server processors, according to Mercury Research. But Intel has been losing share as it was slow to introduce new products in the recent past. The big difference between the companies is that Intel makes its own chips in-house, while AMD uses contract manufacturers like TSMC. This strategic difference has served AMD well lately.

In Q4, AMD’s GAAP gross profit margin was 43%, down 7% from a year earlier, partly due to amortization of intangible assets associated with the Xilinx acquisition. Non-GAAP gross margin was 51%.

AMD reported an operating loss of $149 million, compared with an operating profit of $1.2 billion a year earlier. AMD had $5.9 billion in cash and short-term investments in the quarter.

Data center revenue totalled $1.7 billion in the quarter, up 42%. Operating income for the segment was $444 million, up from $369 million a year ago.

Client PC revenue was $903 million, down 51% from a year ago due to reduced shipments from a weak PC market and an inventory correction across the PC supply chain. Average selling prices were flat year over year, but AMD reported an operating loss of $152 million in comparison to operating income of $530 million a year ago.

Gaming segment revenue was $1.6 billion, down 7% from a year ago. Lower sales of gaming graphics cards were partially offset by higher semi-custom product revenue. Operating income was $266 million, down from $407 million a year ago.

Embedded segment revenue was $1.4 billion, up 1,868% from a year ago, thanks to the inclusion of the acquired Xilinx embedded revenue. Operating income was $699 million, compared with $18 million a year ago.

AMD Outlook

For the first quarter of 2023 (ending March 31), AMD expects revenue to be $5.3 billion, plus or minus $300 million. This is down 10% from a year ago.

Year-over-year the client and gaming segments are expected to decline, partially offset by embedded and data center segment growth. AMD expects non-GAAP gross margin to be approximately 50% in the first quarter of 2023.

Su said there are elevated levels of inventory with some cloud customers and that could lead to a soft first half and stronger second half. Su anticipates the PC market will be down 10% in 2023. She said the company’s product portfolio is strong, and she said console demand has been quite strong and could be down in 2023.

“For 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,” Su said.

AMD announced changes to its senior leadership team earlier, including the retirement of chief financial officer Devinder Kumar after 39 years with the company. The company appointed Jean Hu as AMD chief CFO effective January 23, 2023 and announced the promotion of Forrest Norrod to executive vice president and general manager of the Data Center Solutions business group.

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