AMD Q1 2023 revenue drops 9% as PC chip sales decline sharply

[hist78]

• Revenue: $5.4 billion versus $5.3 billion expected
• Adj. EPS: $0.60 versus $0.56 expected
• Data Center: $1.29 billion versus $1.46 billion expected
• Client: $739 million versus $908 million expected
• Gaming: $1.75 billion versus $1.52 billion expected
• Embedded: $1.56 billion versus $1.46 billion expected

AMD Q1 earnings: Beats on revenue and EPS, but chip sales drop 64%

AMD reported better than expected Q1 earnings on Thursday, though data center revenue fell just short of expectations.

finance.yahoo.com

AMD revenue drops 9% as PC chip sales decline sharply

AMD's report comes as the PC industry is in a deep slump, with shipments dropping 30% in the first quarter, according to IDC.

www.cnbc.com

 

[hist78]

I just recognized that AMD's revenue has reached around 45% of Intel's. This is a drastic change compare to just a few years ago and there will be some serious consequences.

AMD Q1 2023 revenue: $5.35 billion
Intel Q1 2023 revenue: $11.7 billion

AMD Q2 2023 revenue forecast: $5 ~ $5.6 billion
Intel Q2 2023 revenue forecast: $11.5 ~ $12.5 billion

 

[count]

Not a good quarter for AMD.

On the plus side, data center revenue was stable, though still below expectations, and embedded was very strong. This more or less confirms Intel's share gains on the client side, but it's looking like AMD still gaining share in the datacenter.

 

[hist78]

AMD Q1 2023 highlights:

 

[ta152h]

I just recognized that AMD's revenue has reached around 45% of Intel's. This is a drastic change compare to just a few years ago and there will be some serious consequences.

AMD Q1 2023 revenue: $5.35 billion
Intel Q1 2023 revenue: $11.7 billion

AMD Q2 2023 revenue forecast: $5 ~ $5.6 billion
Intel Q2 2023 revenue forecast: $11.5 ~ $12.5 billion

Yeah, but you're not looking closely enough. Intel stepped on them in client, what saved them was the console industry and embedded. Even servers were disappointing, showing their free ride is over. Even so, they weren't really that bad. But client? Oh the humanity! I've never seen anything this bad before. Down 65% from already a low market share. Good grief. Horrific. Intel clearly winning in client right now.

When things go back up, and inventory corrects, consoles won't show the same improvement as client processors, as they weren't impacted the same way.

But, embedded and consoles were great. Consoles are such a plus for AMD, it's what kept them alive during the Bulldozer days. But, they might have competition for them soon.

 

[ta152h]

One thing to consider in this train wreck is, the Xilinx acquisition was completed in the middle of Q1 2022. So if you're wondering why embedded is doing so well, it's competing against that. Next quarter will be a more difficult compare.

It also looks like AMD had an extra week this year, as the quarter ended 4/1, whereas in 2022, it ended 3/26.

 

[vslee]

Intel stepped on them in client, what saved them was the console industry and embedded. Even servers were disappointing, showing their free ride is over. Even so, they weren't really that bad. But client? Oh the humanity! I've never seen anything this bad before. Down 65% from already a low market share. Good grief. Horrific. Intel clearly winning in client right now.

When things go back up, and inventory corrects, consoles won't show the same improvement as client processors, as they weren't impacted the same way.

The big question is how much are the retailers actually selling. Under Client Revenue, they say "Processor shipments significantly below consumption to reduce downstream inventory." So their retail sales are not actually down 65%. Whatever that number is (for both AMD and Intel) is what really matters.

 

[ta152h]

The big question is how much are the retailers actually selling. Under Client Revenue, they say "Processor shipments significantly below consumption to reduce downstream inventory." So their retail sales are not actually down 65%. Whatever that number is (for both AMD and Intel) is what really matters.

Yes, the processors to end customers are not down as much nor were they for Intel. In both cases, there is an inventory burn.

But, the sales from the companies themselves were WIDELY divergent, and show AMD got devastated in market share. Unless you want people to start believing that somehow the Intel inventory burn was less than AMD's, which is nonsensical and has no supporting data. In fact, AMD took a sharper hit in client last quarter than Intel as well. Now, if that were because their inventory burn was more severe, this quarter would have been better, with more of the downstream issue addressed. It wasn't. It was horrific.

Here's the thing, I can't make people believe what they don't want to, nor do I care to. But, clearly AMD got stepped on in client, bad. We're not talking within 5% here, it's roughly twice the drop, while having very low market share to begin with.

Also keep in mind AMD had an extra week this quarter. That's 8% more time. Yeah.

And if you're still struggling with that reality, keep in mind Gelsinger mentioned they gained market share. Did Lisa Su say the same? Nope, and they love to claim they gained market share. They might have s little bit in servers, at least at the beginning of the quarter before SPR ramped. But, in client? Think Sherman. Think Georgia. AMD is Georgia.

 

[Barnsley]

Yes, the processors to end customers are not down as much nor were they for Intel. In both cases, there is an inventory burn.

But, the sales from the companies themselves were WIDELY divergent, and show AMD got devastated in market share. Unless you want people to start believing that somehow the Intel inventory burn was less than AMD's, which is nonsensical and has no supporting data. In fact, AMD took a sharper hit in client last quarter than Intel as well. Now, if that were because their inventory burn was more severe, this quarter would have been better, with more of the downstream issue addressed. It wasn't. It was horrific.

Here's the thing, I can't make people believe what they don't want to, nor do I care to. But, clearly AMD got stepped on in client, bad. We're not talking within 5% here, it's roughly twice the drop, while having very low market share to begin with.

Also keep in mind AMD had an extra week this quarter. That's 8% more time. Yeah.

And if you're still struggling with that reality, keep in mind Gelsinger mentioned they gained market share. Did Lisa Su say the same? Nope, and they love to claim they gained market share. They might have s little bit in servers, at least at the beginning of the quarter before SPR ramped. But, in client? Think Sherman. Think Georgia. AMD is Georgia.

Did someone from AMD run over your dog?

 

[ta152h]

Did someone from.AMD run over your dog?

No, actually, I was an investor in AMD and made a lot of money when Ryzen was released. I wish I could tell you I bought at $2 (which I did) and sold at $140 (which I didn't, I sold at around $12 )

I just like the truth, and don't like deceptions or excuses. It's weak. I don't like arguments with no content, just bland generalities of what could be. It's weak. So, I call it as I see it. Because, I will tell you this, Intel and AMD don't give a damn about you as a person. They aren't your friend, they aren't your enemy. They are businesses, and they want to make money. I don't have an emotional attachment like I might have to a cat.

I just see AMD as being overvalued, and I see their quarter as very poor. And I see people trying to spin it. But, here's the reality. After AMD earnings, it's down 6.5%, Intel was up around 4% after theirs, and is up 2.5% after AMD's. So, the market agrees with my assessment, apparently, in a pretty strong way. I mean, I knew AMD would crash after the earnings, but it's interesting how people realize that Intel is eating their lunch, and consequently moved it up.

But, that's after market. Let's see tomorrow what happens. And the market isn't always right, either. But, what irritates me the most is, I knew I should have short sold AMD, and was going to today, and then never got around to it. I could kick myself .

 

[hist78]

The big question is how much are the retailers actually selling. Under Client Revenue, they say "Processor shipments significantly below consumption to reduce downstream inventory." So their retail sales are not actually down 65%. Whatever that number is (for both AMD and Intel) is what really matters.

Lisa Su mentioned that AMD intentionally underdelivered the volume to the channel and it's less than the market demand. In addition to the reason of reducing inventory in the channels, several other possibilities may explain why AMD chose to do that way:

1. Maintain the ASP (Average Selling Price) as much as possible under this downward market condition.
2. Not to damage AMD's gross margin too much under such bad market demand.
3. Prepare the potential surge in demand for the second half of the 2023.

Looking at AMD Q1 2023 result, its gross margin only dropped 4 ppt (GAAP) or 3 ppt (non-GAAP) Year over Year. It seems AMD did achieve the above #2 goal and generated $328 million free cash flow from operations after paying capital expenditure. For Q1 2023 Intel got negative $8,764 million free cash flow after capital expenditure, compare to positive $5,550 million in Q1 2022.

If Intel can not regain a meaningful and positive free cash flow from operations in the coming quarters, it will greatly limit its ability to compete.

 

[lefty]

The reason Intel won client market share is because they dropped their prices and doubled down on their OEM contracts (i.e. a price drop with some strings attached). Look at the laptop market share drop in 2022 Q3 there is a massive 10% drop, with no apparent reason. (At that time AMD laptop products were in fact superior to Intel's)

 

[ta152h]

Lisa Su mentioned that AMD intentionally underdelivered the volume to the channel and it's less than the market demand. In addition to the reason of reducing inventory in the channels, several other possibilities may explain why AMD chose to do that way:

1. Maintain the ASP (Average Selling Price) as much as possible under this downward market condition.
2. Not to damage AMD's gross margin too much under such bad market demand.
3. Prepare the potential surge in demand for the second half of the 2023.

Looking at AMD Q1 2023 result, its gross margin only dropped 4 ppt (GAAP) or 3 ppt (non-GAAP) Year over Year. It seems AMD did achieve the above #2 goal and generated $328 million free cash flow from operations after paying capital expenditure. For Q1 2023 Intel got negative $8,764 million free cash flow after capital expenditure, compare to positive $5,550 million in Q1 2022.

If Intel can not regain a meaningful and positive free cash flow from operations in the coming quarters, it will greatly limit its ability to compete.

OK, so now we're getting on the same page. AMD did lost market share, and a lot of it. But, and 1 and 2 on your list are similar, and probably have some truth to them. But then we have to ask, why was Intel able to make money in CCG, while AMD took a big loss. It's a bad situation there.

In a phrase "Real men have fabs". By the way, I'm guessing you might know that's from a former CEO of AMD.

Of course Lisa Su said they were lowering inventory in the channel, they had no choice, the channel made that decision. And Intel did the same thing. Both delivered fewer products than were consumed, that's not an AMD only situation. Dropping 65% is though . Good grief.

And in clients, AMD lost money, Intel made money. So, let's not try to switch the discussion to something else. AMD LOST money. Intel MADE money in that segment. Of course, there's all sorts of sorcery behind those numbers (like where you allocate the R&D expenses, CAPEX, etc...), but it's not like AMD had a better quarter there. I love their console business though, and that's been a strength for AMD for a long time. And it saved them again.

Also, again a reminder, they had an extra week this quarter, and still had abysmal numbers.

And no, Intel doesn't have to generate free cash flow right away. The point is, to get the fabs built, the nodes on time, and deliver. Things will take care of themselves. Also, I have said this before, and Intel has as well, Intel front loads their expenses for the beginning quarters of the year, so that's not very important. What is important is that they are on time with products, gaining market share, and working through inventory downstream. Now if they lose money every quarter for a long time, yeah, but this is part of the long term investment strategy, and I think it's a good idea. Trying to maximize profits every quarter and being unwilling to suffer a few bad ones was a strategy previous management had (that swine Krzanich), and the company is still eating the bitter fruit from that.

I sure hope Intel goes after AMD's console business. What an asset that is. It's kept the company alive in the past, and it takes a lot of sting out of bad market conditions, because it's so reliable. And it served them well once again.

 

[ta152h]

The reason Intel won client market share is because they dropped their prices and doubled down on their OEM contracts (i.e. a price drop with some strings attached). Look at the laptop market share drop in 2022 Q3 there is a massive 10% drop, with no apparent reason. (At that time AMD laptop products were in fact superior to Intel's)

Superior in what way? There's no real consensus on that. Also, keep in mind that companies don't just sell their newest and sexiest products.

But, yes, pricing has a huge impact, and I agree with you that is a major driver. If we're honest, we'd have to say that you can get an AMD laptop or Intel laptop and be very happy with either. And that goes for the vast majority (almost all) people. But, where it's tricky for AMD is, they have to pay someone to make their parts, Intel does not. Intel has high fixed costs, but their iterative costs after that are obviously less, especially when you consider TSMC's margins. So, it's a difficult situation for AMD, if Intel wants to go for the kill. Whether they sell for below a point where they can reasonable make money, or simply get largely eliminated from the market is up to them, and neither are good. I'm sure Intel would like to sell for more money too, but they have to keep their fabs moving along, and can sell for less and still make money. What they can't do is fund their fixed costs if they can't sell processors, so this situation wasn't super difficult to predict.

 

[ta152h]

Intel up 3%, AMD down 7% as the market opens. I guess they agree with my point of view on the earnings, and the competitive situation between the two companies. But, the market isn't always right, so it's not really that definitive.

 

[hist78]

The reason Intel won client market share is because they dropped their prices and doubled down on their OEM contracts (i.e. a price drop with some strings attached). Look at the laptop market share drop in 2022 Q3 there is a massive 10% drop, with no apparent reason. (At that time AMD laptop products were in fact superior to Intel's)

I'm wondering what is the market share for each of them in the client computing segment during Q1 2023 and Q4 2022?

 

[ta152h]

Last I saw AMD was below 20% in mobile and desktops, might be lower now.

The other bad thing for AMD was their decline in Data Center QtoQ was higher than Intel's. So, might be losing market share there, but I don't really think so. I think Intel would have said so on their earnings; they said they weren't losing share in servers anymore. I think that's about right, probably maintaining market share, not gaining it. I don't think they will this year, I don't see their product mix as being particularly strong, just adequate.

 

[MKWVentures]

Client is a disaster for Intel and AMD. Datacenter looks like flat for both. That is not good for AMD.

 

[ta152h]

Client is a disaster for Intel and AMD. Datacenter looks like flat for both. That is not good for AMD.

Client was done 36% for Intel, and 65% (really more since AMD had an extra week) for AMD. Both had a lot of inventory downstream to clear out. PC usage, however, is still up, and that implies good things down the road. So, client was WAY worse for AMD, but the 65% drop isn't sustainable, and both companies will go up as the inventory clears out, and the buying blip from COVID ages a bit.

But, AMD has those consoles, and they are an oasis in the desert. They're steady, reliable income. But, AMD is down 9%, Intel is up almost 4%, after being up after their own earnings. Clearly the market sees Intel won this round, big. I'm so stupid for not shorting AMD when I knew they were heading into a buzzsaw .

 

[Daniel Nenni]

AMD stock crashes as Wall Street reacts to 'weak' outlook​

A 9% drop is a crash?

"We are in the very early stages of the AI era," Su said. "This will require significant increases in computer performance. AMD is in a strong position for this opportunity."

Not to jump on the anti AMD bandwagon here but I think domain specific (bespoke) silicon made by Google, Amazon, Microsoft, and the other hyperscalers is a serious threat to AMD and Intel for AI. There are a lot of AI chips in the works that will do ChatGPT and deepfake nonsense much faster and more efficiently than general purpose CPUs and GPUs.