AMD Forecasts Deepening Slump in PC Sales as Consumer Demand Softens
Advanced Micro Devices Inc.
AMD -0.67%
issued a glum sales outlook for the current quarter and said it would cut spending as the chip maker responds to a deep slump in demand for consumer products.
AMD Chief Executive
Lisa Su
said the company was cutting expenses in businesses that weren’t doing as well to adapt to the soft demand outlook. She didn’t quantify the amount of the cuts on a call with analysts Tuesday after the company issued third-quarter earnings.
AMD said it expected around $5.5 billion of revenue in the current quarter, up by 14% but below what analysts forecast in a FactSet survey.
The subdued outlook reflected a challenged market for PCs that its chips feature in, and follows a warning last month for the third quarter, when AMD, a competitor to
Intel Corp.
INTC -0.46%
, told investors that the market was declining faster than expected and reduced its revenue guidance. Ms. Su said that the PC market could fall by close to 20% this year.
The company is expecting global economic weakness to also impact its business supplying chips for servers that go into datacenters. That business has been a strong point for AMD, driven partly by demand from fast-growing cloud-computing companies in North America. But Ms. Su said corporate buyers of servers were being more cautious about building out their computing infrastructure.
“We have seen customers taking longer to make decisions and perhaps being a little bit more conservative” on capital spending, she said.
AMD reported third-quarter results Tuesday, including sales of $5.6 billion, which was in line with that warning. The company posted net income of $66 million, down 93% from the prior-year’s figure to reflect accounting changes from a recent acquisition and higher research and development spending.
The muted outlook for the fourth quarter comes as many tech companies get stung by slowing consumer spending, rising interest rates and soaring inflation. The turnabout follows a long-running surge in demand for technology amid the shift toward learning and working remotely at the outset of the Covid-19 pandemic.
Intel last week said it was cutting costs aggressively to cope with the downturn, including through targeted layoffs. The company reported a 20% drop in third-quarter sales and forecast even weaker revenue in the fourth quarter.
Microsoft Corp.
,
Amazon.com Inc.,
Google parent
Alphabet Inc.
and
parent
Meta Platforms Inc.
all gave worse-than-expected outlooks last week, although
Apple Inc.
bucked declines in global smartphone sales this year, reporting record revenue for the third quarter.
Tech companies have been hardest hit in arenas most sensitive to consumer demand, like PCs for AMD and Intel. Sales in the AMD division that includes chips for PCs fell by 40% to $1 billion in the third quarter, the company said. But the datacenter division, which houses its server chips, posted a 45% rise in sales to $1.6 billion, around what analysts expected.
The company’s gaming division—AMD sells chips that go into popular videogame consoles and for PC gaming—rose 14% to $1.6 billion of revenue.
AMD’s stock rose by over 4% in aftermarket trading after disclosing its belt tightening.
While AMD and Intel have struggled in recent quarters, other chip makers have been less directly impacted by economic woes. Companies that cater to the automotive industry, for example, continue to experience high demand for less cutting-edge chips that has caused a shortage and delayed production at the world’s top auto makers.
Toyota Motor Corp.
on Tuesday lowered its production targets, citing persistent issues with chips.
U.S. chip makers
Texas Instruments Inc.
and
On Semiconductor Corp.
, which have large automotive businesses, both said recently that demand in that market remained healthy, even as there have been new signs of weakness in some chips sold for industrial uses.
NXP Semiconductors
NV, a Dutch chip maker that derives about half its revenue from the auto industry, said Monday that supplies were constrained and demand was resilient despite economic uncertainty.
As they confront headwinds in consumer-electronics markets, some chip makers, including AMD, are facing new U.S. curbs on dealings with China. Some of AMD’s most advanced chips geared toward artificial-intelligence calculations require a license from the Commerce Department to be sold in China, although Ms. Su said Tuesday that the restrictions had a minimal impact on revenue in the near term.
Write to Asa Fitch at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Advanced Micro Devices Inc.
AMD -0.67%
issued a glum sales outlook for the current quarter and said it would cut spending as the chip maker responds to a deep slump in demand for consumer products.
AMD Chief Executive
Lisa Su
said the company was cutting expenses in businesses that weren’t doing as well to adapt to the soft demand outlook. She didn’t quantify the amount of the cuts on a call with analysts Tuesday after the company issued third-quarter earnings.
AMD said it expected around $5.5 billion of revenue in the current quarter, up by 14% but below what analysts forecast in a FactSet survey.
The subdued outlook reflected a challenged market for PCs that its chips feature in, and follows a warning last month for the third quarter, when AMD, a competitor to
Intel Corp.
INTC -0.46%
, told investors that the market was declining faster than expected and reduced its revenue guidance. Ms. Su said that the PC market could fall by close to 20% this year.
The company is expecting global economic weakness to also impact its business supplying chips for servers that go into datacenters. That business has been a strong point for AMD, driven partly by demand from fast-growing cloud-computing companies in North America. But Ms. Su said corporate buyers of servers were being more cautious about building out their computing infrastructure.
“We have seen customers taking longer to make decisions and perhaps being a little bit more conservative” on capital spending, she said.
AMD reported third-quarter results Tuesday, including sales of $5.6 billion, which was in line with that warning. The company posted net income of $66 million, down 93% from the prior-year’s figure to reflect accounting changes from a recent acquisition and higher research and development spending.
The muted outlook for the fourth quarter comes as many tech companies get stung by slowing consumer spending, rising interest rates and soaring inflation. The turnabout follows a long-running surge in demand for technology amid the shift toward learning and working remotely at the outset of the Covid-19 pandemic.
Intel last week said it was cutting costs aggressively to cope with the downturn, including through targeted layoffs. The company reported a 20% drop in third-quarter sales and forecast even weaker revenue in the fourth quarter.
Microsoft Corp.
,
Amazon.com Inc.,
Google parent
Alphabet Inc.
and
parent
Meta Platforms Inc.
all gave worse-than-expected outlooks last week, although
Apple Inc.
bucked declines in global smartphone sales this year, reporting record revenue for the third quarter.
Tech companies have been hardest hit in arenas most sensitive to consumer demand, like PCs for AMD and Intel. Sales in the AMD division that includes chips for PCs fell by 40% to $1 billion in the third quarter, the company said. But the datacenter division, which houses its server chips, posted a 45% rise in sales to $1.6 billion, around what analysts expected.
The company’s gaming division—AMD sells chips that go into popular videogame consoles and for PC gaming—rose 14% to $1.6 billion of revenue.
AMD’s stock rose by over 4% in aftermarket trading after disclosing its belt tightening.
While AMD and Intel have struggled in recent quarters, other chip makers have been less directly impacted by economic woes. Companies that cater to the automotive industry, for example, continue to experience high demand for less cutting-edge chips that has caused a shortage and delayed production at the world’s top auto makers.
Toyota Motor Corp.
on Tuesday lowered its production targets, citing persistent issues with chips.
U.S. chip makers
Texas Instruments Inc.
and
On Semiconductor Corp.
, which have large automotive businesses, both said recently that demand in that market remained healthy, even as there have been new signs of weakness in some chips sold for industrial uses.
NXP Semiconductors
NV, a Dutch chip maker that derives about half its revenue from the auto industry, said Monday that supplies were constrained and demand was resilient despite economic uncertainty.
As they confront headwinds in consumer-electronics markets, some chip makers, including AMD, are facing new U.S. curbs on dealings with China. Some of AMD’s most advanced chips geared toward artificial-intelligence calculations require a license from the Commerce Department to be sold in China, although Ms. Su said Tuesday that the restrictions had a minimal impact on revenue in the near term.
Write to Asa Fitch at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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