AMD Revenues Drop, but Company Expects Datacenter Wins Later in 2023
Today, AMD reported its financial results for Q1 2023. The headline: revenues ($5.4 billion) are down by 9.2% year-over-year, just barely beating expectations amid turmoil among the economy in general and AMD’s competition. However, the company is also projecting effectively flat revenues of $5.3 billion in Q2 2023 (±$300 million), which elicited disappointment from analysts. Despite the decline in revenue and the less-than-optimistic projections for the coming quarter, AMD CEO Lisa Su sought to project an air of imminent opportunity as needs for acceleration grow. AMD shares fell around five percent in after-hours trading.
AMD’s revenue declines were largely attributable to client revenue, which dropped 64% year-over-year ($2.1 billion in Q1 2022, $739 million in Q1 2023) due to plummeting PC sales. Datacenter revenue remained almost exactly flat – $1.293 billion in Q1 2022, $1.295 billion in Q1 2023 – but these earnings (along with those of the client segment) fell short of expectations.
Su characterized the Q1 earnings as “better-than-expected” given the “mixed-demand environment.” Within the datacenter segment, Su said that “high cloud sales [were] offset by lower enterprise sales.” Su explained that enterprise sales declined because “end customer demand softened due to near-time macroeconomic uncertainty.” On the other hand, Su touted wins with cloud providers and reminded the audience that a variety of server providers have begun production on systems based on 4th-gen “Genoa” CPUs, as well.
In the webcast, Su cited supercomputing wins like the Max Planck Society’s announcement (“the first supercomputer in the EU powered by fourth-gen Epyc CPUs and … MI300 accelerators”) and recent applications of the AMD-powered LUMI system. This latter point also tied in with another (predictable) focus of the earnings call: AI and large language models (LLMs). “Customer interest has increased significantly for our next-generation Instinct MI300 GPUs for both AI training and inference of large-language models,” Su said.
Of course, the biggest supercomputing win for AMD that will (ostensibly) arrive this year is the exascale El Capitan supercomputer at Lawrence Livermore National Laboratory, which will leverage AMD’s hybrid CPU-GPU MI300 “APU.”
“We made excellent progress achieving key MI300 silicon and software readiness milestones in the quarter,” Su said, “and we’re on track to launch MI300 later this year to support the El Capitan exascale supercomputing at Lawrence Livermore National Laboratory and large cloud AI customers.” Later in the call, Su specified an MI300 ramp beginning in the fourth quarter with “supercomputing wins” as well as “early cloud AI wins.” She also hinted that more MI300 specifications would be arriving in the “coming quarters.”
Further: “We are on track to launch Bergamot, our first cloud-native server CPU, and Genoa-X, our fourth-gen Epyc processor with chiplets for leadership and technical computing workloads, later this quarter.”
In light of all this, Su said that while AMD expects server demand to “remain mixed” in the second quarter, they also see the company as “well-positioned” to grow its enterprise footprint in the back half of the year. Along with embedded computing, AMD sees datacenter as one of its core opportunities for growth, “led by accelerating adoption of our AI products.” Su specifically cited an expectation for double-digit datacenter growth from full-year 2022 to full-year 2023.
“We are in the very early stages of the AI computing era, and the rate of adoption and growth is faster than any other technology in recent history,” Su said. “And as the recent interest in generative AI highlights, bringing the benefits of large-language models and other AI capabilities to cloud, edge and endpoints requires significant increases in computer performance. AMD is very well-positioned to capitalize on this increased demand for compute[.]”
It’s hard to take too harsh a view of AMD’s earnings given the state of its competition: Intel announced its worst-ever quarterly loss last week, with Q1 2023 revenues declining 36% relative to Q1 2022’s. While Intel significantly beat its own guidance for that quarter, it remains to be seen whether the aggressive streamlining and pivoting occurring at the chip giant is, indeed, successfully positioning it for growth and paving a path out of its current losses.