AMD Reduces Q3 Revenue Forecast by $1.1 Billion - Cites Weak PC Market

AMD shared some of its Q3 earnings results today. The company lowered its expected revenue for the quarter by $1.1 billion, from $6.7 billion to $5.6 billion. 

AMD also told investors that its non-GAAP gross margin would be 50%, which was lower than the 54% that was expected. The company said that consumer PC sales were lower than expected and that the PC supply chain had to make a lot of changes to inventory. It did say, though, that its data centre, gaming, and embedded businesses are still doing well.

AMD's warning lowers its revenue projections from a 55% year-over-year growth rate to a 29% year-over-year growth rate. Despite the headwinds, the company will still grow. AMD said that the revenue miss was caused by lower shipments and lower average selling prices (ASPs) for its client processors. This problem has also caused trouble for other companies that make semiconductors, like Intel and Nvidia, because their stockpiles are getting bigger as demand goes down.

Because they have too much inventory, retailers and original equipment manufacturers (OEMs) have to cut prices to get rid of it, which lowers ASPs. AMD's gross margin, which is now expected to be 50% instead of 54%, is also lower because of the lower ASPs. AMD is also taking a charge of $160 million for "inventory, pricing, and related reserves in the graphics and client business."

AMD's shortfall comes after an impressive Q2 in which its revenue grew by 70% year-over-year. It is still taking market share away from Intel, even though sales of desktop CPUs were the lowest they have been in 30 years. But the company's Q2 reports hinted at problems that could happen in the future. Most analysts thought that the company's Q3 forecast was already below expectations.

AMD's competitors in both CPUs and GPUs have seen their sales drop recently due to the weakening PC market and the inventory adjustments that come with it. In August, Nvidia announced that it would miss its earnings by $1.4 billion. This was because GPU sales were falling after the collapse of cryptomining, which led to a bad quarter for the company and a big drop in its stock price. CPU heavyweight Intel also posted its first quarterly loss in decades, losing $500 million as its sales dropped 17%.

Multiple economic factors, like inflation and problems with the supply chain, have shaken up markets all over the world. This has set the stage for the PC market to drop quickly.