[Asia Economy Reporter Minji Lee] AMD (Advanced Micro Devices) is facing growing concerns about the industry outlook after posting weak third-quarter results due to sluggish PC business performance. This is notable as the company had previously shown relatively strong performance compared to other firms.
On the 9th, AMD's stock price stood at $58.44. It has plummeted 9.3% over the past week and has fallen 61% on an annual basis. The weak third-quarter results amid expanding worries about the semiconductor industry's slowdown have significantly dragged down the stock price in a short period.
Most business units fell short of market expectations in the third quarter. Revenue for Q3 was $5.6 billion, down more than 17% from the market forecast of $6.5 to $6.9 billion. The gross profit margin (GPM) was around 50%, 54% lower than previous estimates, due to reduced sales volume and declining average selling prices.
By business segment, the data center, gaming, and embedded divisions all saw double-digit growth compared to the same period last year. The data center segment, which includes server CPUs and GPUs, grew 44% year-over-year but fell 7% short of market expectations. Youngho Ryu, a researcher at Mirae Asset Securities, explained, “The gaming segment recorded solid results thanks to the peak season effect of console products despite weak GPU demand. The data center segment saw a decline in enterprise sales, and the embedded segment grew 1549% year-over-year due to the Xilinx merger effect.”
However, the client segment, which includes the PC CPU business, dropped more than 40%. This was due to weak demand and supply chain inventory adjustments. Earlier, AMD conservatively forecasted that the PC market would shrink by 15% year-over-year this year. Youngho Ryu of Mirae Asset Securities noted, “Both AMD and Intel planned to launch new products starting in the fourth quarter, so there is a possibility of pent-up demand. However, if the demand slowdown is not due to pent-up demand or inventory adjustments for new products, the PC market downturn is likely to be prolonged. The gaming segment in Q4 is expected to face challenges in growth compared to the previous quarter due to the off-season for console products.”
Market experts predict that it will take more time for investor sentiment to improve regarding the industry outlook due to AMD’s weak earnings. The earnings shock indicates that front-end demand is deteriorating faster than market concerns. Junho Moon, a researcher at Samsung Securities, said, “This earnings report reveals that AMD cannot escape the impact of shrinking front-end demand, so profit forecasts will likely be revised downward. However, it should be noted that the stock price has already fallen significantly, and expectations for market share expansion next year compared to other companies remain valid.”
Meanwhile, the company plans to share its industry outlook and Q4 guidance during an earnings conference call after market close on November 1.
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