AMD Stock Drops After Earnings

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Advanced Micro Devices reported better-than- expected earnings results Tuesday afternoon. But the company forecast less revenue than expected for its September quarter, sending the stock lower in after-hours trading.

AMD

(ticker: AMD) cited deteriorating demand in the overall PC market for its guidance.

For the second quarter, the semiconductor company reported adjusted earnings per share of $1.05, compared with Wall Street’s consensus estimate of $1.03, according to FactSet. Revenue came in at $6.6 billion, which was above analysts’ expectations of $6.53 billion. But AMD offered a range for current quarter sales that comes to $6.7 billion at the midpoint versus analysts’ estimate for $6.84 billion.

AMD shares initially fell as much as 5% in late trading following the release.

There was some good news. AMD’s server chip business is still thriving. Second-quarter revenue from its data center segment grew 83% year-over-year during the June quarter.

Intel

(INTC), by comparison, last week reported a 16% year-over-year sales drop for its data-center server unit over the same period.

The company added its next-generation server chip Genoa is on track to launch later this year and is positioned to take more market share from Intel.

But industry demand for computers has been softening. Worldwide shipments for personal computers fell 15% in the June quarter from a year earlier, IDC reported last month. The research firm attributed the drop to “macroeconomic headwinds,” such as rising inflation, as well as supply-chain disruptions.

AMD has a similar view. On the conference call, the company’s management lowered its expectations for the overall PC market. It now expects the PC market to drop by a “mid teens” percent this year versus its prior estimate of a down “high-single digit” percent.

Some analysts believe AMD’s strong position in high-end server processors will help the company overcome general PC weakness. Earlier this week, KeyBanc Capital Markets analyst John Vinh reiterated his Overweight rating on AMD. “We continue to see AMD benefiting from strong demand in U.S. cloud data center,” he wrote.

AMD shares were down 31% this year as of Tuesday’s close. For the same period the

iShares Semiconductor ETF

(SOXX), which tracks the performance of the ICE Semiconductor Index, has declined 25%.

Write to Tae Kim at [email protected]