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Advanced micro-devices announced that its third quarter results will be below expectations due to a weakening PC market and supply chain challenges.
It is the latest company to say it would have a weak quarter, following Nvidia’s announcement that demand in China fell off a cliff and delayed shipping to free up inventory channels.
AMD said it expects revenue of $5.6 billion in the third quarter, down from earlier expectations of $6.7 billion. Shares of AMD are down 3.8% in afterhours trading to $65.28 a share. The $55.6 billion was 29% higher than in the third quarter of 2021 and 15% lower than in the previous quarter.
AMD now expects non-GAAP gross margin to be 50%, down from its previous expectation of 54%.
Customer revenue, which was unexpectedly low, was about $1 billion, down 40% from a year ago. Gaming was about $1.6 billion, up 14%. And data center operations were $1.6 billion, up 45%. AMD said the embedded business, which benefited from the Xilinx acquisition, was about $1.3 billion.
AMD said the gross margin shortfall was caused by lower revenues from lower shipments of client processor units and ASP, as well as about $160 million in inventory, pricing and related costs the company charged in the quarter for its PC CPU and GPU. Products.
“While we expected a weak PC market, sales to our PC OEMs and the channel were significantly lower than expected as our partners focused on reducing inventory levels in the PC supply chain,” AMD said.
The company will report full results on November 1. Third quarter operating expenses are expected to be approximately $2.4 billion and non-GAAP operating expenses are expected to be approximately $1.5 billion. Non-GAAP operating expenses are lower than previous expectations of $1.6 billion due to lower variable compensation expenses in the quarter.
“The PC market weakened significantly in the quarter,” AMD chief executive Lisa Su said in a statement. “While our product portfolio remains very strong, macroeconomic conditions drove lower-than-expected PC demand and a significant inventory correction in the PC supply chain. As we navigate the current market conditions, we are pleased with the performance of our data center, embedded and gaming segments and the strength of our diversified business model and balance sheet. We remain focused on delivering our industry-leading product roadmap and look forward to launching our next-generation 5nm data center and graphics products later this quarter.”
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