Computer chipmaker Advanced Micro Devices Inc. brushed aside any concerns of a slowdown in the semiconductor industry today as it delivered first quarter earnings and revenue that beat expectations, sending its stock higher in extended trading.
The company reported earnings before certain costs such as stock compensation of $1.13 per share on revenue of $5.89 billion, up 71% from the same period last year. That helped drive a net income of $786 million for AMD.
The performance was better than expected, with Wall Street analysts looking for earnings of just 91 cents per share on sales of $5.52 billion.
AMD Chairwoman and Chief Executive Lisa Su (pictured) said the quarter was a significant inflection point in the company’s journey to scale and transform its business, delivering record revenue. More important, the quarter makes it clear that AMD is still growing rapidly, with each of its business lines showing significant growth.
“Each of our businesses grew by a significant double digit percentage year-over-year, led by EPYC server processor revenue more than doubling for the third straight quarter,” Su said in a statement.
AMD did especially well to keep growing sales of personal computer chips. Many analysts have forecast that PC sales will shrink this year following two years of explosive pandemic-related growth, but AMD shrugged off any worries that its business may feel the heat.
AMD’s computing and graphics segment, which includes PC chip sales, saw revenue jump 33% compared to one year ago, while growing 8% from the previous quarter. This growth was driven by both central processing units and graphics processing units, the company said. It was helped by the fact the average selling price of its Ryzen chips rose during the quarter.
“Although the PC market is experiencing some softness coming off multiple quarters of near-record unit shipments, our focus remains on the premium, gaming and commercial portions of the market where we see strong growth opportunities,” Su told analysts on a conference call.
Another highlight for AMD was its high-end server chip sales, where it primarily competes with Intel Corp. Server chip sales are included in the company’s Embedded, Enterprise and Semi-Custom business segment, which saw sales jump by 88% to $2.5 billion. According to the company, this was driven by stronger sales of server chips, plus increased shipments of the silicon that powers games consoles like the Sony PlayStation 5. Su said in the call that the semi-custom business, which includes console chips, grew by “double-digits” due to strong demand for the PS5 and also Microsoft Corp.’s Xbox and Valve Corp.’s Steam Deck.
“Sales for this game console generation continue to outpace all prior generations,” Su said. “We expect 2022 to be a record year for our semi-custom business.”
AMD didn’t call it out specifically in the call, but it was no doubt helped by strong sales of its server chips to hyperscale data center operators such as Google LLC. During the quarter, Google Cloud announced a new family of EPYC-based AMD instances for high-performance cloud workloads.
Looking to the next quarter, AMD forecast more of the same, saying it expects sales of around $6.5 billion, give or take $200 million, which would equate to annual growth of 69%. The forecast came in above Wall Street’s consensus estimate of $6.38 billion in revenue.
AMD’s stock has struggled in 2022, declining more than 30% since the start of the year as investors shy away from the semiconductor industry over fears of inflation risk. Last week for instance, Intel Corp. offered a lower forecast, citing weak demand for PC chips and macroeconomic challenges.
AMD’s performance has been more encouraging though, and its stock promptly gained more than 6% in the after-hours trading session, adding to a 1% gain earlier in the day.
During the quarter, AMD announced it had completed its $50 billion acquisition of Xilinx Inc., which makes programmable chips called field-programmable gate arrays. Xilinx has since been transformed into an entirely new business unit at AMD, called the Adaptive and Embedded Computing Group.
The company said this quarter’s results included six weeks of revenue from Xilinx, and that without this its total revenue would have only increased by 55% from the year before.
AMD can expect to see even more revenue added to its business soon, having also announced during the quarter its plans to acquire the data center chip startup Pensando Systems Inc. for about $1.9 billion. Once that deal closes later this year, Pensando will become part of AMD’s Data Center Solutions Group.