By Chavi Mehta and Jane Lanhee Lee
(Reuters) -Advanced Micro Devices expects sales growth in its PC and data center businesses in the second half, Chief Executive Lisa Su said on Tuesday, but a below-expectations second-quarter forecast showed the chip market will remain weak until then.
AMD shares dropped 5% after hours. Executives at AMD rival Intel Corp last week told investors they expected the PC market to start rebounding in the second half, raising Intel’s margins with it. Those remarks had spurred hopes that AMD’s PC business might also show signs of recovery, but the company’s results showed demand remains down.
“AMD results were more vulnerable than Intel’s because most AMD-based PC customers were consumers. In contrast, Intel had a significant share in the business PC segment,” said Mikako Kitagawa, analyst at research firm Gartner. “The results reflect a weaker consumer PC segment than the business PC segment.”
Enterprise, cloud, and China server customers have been cutting orders, with AMD rival Intel expecting data center demand to decline throughout the first half and recover only moderately in the second half. The weakness is also pronounced amid US cloud customers, analysts said.
Order cuts by networking equipment makers have also cast a shadow over demand for products by Xilinx, the data center and networking chip company AMD acquired last year.
Su told investors on a conference call that the company expects better sales in both the PC segment and in data centers, driven in part by a forthcoming chip that will compete with Nvidia Corp’s flagship chips for artificial intelligence. Su said customer interest in that chip is growing.
“We remain confident in our ability to grow in the second half of the year,” she said.
AMD forecast current-quarter revenue of about $5.3 billion, plus or minus $300 million. Analysts polled by Refinitiv were expecting revenue of $5.48 billion.
Revenue in the quarter ended April 1 came in at $5.35 billion, compared to estimates of $5.30 billion.
Revenue from AMD’s client segment, which includes personal computers, fell 65% to $739 million in the first quarter.
Data center segment revenue was flat at $1.30 billion during the quarter.
(Reporting by Chavi Mehta in Bengaluru; Editing by Maju Samuel and David Gregorio)
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