AMD Q2 FY 2022 Earnings Report Recap

Advanced Micro Devices Financial Results: Analysis

Advanced Micro Devices, Inc. (AMD) reported Q2 FY 2022 earnings that were mixed relative to analyst expectations. Earnings Per Share (EPS) solidly beat estimates and enterprise, embedded, and semi-custom segment revenue also surpassed analyst predictions. Total revenue increased by 70% year-over-year (YOY), in line with expectations. That increase was driven by growth across all segments but also the inclusion of Xilinx revenue.

AMD's New Segments

In Q2, AMD began reporting using a new set of revenue segments in light of AMD's diversification outside of its traditional business of providing graphical processing units (GPUs) and processors to desktop and laptop computers. This has been spurred by greater data center demand from the rise of cloud computing and the increased number of embedded chips in various products such as cars. AMD's new segments are gaming, client, data center, and embedded. The first two segments are for its consumer GPU and CPU business. Data center is AMD's sales to large data centers, such as those for cloud computing platforms, and embedded overs chips used in other products such as cars.

Data Center segment revenue was $1.5 billion, up 83% year-over-year in Q2 FY 2022. Client segment revenue was $2.2 billion, up 25% YOY, driven by mobile processor sales. Gaming segment revenue was $1.7 billion, up 32% YOY driven by higher semi-custom product sales. Embedded segment revenue was up 2,228% YOY driven by the inclusion of Xilinx embedded revenue.

AMD's old Enterprise, Embedded, and Semi-Custom segment roughly covered the new data center, embedded, and a semi custom chips within its gaming segment. While AMD does not specify what portion of gaming revenue comes from semi-custom chips, just the data center and embedded segment revenues of $2.8 billion already exceeded the consensus expectation of $2.7 billion for the old combined segment.

AMD Outlook and Stock Performance

In its earnings release, AMD announced it expects revenue for Q3 FY 2022 to be about $6.7 billion, plus or minus $200 million. That would represent an increase of about 55% YOY. The company expects FY 2022 revenue to be roughly $26.3 billion, plus or minus $300 million. That would be an increase of about 60% over 2021.

AMD stock was up about 2.9% in extended trading hours following the earnings release, as of this writing. AMD has underperformed the S&P 500 over the past year, returning -8.6% compared to the S&P 500's -6.8%.

AMD Earnings Call Recap

In the quarterly report, AMD Chair and Chief Executive Officer (CEO) Dr. Lisa Su said the company delivered its eighth straight quarter of record revenue. She attributes that to a "strong execution and expanded product portfolio."

Su, in a conference call with analysts after results were released, was increasingly pessimistic about demand for PCs. She said that AMD expected the PC business to drop in the “mid-teen” percentage range, which is steeper than three months ago when she expected a decline in the high-single-digit percentage range this year. Su's outook today is more pessimistic than rival Intel's.

AMD's next earnings report (for Q3 FY 2022) is expected to be released on Oct. 25, 2022.