01—Abstract
Summary
Summary of the 10-Q filed May 3, 2023. Cited figures are marked; the original filing is the authoritative source.
Advanced Micro Devices, Inc. (AMD) reported a net loss of $139 milliona for the first quarter of 2023, a significant shift from the $786 million net income in the same period last year.
This decline was primarily driven by a 65% decrease in the Client segment's revenue, attributed to inventory reduction efforts and weak PC market conditions, as well as a 6% dip in the Gaming segment. The Data Center segment remained flat year-over-year, while the Embedded segment saw substantial growth, largely due to the full quarter inclusion of Xilinx's results. Despite the net loss, the company generated $486 millionb in operating cash flow.
However, operating expenses increased, notably in Research and Development, up 33% year-over-year, driven by acquisitions and organic growth. A significant factor impacting profitability was the increase in amortization of acquisition-related intangible assets, which rose substantially due to the Xilinx acquisition. AMD continues to manage its balance sheet, with $5.9 billionc in cash, cash equivalents, and short-term investments, and has $6.3 billion remaining under its stock repurchase program.
02—Key points
Key Highlights
- Net loss of $139 million in Q1 2023, compared to a net income of $786 million in Q1 2022.
- Total revenue decreased by 9% to $5.35 billion compared to $5.89 billion in the prior year period.
- Client segment revenue declined significantly by 65% due to inventory reduction and weak market conditions.
- Embedded segment revenue surged by 163%, boosted by the full quarter impact of the Xilinx acquisition.
- Gross margin decreased to 44% from 48% year-over-year, impacted by lower Client segment performance and higher amortization costs.
- Research and Development expenses increased by 33% to $1.41 billion, driven by acquisitions and growth.
- Generated $486 million in cash from operating activities in the quarter.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2023, Advanced Micro Devices Inc lost $0.03.
- Revenue$5.35B100.0%
- Cost of revenue−$2.99B55.9%
- Gross profit$2.36B44.1%
- Operating costs−$2.50B46.8%
- Operating income−$145.0M2.7%
- Interest, other & tax$6.0M0.1%
- Net income−$139.0M2.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed May 3, 2023Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $5.35B$6.55B | −18.3% |
| Cost of Revenue | $2.99B$3.52B | −15.0% |
| Gross Profit | $2.36B$3.03B | −22.1% |
| R&D Expenses | $1.41B$1.30B | +8.5% |
| SG&A Expenses | $585.00M$592.00M | −1.2% |
| Operating Income | -$145.00M$526.00M | −127.6% |
| Interest Expense | $25.00M$25.00M | 0.0% |
| Net Income | -$139.00M$447.00M | −131.1% |
| EPS (Basic) | $-0.09$0.28 | −132.1% |
| EPS (Diluted) | $-0.09$0.27 | −133.3% |
| Shares Outstanding (Basic) | 1.61B1.62B | −0.4% |
| Shares Outstanding (Diluted) | 1.61B1.63B | −1.3% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant decrease in net income compared to the previous year?
The primary reasons for the decrease in net income from $786 million to a net loss of $139 million are a substantial decline in revenue from the Client segment (down 65%) due to inventory correction and weak market demand, and an increase in operating expenses, particularly R&D and amortization of acquisition-related intangible assets, largely from the Xilinx acquisition.
How did the Xilinx acquisition impact the financial results?
The Xilinx acquisition significantly boosted the Embedded segment's revenue and operating income due to its full-quarter inclusion in Q1 2023 compared to a partial quarter in Q1 2022. However, it also led to a substantial increase in amortization of acquisition-related intangible assets, negatively impacting gross margin and overall profitability.
What is the company's cash position and liquidity outlook?
AMD ended the quarter with $5.9 billion in cash, cash equivalents, and short-term investments. The company generated $486 million in operating cash flow during the quarter and has $6.3 billion remaining under its stock repurchase program, indicating a solid liquidity position.
What are the key challenges the company is facing, as highlighted in the filing?
Key challenges include the cyclical nature of the semiconductor industry, intense competition (particularly from Intel), global economic uncertainty impacting demand, supply chain risks related to third-party manufacturers, and the significant ongoing amortization costs associated with recent acquisitions.
06—Continue