10-QPeriod: Q2 FY2023

ADVANCED MICRO DEVICES INC Quarterly Report for Q2 Ended Apr 1, 2023

Filed May 3, 2023For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported a net loss of $139 million 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 million 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 billion in cash, cash equivalents, and short-term investments, and has $6.3 billion remaining under its stock repurchase program.

Financial Highlights

50 data points
Beta

Revenue

$5.35B

44.1% Gross Margin

Net Income

-$139.00M

-2.6% Net Margin

EPS (Diluted)

$-0.09

Total Assets

$67.63B

Cash & Equivalents

$3.83B

Free Cash Flow

$328.00M

Financial Statements
Beta
Revenue$5.35B
Cost of Revenue$2.99B
Gross Profit$2.36B
R&D Expenses$1.41B
SG&A Expenses$585.00M
Operating Income-$145.00M
Interest Expense$25.00M
Net Income-$139.00M
EPS (Basic)$-0.09
EPS (Diluted)$-0.09
Shares Outstanding (Basic)1.61B
Shares Outstanding (Diluted)1.61B

Key Highlights

  • 1Net loss of $139 million in Q1 2023, compared to a net income of $786 million in Q1 2022.
  • 2Total revenue decreased by 9% to $5.35 billion compared to $5.89 billion in the prior year period.
  • 3Client segment revenue declined significantly by 65% due to inventory reduction and weak market conditions.
  • 4Embedded segment revenue surged by 163%, boosted by the full quarter impact of the Xilinx acquisition.
  • 5Gross margin decreased to 44% from 48% year-over-year, impacted by lower Client segment performance and higher amortization costs.
  • 6Research and Development expenses increased by 33% to $1.41 billion, driven by acquisitions and growth.
  • 7Generated $486 million in cash from operating activities in the quarter.

Frequently Asked Questions

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.

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.

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.

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.