10-QPeriod: Q3 FY2023

ADVANCED MICRO DEVICES INC Quarterly Report for Q3 Ended Jul 1, 2023

Filed August 2, 2023For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported its second-quarter 2023 results, indicating a challenging period primarily driven by a significant downturn in the PC market. Net revenue for the quarter was $5.36 billion, an 18% decrease year-over-year, largely attributed to a 54% decline in the Client segment due to lower PC shipments and inventory corrections. Despite the revenue drop, gross margin remained stable at 46%, benefiting from stronger performance in the Embedded segment and lower amortization of acquisition-related intangibles. The company posted a net income of $27 million, a sharp decrease from $447 million in the prior year, resulting in diluted earnings per share of $0.02. While the Data Center segment saw a modest revenue decline of 11%, the Embedded segment demonstrated robust growth of 16%. AMD continues to invest heavily in Research and Development, with a 11% increase in R&D expenses for the quarter, signaling a commitment to future innovation amidst market headwinds. The company maintains a strong liquidity position with $6.3 billion in cash, cash equivalents, and short-term investments.

Financial Highlights

54 data points
Beta

Revenue

$5.80B

47.4% Gross Margin

Net Income

$299.00M

5.2% Net Margin

EPS (Diluted)

$0.18

Total Assets

$67.63B

Cash & Equivalents

$3.56B

Free Cash Flow

$551.00M

Financial Statements
Beta
Revenue$5.80B
Cost of Revenue$3.05B
Gross Profit$2.75B
R&D Expenses$1.51B
SG&A Expenses$576.00M
Operating Income$224.00M
Interest Expense$26.00M
Net Income$299.00M
EPS (Basic)$0.18
EPS (Diluted)$0.18
Shares Outstanding (Basic)1.62B
Shares Outstanding (Diluted)1.63B

Key Highlights

  • 1Net revenue declined 18% year-over-year to $5.36 billion, primarily due to a 54% decrease in the Client segment, reflecting a weak PC market and inventory correction.
  • 2Gross margin remained strong at 46%, consistent with the prior year, supported by improved Embedded segment performance and lower amortization expenses.
  • 3Net income dropped significantly to $27 million from $447 million in the prior year, leading to diluted earnings per share of $0.02.
  • 4The Data Center segment revenue decreased by 11% year-over-year, while the Embedded segment revenue grew by 16%, highlighting diversified performance across business units.
  • 5Research and Development expenses increased by 11% year-over-year to $1.44 billion, indicating continued investment in future product development.
  • 6The company ended the quarter with a robust cash, cash equivalents, and short-term investments balance of $6.3 billion, providing significant financial flexibility.
  • 7AMD repurchased $241 million of its common stock during the first six months of the year, with $6.3 billion remaining under its authorized repurchase program.

Frequently Asked Questions

The primary driver for the year-over-year revenue decline is the significant contraction in the Client segment, which saw a 54% decrease in revenue. This is attributed to a weaker personal computer market and an ongoing inventory correction across the PC supply chain, leading to fewer processor shipments and a lower average selling price.

Despite the revenue decline, AMD has maintained its gross margin at 46% by offsetting lower Client segment performance with higher Embedded segment revenue and a reduction in the amortization of acquisition-related intangible assets. The company has also seen a slight decrease in Marketing, General, and Administrative expenses, though Research and Development expenses have increased by 11% as AMD continues to invest in future technologies.

AMD maintains a strong liquidity position with $6.3 billion in cash, cash equivalents, and short-term investments. While the second quarter was impacted by the PC market downturn, the growth in the Embedded segment and continued R&D investment suggest a focus on long-term strategic growth. The company expects to fund its operations, including capital expenditures and purchase commitments, through its existing resources and credit facilities.

The Xilinx acquisition is significantly contributing to the Embedded segment's performance, with embedded product revenue showing a substantial increase due to the inclusion of Xilinx for a full six-month period in 2023 compared to a partial period in 2022. However, the acquisition also contributes to substantial amortization of acquisition-related intangible assets, which is accounted for in 'All Other' operating expenses.