AMD warns of weak Q3 revenues as PC market is weaker than expected

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Advanced Micro Devices preannounced that its third-quarter results will be below its guidance due to a weakening PC market and supply chain challenges.

It is the latest company to say it would have a weak quarter, following Nvidia’s announcement that demand in China was falling off a cliff and it was slowing shipment to clear inventory channels.

AMD said it expects to report Q3 revenue of $5.6 billion, down from previous expectations of $6.7 billion. AMD’s stock is down 3.8% in afterhours trading to $65.28 a share. The $55.6 billion was up 29% from Q3 2021 and down 15% from the previous quarter.

AMD now expects the non-GAAP gross margin to be 50%, down from the previous expectation of 54%.

Client revenue, which was unexpectedly low, was about $1 billion, down 40% from a year ago. Gaming was about $1.6 billion, up 14%. And data center business was $1.6 billion, up 45%. AMD said the embedded business, which benefited from its Xilinx acquisition, was about $1.3 billion.

AMD said the gross margin shortfall was driven by lower revenue due to lower client processor unit shipments and ASP as well as about $160 million of inventory, pricing and related charges the company took in the quarter for the PC CPU and GPU products.

“Although we anticipated a weak PC market, sales to our PC OEMs and the channel were significantly lower than expected as our partners focused on reducing inventory levels across the PC supply chain,” AMD said.

The company reports full results on November 1. Third quarter operating expenses are expected to be approximately $2.4 billion and non-GAAP operating expenses are expected to be approximately $1.5 billion. Non-GAAP operating expenses are lower than previous expectations of $1.6 billion driven by lower variable compensation expenses in the quarter.

“The PC market weakened significantly in the quarter,” said AMD CEO Lisa Su, in a statement. “While our product portfolio remains very strong, macroeconomic conditions drove lower than expected PC demand and a significant inventory correction across the PC supply chain. As we navigate the current market conditions, we are pleased with the performance of our datacenter, embedded, and gaming segments and the strength of our diversified business model and balance sheet. We remain focused on delivering our leadership product roadmap and look forward to launching our next-generation 5nm data center and graphics products later this quarter.”

Originally appeared on: TheSpuzz