AMD Earnings Miss Expectations, China Shipments Delay Causes 5% Share Slump
Advanced Micro Devices (AMD) experienced a significant dip in its share price by over 5%, following the release of earnings that fell short of analyst expectations and uncertainty surrounding the resumption of shipments to China.
The technology company, headquartered in Santa Clara, California, reported adjusted earnings of 48 cents per share, compared to the anticipated 49 cents per share by analysts surveyed by LSEG.
During a call with analysts, CEO Lisa Su acknowledged the impact of U.S. restrictions on artificial intelligence chips. She stated, “AI business revenue declined year over year as U.S. export restrictions effectively eliminated MI308 sales to China, and we began transitioning to our next generation.”
For the current quarter, AMD forecasted revenues between $8.7 billion and $8.1 billion. This figure surpasses the $8.3 billion anticipated by analysts. However, it’s important to note that this projection does not include potential revenue from the MI308 AI chip designed for the Chinese market, which has been affected by chip restrictions.
Su mentioned during an interview with CNBC’s “Squawk on the Street” that AMD has been working closely with the U.S. administration regarding the necessary licenses for shipping chips to China. Despite this collaboration, AMD opted for a cautious approach in its forecasting. Su expressed confidence in the company’s strong portfolio and the substantial potential of the Chinese market, estimating it to be over 500 billion dollars over the coming years.
Earlier in the year, AMD had announced a projected $800 million loss during the second quarter due to chip restrictions. The company later stated in July that it expects to restart those shipments, as the Department of Commerce prepares to resume application review.
Analysts have expressed concerns over the timeline for these shipments’ resumption. Morgan Stanley analysts described the timing as “vague,” adding that the company requires a “near-term upside in GPU” to maintain its premium position. Bernstein analysts noted potential risks associated with pull-forward and inventory, along with rising operating expenses, which they believe may limit earnings leverage.
Investors also expressed concerns about AMD’s datacenter business, which grew 14% to $3.2 billion in the reported quarter, encompassing central processors and graphics processing units. Goldman Sachs analysts voiced reservations over AMD’s ability to achieve significant scale in Datacenter GPUs long-term, citing potential obstacles to operating leverage due to substantial operational expenses required to support software and systems efforts tied to datacenters.
Su stated during the call that the company is anticipating an “inflection point” for compute in the third quarter, with strong forecasts from key customers. She emphasized that the data center business is a major growth driver for AMD.