AMD's Q2 earnings report may not be as good as Intel's

AMD$Advanced Micro Devices (AMD.US)$ The Q2 earnings report will be released after the market closes on August 1 local time.

According to AMD's forecast, the midpoint of its revenue guidance range for the second quarter of 2023 is $5.3 billion, a year-on-year decrease of 19%, and basically flat quarter-on-quarter. According to Zacks consensus estimates, the market generally expects revenue to be $5.32 billion, a decrease of 18.73% from the same period last year, and the market generally expects earnings per share to be 57 cents, a year-on-year decrease of 45.71%.

These results are not very optimistic, especially when compared to the recent earnings report from long-time rival Intel, which just released a better-than-expected financial report.

After two consecutive quarters of losses, Intel has finally returned to profitability, with both quarterly revenue and net profit exceeding the upper end of the company's guidance.

The earnings report shows that Intel's revenue for the second quarter was $12.9 billion, down 15% year-over-year but higher than the market expectation of $12.02 billion; net profit was $1.473 billion, compared to a net loss of $454 million in the same period last year; gross margin fell by 0.7 percentage points year-over-year to 35.8%; adjusted gross margin was 39.8%, higher than the company’s previous forecast of 37.5%; adjusted earnings per share were 13 cents, better than the market expectation of a loss of 3 cents per share.

In the first quarter, the performance was as bad as it could get. Intel's total revenue for the first quarter dropped 36% year-over-year and 16% quarter-over-quarter to $11.7 billion, slightly above analysts' expectations of $11.1 billion, but still close to its lowest level since 2010.

Analysts believe that Intel's recovery in performance is mainly due to strong PC sales.

But this is precisely the reason for AMD's poor performance. Some analysis suggests that due to the weak personal computer market, as well as sluggish trends in data centers and wireless infrastructure, AMD's second-quarter revenue growth is expected to be affected by a decline in client revenue.

According to Gartner's latest report, global PC shipments totaled 59.7 million units in the second quarter of 2023, down 16.6% year-over-year. According to Zacks model, AMD's client revenue is expected to drop 62.4% year-over-year to $809.2 million. Additionally, gaming revenue is estimated to fall 6.6% to $1.55 billion.

However, this does not affect AMD’s optimism about the PC market. AMD Chairman and CEO Lisa Su recently expressed confidence in the PC market, stating that she believes there is still great potential in the personal computer sector.

But for AMD, AI will likely become the most watched focus in the future. This year, large language models like ChatGPT have gained significant attention, driving rapid growth in high-end GPU sales.

NVIDIA, the king of GPUs, has become the biggest beneficiary, pushing its market value close to $1 trillion. As the seasoned 'second-place player' in the chip industry, AMD naturally won’t give up on such a massive market.

As early as June, it launched the most advanced GPU Instinct MI300 for training large models using ADM. Reportedly, the Instinct MI300A is touted as the world's first Accelerated Processing Unit (APU) accelerator designed for AI and high-performance computing (HPC). It features 146 billion transistors spread across 13 chiplets. Built on the CDNA 3 GPU architecture with 24 Zen 4 CPU cores, it comes equipped with 128GB of HBM3 memory. Compared to its predecessor, the MI250, the MI300 delivers an eightfold increase in performance and a fivefold improvement in efficiency. Earlier during the launch event, AMD explained that the new Zen 4c core offers higher density than the standard Zen 4 core, being 35% smaller while maintaining 100% software compatibility.

However, this product does not seem to have satisfied the capital markets. AMD's stock price notably declined on the day of the release, closing down 3.61%, whereas its competitor NVIDIA closed up 3.90%, with its market value surpassing the $1 trillion mark for the first time.

But for AMD, regardless, its AI initiatives will not stop. As for its new quarterly earnings report, how it performs remains to be seen when the results are released on Wednesday.

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