(Bloomberg) — Advanced Micro Devices Inc., the second-largest maker of computer processors, gave a better-than-feared sales forecast for the first quarter as gains in the lucrative server market help make up for a collapse in demand for PC chips.
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Revenue will be as much as $5.6 billion in the period, AMD said in a statement Tuesday, compared with an average analyst prediction of $5.56 billion — with estimates coming in as low as $5 billion.
The forecast highlights the gains that the company has made at the expense of its bigger rival in computer processors, Intel Corp., and helped send AMD up in late trading. The shares, which were up 3.7% at the close in New York, jumped as much as 4.6% following the announcement.
AMD has beaten Intel to the market with more capable chips for the machines that run corporate networks and serve as the backbone for cloud-computing data centers. That’s allowed it to take share in a market where spending has held up better than the PC industry.
“As we enter 2023, we expect the overall demand environment to remain mixed — with the second half stronger than the first half,” Chief Executive Officer Lisa Su said on a conference call. Su said she expects the data-center business to continue to win, fueling further growth this year.
AMD’s data-center business posted a sales increase of 42% from a year earlier, with revenue of $1.7 billion. Sales at the client division, its PC chip unit, dropped 51% to $903 million.
Intel, meanwhile, saw its overall sales plunge 32% last quarter. Revenue for the company’s data-center and artificial-intelligence business fell 33%.
After two years of struggling to keep up with demand, chipmakers are now facing one of the industry’s periodic gluts. Makers of components for computers and smartphones have been among the hardest hit, with those companies seeing sharp declines in sales and profitability.
Under Su, AMD has been one of the biggest gainers in the chip industry. And with the company continuing to take market share, it’s not suffering as much as bigger players like Intel.
AMD sees a PC market of about 260 million units this year, down from 290 million in 2022. The company has been shipping fewer chips as its customers draw down inventory, she said. Su predicted that the first quarter would represent the bottom for that part of her company.
In the fourth quarter, profit was 69 cents a share, excluding some items. Revenue gained 16% to $5.6 billion. Analysts had predicted earnings of 67 cents and revenue of $5.52 billion.
Though a less severe drop than expected, the outlook represents the company’s first year-over-year quarterly sales decline since 2019, ending a growth streak that elevated AMD into the upper ranks of the chip industry.
(Updates with chart after seventh paragraph.)
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