AMD (NASDAQ:AMD) delivered modestly better-than-expected Q2 results and Q3 guidance. EPS of $0.58 came in better than the consensus estimate of $0.57. Revenue fell 18% year-over-year to $5.4 billion, beating the consensus estimate of $5.32B.
Data Center segment revenue was down 11% year-over-year to $1.3B, mainly attributed to lower sales of the 3rd Gen EPYC processor, as there was lower demand from Enterprise customers and Cloud inventory levels were elevated at some customers. Client segment revenue fell 54% year-over-year to $998 million, primarily caused by a decrease in processor shipments due to a weaker PC market and a significant inventory correction across the PC supply chain.
Gaming segment revenue was $1.6B, down 4% year-over-year, while embedded segment revenue was $1.5B, up 16% year-over-year.
“Our AI engagements increased by more than seven times in the quarter as multiple customers initiated or expanded programs supporting future deployments of Instinct accelerators at scale,” said CEO Lisa Su.
Speaking on the earnings call, Su said that "customer interest in our Instinct MI300A and MI300X GPUs is very high." The company expects Q3/23 revenue in the range of $5.4-$6B, compared to the consensus estimate of $5.82B.
Citi analysts raised the rating on AMD stock to Buy from Neutral with a price target bumped by $16 to $136 per share.
"We thought AMD’s AI products (MI300) would be margin dilutive and investors would eventually care about the expensive valuation on AMD, and we were wrong on both counts," they said.
Oppenheimer analysts remain cautious:
"Difficult to confidently model given lack of design-wins and/or timeline. GM expected to improve 130bps to 51% in 3Q (mix). We remain sidelined as AMD’s AI strategy proves out."
Additional reporting by Senad Karaahmetovic