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Because you've all stopped buying PCs, AMD's wiped $1b+ off expected sales

Q3 revenue still set to be up overall, Ryzen biz says in FYI to Wall St

AMD has warned investors its guidance for quarterly revenue was out by $1.1 billion.

The Ryzen processor designer is not due to report its Q3 results until November 1, though has nonetheless decided to give Wall Street a taste of its numbers – a move that businesses rarely use unless they have bad news to disclose or feel investors need to know about changing trading conditions sooner rather than later.

Today’s announcement mixes good and bad news.

The headline item is that AMD now forecasts Q3 revenue of $5.6 billion, down from the $6.7 billion haul (plus or minus $200 million) it previously predicted. That's a 16 percent crash in predicted sales.

The biz has blamed people not buying enough personal computers, and thus its processors for those machines, for its woes.

“The PC market weakened significantly in the quarter,” AMD CEO Dr Lisa Su said in a canned quote. “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.”

Su is not alone in seeing a PC slowdown: IDC found a 15.3 percent year-on-year market decline in Q2 and rival analysts Gartner saw a 12.6 percent dip in the same period.

Both analyst houses attributed the sales slump to a combination of economic uncertainty and rising inflation, and buyers having snapped up all the gear they need to get through the pandemic-driven shift to working-from-home.

The good news we mentioned above is that even with the PC sales slump kicking a billion dollar hole in revenue, AMD’s revised guidance still indicates a 29 percent year-on-year revenue increase for Q3.

Datacenter, gaming, and embedded products delivered that result, with all reporting “increased significantly year-over-year in-line with the company’s expectations.”

Su declared herself “pleased with the performance of our Data Center, Embedded, and Gaming segments and the strength of our diversified business model and balance sheet,” and said AMD “remain[s] focused on delivering our leadership product roadmap and look forward to launching our next-generation 5nm data center and graphics products later this quarter."

The chief exec didn’t address AMD’s margins, which have fallen along with PC sales.

Forecast non-GAAP gross margin of 54 percent was reduced to “approximately 50 percent,” with a roughly $160 million charge related primarily to “inventory, pricing, and related reserves in the graphics and client businesses” denting numbers.

AMD’s warning is another sign, if it were needed, of softening global economic conditions primarily caused by plague, inflation, and war.

Enjoy your weekend, dear reader. If you can. ®

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