AMD Q1 earnings: Beats on revenue and EPS, but chip sales drop 64%

AMD (AMD) announced its fiscal first quarter earnings after the bell on Tuesday, beating analysts' expectations on the top and bottom line, despite falling short on data center and client revenue.

AMD is contending with a huge drop in PC sales. According to Gartner, worldwide shipments collapsed 30% year-over-year in the first quarter of the year, falling to 55.2 million units. The problem? Limited demand from consumers and businesses and too much inventory mean fewer PCs are being sold. The result? A 64% year-over-year decline in client revenue, which includes sales of PC chips.

Here are the most important numbers from the report compared to what Wall Street expected from the chip maker, as compiled by Bloomberg.

Revenue: $5.4 billion versus $5.3 billion expected

Adj. EPS: $0.60 versus $0.56 expected

Data Center: $1.29 billion versus $1.46 billion expected

Client: $739 million versus $908 million expected

Gaming: $1.75 billion versus $1.52 billion expected

Embedded: $1.56 billion versus $1.46 billion expected

Shares were down roughly 4% following the announcement.

“We executed very well in the first quarter as we delivered better than expected revenue and earnings in a mixed demand environment,” AMD CEO Dr. Lisa Su said in a statement.

“We launched multiple leadership products and made significant progress accelerating our AI roadmap and customer engagements in the quarter. Longer-term, we see significant growth opportunities as we successfully deliver our roadmaps, execute our strategic data center and embedded priorities and accelerate adoption of our AI portfolio.”

CFO Jean Hu, meanwhile, said that the company is confident in second-half growth in both its Data Center and Client segments, which should offset "modest declines" in its Gaming and Embedded businesses.

AMD Chair and CEO Dr. Lisa Su delivers a keynote address at CES 2023 at The Venetian Las Vegas on January 04, 2023 in Las Vegas, Nevada. (Photo by David Becker/Getty Images)Second quarter revenue is expected to come in between $5 billion and $5.6 billion. Analysts called for $5.51 billion.

The PC market is experiencing some of its worst performance in years, as consumers and businesses pull back on purchasing new computers amid increased interest rates.

That said, the pain in the PC market also may have reached a bottom. According to Morgan Stanley Research equity analyst Erik Woodring, “pockets of demand are slowly emerging.”

Sign up for Yahoo Finance's tech newsletter.Woodring says that for the first time in six months, PCs built, which make up 75% of shipments, have been revised upward in two consecutive months. AMD could also benefit from the AI boom, thanks to its graphics card capabilities.

AMD’s numbers are coming as Intel continues to struggle amidst a broader turnaround effort. Rival Nvidia (NVDA), meanwhile, is expected to report its quarterly earnings on May 24. Shares of the graphics chip maker have soared 93% year-to-date as of Tuesday afternoon. AMD shares are up 37%, while Intel is up just 14%.

By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley

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