Advanced Micro Devices (AMD) reported fourth-quarter 2023 non-GAAP earnings of 77 cents per share, in line with the Zacks Consensus Estimate. The figure jumped 11.6% year over year.
Revenues of $6.17 billion beat the Zacks Consensus Estimate by 0.88% and increased 10.2% year over year.
AMD shares were down roughly 6.8% in pre-market trading, given unimpressive first-quarter guidance. The company expects weakness in the Gaming and Embedded segment to hurt revenues in the current quarter.
Impressive Data Center Expansion
Data Center revenues surged 38% year over year to $2.28 billion and accounted for 37% of total revenues. Sequentially, revenues increased 43%, driven by the strong adoption of fourth-generation AMD EPYC CPUs and AMD Instinct GPUs.
In cloud, server CPU revenues increased year over year and sequentially as North American hyperscalers expanded fourth Gen EPYC Processor deployments to power their internal workloads and public instances.
Growth and Diversification in Client Segment
Client segment revenues soared 61.8% year over year to $1.46 billion and accounted for 23.7% of total revenues. Revenues benefited from strong Ryzen 7000 Series CPU sales.
The Gaming segment, however, experienced a decrease of 16.8% year over year, attributed to lower semi-custom revenues.
Operating Efficiency and Financial Position
Non-GAAP gross margin contracted 30 basis points (bps) on a year-over-year basis to 50.8%, primarily due to lower Embedded segment revenues. Non-GAAP operating expenses increased 7.8% year over year to $1.73 billion.
Operating cash flow was reported at $381 million compared with $421 million in the third quarter of 2023. AMD also maintained a robust balance sheet, with cash and cash equivalents of $5.77 billion, providing stability amidst economic vagaries.
Resilient Outlook and Strategic Direction
AMD expects to expand its gross margin in 2024. It will continue to invest to address the large AI opportunities while driving operating model leverage to deliver earnings growth faster than top-line revenue growth.
Overall, for 2024, AMD expects the demand environment to remain mixed, with strong growth in its Data Center and Client segments, offset by declines in the Embedded and Gaming segments. This prudent approach aligns with the company’s sustained commitment to adapt and thrive in volatile market conditions.
Conclusion
AMD’s commendable fourth-quarter performance underscores its resilience and strategic foresight amidst market challenges. Although the company faces anticipated headwinds in certain segments, its robust position in the Data Center and Client segments, coupled with a focus on innovation, augurs well for sustained growth and investor confidence. As AMD navigates the evolving economic landscape, its unwavering commitment to operational efficiency and strategic investments sets a benchmark for adaptability and market leadership.