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AMD Reports Second Quarter 2023 Financial Results

SANTA CLARA, Calif., Aug. 01, 2023 (GLOBE NEWSWIRE) -- AMD (NASDAQ:AMD) today announced revenue for the second quarter of 2023 of $5.4 billion, gross margin of 46%, operating loss of $20 million, net income of $27 million and diluted earnings per share of $0.02. On a non-GAAP(*) basis, gross margin was 50%, operating income was $1.1 billion, net income was $948 million and diluted earnings per share was $0.58.

“We delivered strong results in the second quarter as 4th Gen EPYC and Ryzen 7000 processors ramped significantly,” said AMD Chair and CEO Dr. Lisa Su. “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. We made strong progress meeting key hardware and software milestones to address the growing customer pull for our data center AI solutions and are on-track to launch and ramp production of MI300 accelerators in the fourth quarter.”

“We are pleased with our second quarter execution,” said AMD EVP, CFO and Treasurer Jean Hu. “Looking to the third quarter, we expect our Data Center and Client segment revenues to each grow by a double-digit percentage sequentially driven by increasing demand for our EPYC and Ryzen processors, partially offset by Gaming and Embedded segment declines.”

GAAP Quarterly Financial Results

 Q2 2023Q2 2022Y/YQ1 2023Q/Q
Revenue ($M)$5,359$6,550Down 18%$5,353Flat
Gross profit ($M)$2,443$3,028Down 19%$2,359Up 4%
Gross margin46%46%Flat44%Up 2ppts
Operating expenses ($M)$2,471$2,508Down 1%$2,514Down 2%
Operating income (loss) ($M)$(20)$526Down 104%$(145)Up 86%
Operating margin0%8%Down 8 ppts(3)%Up 3ppts
Net income (loss) ($M)$27$447Down 94%$(139)Up 119%
Earnings (loss) per share$0.02$0.27Down 93%$(0.09)Up 122%


Non-GAAP(*) Quarterly Financial Results

 Q2 2023Q2 2022Y/YQ1 2023Q/Q
Revenue ($M)$5,359$6,550Down 18%$5,353Flat
Gross profit ($M)$2,665$3,538Down 25%$2,675Flat
Gross margin50%54%Down 4 ppts50%Flat
Operating expenses ($M)$1,605$1,562Up 3%$1,587Up 1%
Operating income ($M)$1,068$1,982Down 46%$1,098Down 3%
Operating margin20%30%Down 10 ppts21%Down 1ppt
Net income ($M)$948$1,707Down 44%$970Down 2%
Earnings per share$0.58$1.05Down 45%$0.60Down 3%


Quarterly Segment Summary

Recent PR Highlights

Current Outlook
AMD’s outlook statements are based on current expectations. The following statements are forward-looking and actual results could differ materially depending on market conditions and the factors set forth under “Cautionary Statement” below.

For the third quarter of 2023, AMD expects revenue to be approximately $5.7 billion, plus or minus $300 million, and expects non-GAAP gross margin to be approximately 51%.

AMD Teleconference
AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its second quarter 2023 financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at www.amd.com.

 
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in millions, except per share data) (Unaudited)  
  Three Months Ended
  July 1,
2023		 April 1,
2023		 June 25,
2022
GAAP gross profit $2,443  $2,359  $3,028 
GAAP gross margin  46%  44%  46%
Stock-based compensation  10   8   8 
Amortization of acquisition-related intangibles  212   305   407 
Acquisition-related and other costs(1)  —   3   95 
Non-GAAP gross profit $2,665  $2,675  $3,538 
Non-GAAP gross margin  50%  50%  54%
       
GAAP operating expenses $2,471  $2,514  $2,508 
GAAP operating expenses/revenue %  46%  47%  38%
Stock-based compensation  338   297   251 
Amortization of acquisition-related intangibles  481   518   616 
Acquisition-related and other costs(1)  47   112   79 
Non-GAAP operating expenses $1,605  $1,587  $1,562 
Non-GAAP operating expenses/revenue %  30%  30%  24%
       
GAAP operating income (loss) $(20) $(145) $526 
GAAP operating margin  0% (3)%  8%
Stock-based compensation  348   305   259 
Amortization of acquisition-related intangibles  693   823   1,023 
Acquisition-related and other costs(1)  47   115   174 
Non-GAAP operating income $1,068  $1,098  $1,982 
Non-GAAP operating margin  20%  21%  30%
       


  Three Months Ended
  July 1,
2023		 April 1,
2023		 June 25,
2022
GAAP net income (loss) / earnings (loss) per share $27  $0.02  $(139) $(0.09) $447  $0.27 
(Gains) losses on equity investments, net  3   —   (1)  —   10   — 
Stock-based compensation  348   0.21   305   0.19   259   0.16 
Equity income in investee  (6)  —   (1)  —   (4)  — 
Amortization of acquisition-related intangibles  693   0.42   823   0.51   1,023   0.63 
Acquisition-related and other costs(1)  47   0.03   115   0.07   174   0.11 
Income tax provision  (164)  (0.10)  (132)  (0.08)  (202)  (0.12)
Non-GAAP net income / earnings per share $948  $0.58  $970  $0.60  $1,707  $1.05 


(1) Acquisition-related and other costs primarily comprised of transaction costs, purchase price adjustments for inventory, certain compensation charges, contract termination and workforce rebalancing charges.
   

About AMD
For more than 50 years AMD has driven innovation in high-performance computing, graphics and visualization technologies. AMD employees are focused on building leadership high-performance and adaptive products that push the boundaries of what is possible. Billions of people, leading Fortune 500 businesses and cutting-edge scientific research institutions around the world rely on AMD technology daily to improve how they live, work and play. For more information about how AMD is enabling today and inspiring tomorrow, visit the AMD (NASDAQ: AMD) website, blog, Facebook and Twitter pages.

Cautionary Statement

This press release contains forward-looking statements concerning Advanced Micro Devices, Inc. (AMD) such as the expected launch and production ramp of AMD Instinct™ MI300 accelerators in the fourth quarter 2023; expected double digit revenue growth in AMD’s Data Center and Client segments on a sequential basis driven by increasing demand for AMD’s EPYC™ and Ryzen™ processors, partially offset by Gaming and Embedded segment declines; the features, functionality, performance, availability, timing and expected benefits of AMD products, and AMD’s expected third quarter 2023 financial outlook, including revenue and non-GAAP gross margin, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are commonly identified by words such as "would," "may," "expects," "believes," "plans," "intends," "projects" and other terms with similar meaning. Investors are cautioned that the forward-looking statements in this press release are based on current beliefs, assumptions and expectations, speak only as of the date of this press release and involve risks and uncertainties that could cause actual results to differ materially from current expectations. Such statements are subject to certain known and unknown risks and uncertainties, many of which are difficult to predict and generally beyond AMD's control, that could cause actual results and other future events to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Material factors that could cause actual results to differ materially from current expectations include, without limitation, the following: Intel Corporation’s dominance of the microprocessor market and its aggressive business practices; global economic uncertainty; cyclical nature of the semiconductor industry; market conditions of the industries in which AMD products are sold; loss of a significant customer; impact of the COVID-19 pandemic on AMD’s business, financial condition and results of operations; competitive markets in which AMD’s products are sold; quarterly and seasonal sales patterns; AMD's ability to adequately protect its technology or other intellectual property; unfavorable currency exchange rate fluctuations; ability of third party manufacturers to manufacture AMD's products on a timely basis in sufficient quantities and using competitive technologies; availability of essential equipment, materials, substrates or manufacturing processes; ability to achieve expected manufacturing yields for AMD’s products; AMD's ability to introduce products on a timely basis with expected features and performance levels; AMD's ability to generate revenue from its semi-custom SoC products; potential security vulnerabilities; potential security incidents including IT outages, data loss, data breaches and cyber-attacks; potential difficulties in upgrading and operating AMD’s new enterprise resource planning system; uncertainties involving the ordering and shipment of AMD’s products; AMD’s reliance on third-party intellectual property to design and introduce new products in a timely manner; AMD's reliance on third-party companies for design, manufacture and supply of motherboards, software and other computer platform components; AMD's reliance on Microsoft and other software vendors' support to design and develop software to run on AMD’s products; AMD’s reliance on third-party distributors and add-in-board partners; impact of modification or interruption of AMD’s internal business processes and information systems; compatibility of AMD’s products with some or all industry-standard software and hardware; costs related to defective products; efficiency of AMD's supply chain; AMD's ability to rely on third party supply-chain logistics functions; AMD’s ability to effectively control sales of its products on the gray market; impact of government actions and regulations such as export administration regulations, tariffs and trade protection measures; AMD’s ability to realize its deferred tax assets; potential tax liabilities; current and future claims and litigation; impact of environmental laws, conflict minerals-related provisions and other laws or regulations; impact of acquisitions, joint ventures and/or investments on AMD’s business and AMD’s ability to integrate acquired businesses; impact of any impairment of AMD’s tangible, definite-lived or indefinite-lived intangible assets, including goodwill, on AMD’s financial position and results of operation; restrictions imposed by agreements governing AMD’s notes, the guarantees of Xilinx’s notes and the revolving credit facility; AMD's indebtedness; AMD's ability to generate sufficient cash to meet its working capital requirements or generate sufficient revenue and operating cash flow to make all of its planned R&D or strategic investments, as well as the impact of financial institution failure on AMD’s cash and cash equivalents; political, legal, economic risks and natural disasters; future impairments of technology license purchases; AMD’s ability to attract and retain qualified personnel; AMD’s stock price volatility; and worldwide political conditions. Investors are urged to review in detail the risks and uncertainties in AMD’s Securities and Exchange Commission filings, including but not limited to AMD’s most recent reports on Forms 10-K and 10-Q.

(*) In this earnings press release, in addition to GAAP financial results, AMD has provided non-GAAP financial measures including non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share. AMD uses a normalized tax rate in its computation of the non-GAAP income tax provision to provide better consistency across the reporting periods. For fiscal 2023, AMD uses a projected non-GAAP tax rate of 13%, which excludes the tax impact of pre-tax non-GAAP adjustments, reflecting currently available information. AMD also provided adjusted EBITDA and free cash flow as supplemental non-GAAP measures of its performance. These items are defined in the footnotes to the selected corporate data tables provided at the end of this earnings press release. AMD is providing these financial measures because it believes this non-GAAP presentation makes it easier for investors to compare its operating results for current and historical periods and also because AMD believes it assists investors in comparing AMD’s performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of its core operating performance and for the other reasons described in the footnotes to the selected data tables. The non-GAAP financial measures disclosed in this earnings press release should be viewed in addition to and not as a substitute for or superior to AMD’s reported results prepared in accordance with GAAP and should be read only in conjunction with AMD’s Consolidated Financial Statements prepared in accordance with GAAP. These non GAAP financial measures referenced are reconciled to their most directly comparable GAAP financial measures in the data tables in this earnings press release. This earnings press release also contains forward-looking non-GAAP gross margin concerning AMD’s financial outlook, which is based on current expectations as of August 1, 2023 and assumptions and beliefs that involve numerous risks and uncertainties. Adjustments to arrive at the GAAP gross margin outlook typically include stock-based compensation, amortization of acquired intangible assets and acquisition-related and other costs. The timing and impact of such adjustments are dependent on future events that are typically uncertain or outside of AMD's control, therefore, a reconciliation to equivalent GAAP measures is not practicable at this time. AMD undertakes no intent or obligation to publicly update or revise its outlook statements as a result of new information, future events or otherwise, except as may be required by law.

AMD, the AMD Arrow logo, EPYC, Radeon, Ryzen, Instinct, Versal, Artix, Spartan, Ultrascale+ and combinations thereof, are trademarks of Advanced Micro Devices, Inc.

 
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions except per share amounts and percentages) (Unaudited)
     
  Three Months Ended Six Months Ended
  July 1,
2023		 April 1,
2023		 June 25,
2022		 July 1,
2023		 June 25,
2022
Net revenue $5,359  $5,353  $6,550  $10,712  $12,437 
Cost of sales  2,704   2,689   3,115   5,393   5,998 
Amortization of acquisition-related intangibles  212   305   407   517   593 
Total cost of sales  2,916   2,994   3,522   5,910   6,591 
Gross profit  2,443   2,359   3,028   4,802   5,846 
Gross margin  46%  44%  46%  45%  47%
Research and development  1,443   1,411   1,300   2,854   2,360 
Marketing, general and administrative  547   585   592   1,132   1,189 
Amortization of acquisition-related intangibles  481   518   616   999   909 
Licensing gain  (8)  (10)  (6)  (18)  (89)
Operating income (loss)  (20)  (145)  526   (165)  1,477 
Interest expense  (28)  (25)  (25)  (53)  (38)
Other income (expense), net  46   43   (4)  89   (46)
Income (loss) before income taxes and equity income  (2)  (127)  497   (129)  1,393 
Income tax provision (benefit)  (23)  13   54   (10)  167 
Equity income in investee  6   1   4   7   7 
Net income (loss) $27  $(139) $447  $(112) $1,233 
Earnings (loss) per share          
Basic $0.02  $(0.09) $0.28  $(0.07) $0.82 
Diluted $0.02  $(0.09) $0.27  $(0.07) $0.81 
Shares used in per share calculation          
Basic  1,612   1,611   1,618   1,612   1,506 
Diluted  1,627   1,611   1,632   1,612   1,521 
                     


 
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions)
     
  July 1,
2023		 December 31,
2022
  (Unaudited)  
ASSETS    
Current assets:    
Cash and cash equivalents $3,841  $4,835 
Short-term investments  2,444   1,020 
Accounts receivable, net  4,312   4,126 
Inventories  4,567   3,771 
Receivables from related parties  2   2 
Prepaid expenses and other current assets  1,339   1,265 
Total current assets  16,505   15,019 
Property and equipment, net  1,541   1,513 
Operating lease right-of-use assets  461   460 
Goodwill  24,177   24,177 
Acquisition-related intangibles, net  22,598   24,118 
Investment: equity method  90   83 
Deferred tax assets  68   58 
Other non-current assets  2,527   2,152 
Total Assets $67,967  $67,580 
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable $2,779  $2,493 
Payables to related parties  313   463 
Accrued liabilities  2,971   3,077 
Current portion of long-term debt, net  753   — 
Other current liabilities  756   336 
Total current liabilities  7,572   6,369 
Long-term debt, net of current portion  1,714   2,467 
Long-term operating lease liabilities  393   396 
Deferred tax liabilities  1,365   1,934 
Other long-term liabilities  1,787   1,664 
     
Stockholders' equity:    
Capital stock:    
Common stock, par value  16   16 
Additional paid-in capital  58,825   58,005 
Treasury stock, at cost  (3,430)  (3,099)
Accumulated deficit  (243)  (131)
Accumulated other comprehensive loss  (32)  (41)
Total stockholders' equity $55,136  $54,750 
Total Liabilities and Stockholders' Equity $67,967  $67,580 
         


 
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions) (Unaudited)
     
  Three Months Ended Six Months Ended
  July 1,
2023		 June 25,
2022		 July 1,
2023		 June 25,
2022
Cash flows from operating activities:        
Net income (loss) 27  447  (112) 1,233 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation and amortization 849  1,180  1,831  1,789 
Stock-based compensation 348  292  657  491 
Amortization of operating lease right-of-use assets 24  21  48  40 
Amortization of inventory fair value adjustment 1  96  3  185 
Loss on sale or disposal of property and equipment 1  —  7  15 
Deferred income taxes (274) (276) (582) (618)
(Gains) losses on equity investments, net 3  10  2  54 
Other (18) (2) (20) (4)
Changes in operating assets and liabilities        
Accounts receivable, net (272) (344) (186) (1,016)
Inventories (332) (248) (796) (274)
Receivables from related parties —  —  —  (1)
Prepaid expenses and other assets (46) 23  (237) (237)
Payables to related parties (41) 156  (150) 277 
Accounts payable 236  24  309  28 
Accrued and other liabilities (127) (341) 91  71 
Net cash provided by operating activities 379  1,038  865  2,033 
Cash flows from investing activities:        
Purchases of property and equipment (125) (132) (283) (203)
Purchases of short-term investments (1,113) (520) (2,816) (620)
Proceeds from maturity of short-term investments 698  1,285  1,171  2,248 
Proceeds from sale of short-term investments 103  —  248  1 
Cash received from acquisition of Xilinx —  —  —  2,366 
Acquisition of Pensando, net of cash acquired —  (1,558) —  (1,558)
Other (1) (3) 5  (4)
Net cash provided by (used in) investing activities (438) (928) (1,675) 2,230 
Cash flows from financing activities:        
Proceeds from debt, net of issuance costs —  991  —  991 
Proceeds from sales of common stock through employee equity plans 141  76  144  78 
Repurchases of common stock —  (921) (241) (2,835)
Common stock repurchases for tax withholding on employee equity plans (66) (31) (87) (66)
Other —  (1) —  (2)
Net cash provided by (used in) financing activities 75  114  (184) (1,834)
Net increase (decrease) in cash and cash equivalents 16  224  (994) 2,429 
Cash and cash equivalents at beginning of period 3,825  4,740  4,835  2,535 
Cash and cash equivalents at end of period 3,841  4,964  3,841  4,964 
             


 
SELECTED CORPORATE DATA
(Millions) (Unaudited)
     
  Three Months Ended Six Months Ended
  July 1,
2023		 April 1,
2023		 June 25,
2022		 July 1,
2023		 June 25,
2022
Segment and Category Information(1)          
Data Center          
Net revenue $1,321  $1,295  $1,486  $2,616  $2,779 
Operating income $147  $148  $472  $295  $899 
Client          
Net revenue $998  $739  $2,152  $1,737  $4,276 
Operating income (loss) $(69) $(172) $676  $(241) $1,368 
Gaming          
Net revenue $1,581  $1,757  $1,655  $3,338  $3,530 
Operating income $225  $314  $187  $539  $545 
Embedded          
Net revenue $1,459  $1,562  $1,257  $3,021  $1,852 
Operating income $757  $798  $641  $1,555  $918 
All Other          
Net revenue $—  $—  $—  $—  $— 
Operating loss $(1,080) $(1,233) $(1,450) $(2,313) $(2,253)
Total          
Net revenue $5,359  $5,353  $6,550  $10,712  $12,437 
Operating income (loss) $(20) $(145) $526  $(165) $1,477 
           
Other Data          
Capital expenditures $125  $158  $132  $283  $203 
Adjusted EBITDA(2) $1,224  $1,257  $2,139  $2,481  $4,106 
Cash, cash equivalents and short-term investments $6,285  $5,939  $5,992  $6,285  $5,992 
Free cash flow(3) $254  $328  $906  $582  $1,830 
Total assets $67,967  $67,634  $67,502  $67,967  $67,502 
Total debt $2,467  $2,467  $2,777  $2,467  $2,777 


(1) The Data Center segment primarily includes server microprocessors (CPUs) and graphics processing units (GPUs), data processing units (DPUs), Field Programmable Gate Arrays (FPGAs) and Adaptive System-on-Chip (SoC) products for data centers.
  The Client segment primarily includes CPUs, accelerated processing units that integrate microprocessors and GPUs (APUs), and chipsets for desktop and notebook personal computers.
  The Gaming segment primarily includes discrete GPUs, semi-custom SoC products and development services.
  The Embedded segment primarily includes embedded CPUs and GPUs, FPGAs, and Adaptive SoC products.
  From time to time, the Company may also sell or license portions of its IP portfolio.
  All Other category primarily includes certain expenses and credits that are not allocated to any of the operating segments, such as amortization of acquisition-related intangible asset, employee stock-based compensation expense, acquisition-related and other costs, and licensing gain.


(2) Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA


  Three Months Ended Six Months Ended
  July 1,
2023		 April 1,
2023		 June 25,
2022		 July 1,
2023		 June 25,
2022
GAAP net income (loss) $27  $(139) $447  $(112) $1,233 
Interest expense  28   25   25   53   38 
Other (income) expense, net  (46)  (43)  4   (89)  46 
Income tax provision (benefit)  (23)  13   54   (10)  167 
Equity income in investee  (6)  (1)  (4)  (7)  (7)
Stock-based compensation  348   305   259   653   433 
Depreciation and amortization  156   159   157   315   287 
Amortization of acquisition-related intangibles  693   823   1,023   1,516   1,502 
Acquisition-related and other costs  47   115   174   162   407 
Adjusted EBITDA $1,224  $1,257  $2,139  $2,481  $4,106 


The Company presents “Adjusted EBITDA” as a supplemental measure of its performance. Adjusted EBITDA for the Company is determined by adjusting GAAP net income (loss) for interest expense, other income (expense), net, income tax provision (benefit), equity income in investee, stock-based compensation, depreciation and amortization expense (including amortization of acquisition-related intangibles), acquisition-related and other costs. The Company calculates and presents Adjusted EBITDA because management believes it is of importance to investors and lenders in relation to its overall capital structure and its ability to borrow additional funds. In addition, the Company presents Adjusted EBITDA because it believes this measure assists investors in comparing its performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The Company’s calculation of Adjusted EBITDA may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view Adjusted EBITDA as an alternative to the GAAP operating measure of income or GAAP liquidity measures of cash flows from operating, investing and financing activities. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities that can affect cash flows.


(3) Reconciliation of GAAP Net Cash Provided by Operating Activities to Free Cash Flow


  Three Months Ended Six Months Ended
  July 1,
2023		 April 1,
2023		 June 25,
2022		 July 1,
2023		 June 25,
2022
GAAP net cash provided by operating activities $379  $486  $1,038  $865  $2,033 
Operating cash flow margin %  7%  9%  16%  8%  16%
Purchases of property and equipment $(125) $(158) $(132) $(283) $(203)
Free cash flow $254  $328  $906  $582  $1,830 
Free cash flow margin %  5%  6%  14%  5%  15%


The Company also presents free cash flow as a supplemental Non-GAAP measure of its performance. Free cash flow is determined by adjusting GAAP net cash provided by operating activities for capital expenditures, and free cash flow margin % is free cash flow expressed as a percentage of the Company's net revenue. The Company calculates and communicates free cash flow in the financial earnings press release because management believes it is of importance to investors to understand the nature of these cash flows. The Company’s calculation of free cash flow may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view free cash flow as an alternative to GAAP liquidity measures of cash flows from operating activities.


Media Contact:
Drew Prairie
AMD Communications
512-602-4425
Email Contact
        
Investor Contact:
Mitch Haws
AMD Investor Relations
408-749-3124
Email Contact


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