As if AMD’s Q1 financial performance wasn’t bad enough, the company’s revised Q2 guidance is actually worse than expected. The company originally forecast a 3 percent sequential drop in quarterly revenue (the company added a +/- 3 percent margin or error indicating a 6 percent decline as worst case scenario), but now has revised that figure to a more troubling 8 percent.
AMD’s Q1 2015 revenue came in at $1.03 billion, so an 8 percent dip in Q2 revenue would put the company at roughly $948 million (analysts were expecting revenue of around $999.6 million). Compared to Q2 2014, when AMD pulled in $1.44 billion, this would represent a 26 percent decline year-over-year.
Non-GAAP gross margin will also come in at 28 percent versus a previously forecast 32 percent. AMD’s channel inventory, however, is in line with expectations. And the company also reported better than expected sales for its Enterprise, Embedded and Semi-Custom business (we have to give a shout out to the Xbox One and PlayStation 4 here).
AMD CEO Lisa Su
AMD partially blames weaker than expanded demand in the PC sector (this is a common, tired refrain in the PC sector), which is affecting Accelerated Processing Unit (APU) sales to its OEM partners. The downturn is to be expected as consumers and businesses are ramping up for the release of Windows 10 later this month. If things don’t start picking up by Q3 and most certainly by the Q4 (a traditional high point for the tech industry), then we should definitely start worrying about the company that has perennially lurked in Intel’s shadows.
The company is also blaming a $33 million charge as a result of moving several of its next generation chips from 20 nanometer fabs to a “leading edge FinFET” process (we’re expecting either 14nm or 16nm).
The bad news sent AMD shares tumbling nearly 14 percent in after hours trading. Over the past 52 weeks, AMD shares have dropped 42 percent.