By Wallace Witkowski
Advanced Micro Devices Inc. shares fell in the extended session Thursday after the chip maker cut its already conservative forecast because a drop in PC sales after two years of pandemic-driven sales appears worse than feared.
AMD /zigman2/quotes/208144392/composite AMD -1.32% shares fell as much as 4% after hours, following a 0.1% decline in the regular session to close at $67.85.
Late Thursday, the company forecast third-quarter revenue of about $5.6 billion with adjusted gross margin of 50%.
“The PC market weakened significantly in the quarter,” said Lisa Su, AMD’s chair and chief executive, in a statement. “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.”
AMD expects a 40% drop in client sales to about $1 billion, compared with Wall Street’s consensus estimate of $2.04 billion.
In early August, AMD held firm on its revenue forecast of $26 billion to $26.6 billion for the year, and forecast third-quarter revenue of $6.5 billion to $6.9 billion, which at the time fell below the Wall Street consensus , and gross margins of 54%.
Analysts polled by FactSet currently forecast third-quarter revenue of $6.71 billion, and annual sales of $26.13 billion. AMD is scheduled to report quarterly earnings on Nov. 1.
“The gross-margin shortfall to expectations was primarily due to lower revenue driven by lower client processor unit shipments and average selling price,” AMD said. “In addition, the third-quarter results are expected to include approximately $160 million of charges primarily for inventory, pricing and related reserves in the graphics and client businesses.”
Last week, after Micron Technology Inc. /zigman2/quotes/205710729/composite MU -0.76% reported an “unprecedented” oversupply problem, analysts debated whether this supply glut was worse than the one in 2019 that the industry has tried to avoid this time around, following two-years of COVID-19-related demand and supply-chain difficulties.