Unexpectedly lousy Zen 4 sales could hit AMD hard as the company is projected to lose millions in Q4 2022

AMD has published its financial results for Q3 2022 and while overall, the company is doing good with a 29% year-over-year (y/y) increase in revenue which now stands at US$5.6 billion, the figures are significantly less than previously projected. According to AMD CEO Dr. Lisa Su, “Third quarter results came in below our expectations due to the softening PC market and substantial inventory reduction actions across the PC supply chain”.

The company notes that the bump in revenue is mainly due to stellar growth of the Data Center, Gaming, and Embedded System segments. For instance, Team Red’s EPYC series of server processors continue to sell like hotcakes driving Data Center revenue up by 45% y/y. AMD says that this is the company’s “10^th straight quarter of record server processor sales in Q3’22”.

Similarly, Team Red’s gaming revenue also saw a 14% y/y uptick to US$1.6 billion. The main contributors to the gaming revenue were strong sales of PS5 and Xbox Series S/X consoles all of which use AMD-developed SoCs. However, AMD’s Gaming segment actually recorded a decrease in operating income which went from US$231 million to US$142 million due to weak “graphics revenue and inventory, pricing, and related charges”. From this, we can reasonably deduce that the GPU deluge caused by the crypto mining crash may still be hitting the company hard due to excess inventory of RX 6000 and falling prices.

Moving on, AMD explains that client segment revenue fell by a massive 40% y/y to US$1.022 billion due to a significant reduction in CPU sales. AMD blames the “weak PC market and a significant inventory correction across the PC supply chain” for the lethargic processor shipments.

AMD's Q4 2022 forecast

Perhaps the most interesting information that has come out of AMD’s Q3 earnings call is the Q4 2022 outlook. The company doesn’t expect a big bump in Q4 revenue as it is projecting a 14%y/y increase. This potential slowdown is likely a combination of a slow PC market and poor Zen 4 sales. Semiconductor industry analyst Ian Cutress has posted handy charts breaking down AMD’s forecasts and actual reported figures.

Per AMD’s Q2 2022 financial forecasts, the company expected the Q3 revenue to stand at US$6.7 billion as compared to the final figure of US$5.6 billion. Similarly, where the company expected to make US$7.2 billion in Q4 due to a potentially strong Zen 4 launch, the current forecast only puts the number at US$5.5 billion, a 24% decrease.

Recent reports from several different outlets claim that the sales of the Ryzen 7000 series processors are tanking. Earlier, we reported that the Ryzen 7 5800X3D was the bestselling CPU on Mindfactory, far outpacing the Ryzen 7000 CPUs. On the other hand, Intel Raptor Lake chips like the Core i5-13600K comparatively sold quite well. Similarly, popular tech YouTube channel Hardware Unboxed also recently looked at the CPU sales data on Amazon and found that there was no Zen 4 part in the top 10.

In short, it is safe to assume that Ryzen 7000 processors aren’t moving like AMD expected them to. We can conjecture the bad sales are due to aggressively priced Raptor Lake processors and the high cost of entry for the Zen 4 CPUs as good AM5 motherboards and DDR5 memory, both of which are required for Zen 4, are still comparatively pricey.

AMD is going to unveil the Radeon RX 7000 series GPUs based on the RDNA 3 architecture today. If the new GPUs do manage to compete favorably with Nvidia on both price and performance, the company may have a slightly healthier Q4 than it projects.

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