AMD posted a record $13.4 billion quarter even as its gaming revenue fell 40 per cent, Ars Technica reports, with its data centre business doubling. The result shows how far the chipmaker’s weight has shifted towards chips for large computing facilities.
The company and its results
Advanced Micro Devices, usually called AMD, is an American semiconductor company that designs processors and graphics chips. Its customers include operators of large server fleets, personal computer manufacturers, games console makers and builders of specialised equipment. Like other listed companies, it publishes a financial report every quarter, and that report divides revenue by business line.
That division is the point of interest here. Ars Technica reports a record quarter of $13.4 billion, a doubling of the data centre business and a 40 per cent fall in gaming revenue. The overall figure and the gaming figure moved in opposite directions because they measure different markets with different buyers.
A data centre is a building full of networked computers that run cloud services, corporate software and artificial intelligence workloads. Gaming, in AMD’s reporting, has broadly covered graphics cards for PCs and custom chips supplied to console makers. The first market buys computing capacity as business infrastructure, while the second depends on consumer products and their replacement cycles.
Origins of the split
AMD began as a chip supplier in the shadow of larger rivals, and for much of its history it was known chiefly as a second source of x86 processors, the architecture created by Intel that dominates PCs and servers. Gaming became more prominent when AMD bought ATI, a Canadian graphics company, whose Radeon line gave it a direct competitor to Nvidia’s graphics cards.
Owning both processor and graphics designs allowed AMD to combine them on one chip. That capability made it a natural supplier to console makers, and its custom designs went into Sony’s PlayStation and Microsoft’s Xbox machines. For years this semi-custom work gave the company a steady source of income at a time when its position in PCs and servers was weak.
The company later separated from its factories, spinning off manufacturing into what became GlobalFoundries, and came to rely on outside producers, chiefly TSMC. It then rebuilt its processor line around the Zen design, which led to Ryzen chips for PCs and EPYC chips for servers. EPYC took AMD back into the data centre market, and its Instinct accelerators extended that effort into the chips used for training and running AI models.
Current business mechanics
AMD does not, for the most part, manufacture its own chips. It designs them, pays contract manufacturers to make them, and sells the finished products. Revenue therefore depends on how many chips customers order, at what price, and whether the company can obtain enough manufacturing capacity.
The data centre business sells to cloud providers, large companies and other organisations. Two product families are central: server processors, which handle general computing, and accelerators, which perform the large volumes of parallel calculation that AI models require. Individual orders can be very large, because a single customer may equip entire buildings. Nvidia is the main rival in accelerators and Intel the long-standing rival in server processors.
The gaming business behaves differently. Console chips follow a generational cycle: shipments tend to be strong in the years after a new machine launches and to weaken as that machine ages and console makers manage their stocks. Because a console maker buys chips before consumers buy consoles, revenue can move ahead of retail demand. Graphics cards for PCs have their own cycle, tied to new product launches and consumer spending.
The summary of the report available for this article does not say what caused the 40 per cent fall, and it gives no period for comparison. Comparisons of this kind are usually made with the same quarter a year earlier, but that should be checked against the company’s own figures. The general mechanics above are context, not a confirmed explanation of this result.
Common misunderstandings
The first error is to read a record total as a sign that every part of a company is growing. A total can rise to a new high while one line shrinks sharply, provided another line grows by more. That appears to be the pattern in the reported figures.
The second is to treat a fall in gaming revenue as proof that fewer people are playing games or that they are abandoning AMD hardware. Revenue records what AMD sold to its customers, and many of those customers are companies, not players. A console maker ordering fewer chips says something about its production plans and stock levels, which may differ from how many people are playing at any given moment.
The third is to assume revenue equals profit. A record revenue figure says nothing by itself about margins, spending on research or earnings. The figures available here do not include profit, so no conclusion about profitability can be drawn from them.
The fourth concerns percentages. A percentage change describes a line relative to its own earlier size, so a doubling and a 40 per cent fall cannot be compared in dollars without the underlying amounts. The size of each business line in this quarter is not given in the material used for this article.
Finally, a weak quarter is not a strategic decision. A decline in gaming revenue does not show that AMD is leaving the gaming market, and nothing in the reported summary indicates that it is.
Frequently asked questions
Why did AMD’s gaming revenue fall 40 per cent?
Ars Technica reports the 40 per cent fall, but the summary used for this article gives no cause, so none is asserted here. Gaming revenue in general is affected by ageing console generations, console makers’ stock levels and graphics card demand. AMD’s quarterly report is the place to check its stated reasons.
How much revenue did AMD make in its record quarter?
Ars Technica reports that AMD had a record quarter of $13.4 billion. The same report describes the data centre business as having doubled and gaming revenue as having fallen 40 per cent. Profit and the dollar size of each business line are not included in the material used here.
What does AMD’s data centre business sell?
AMD’s data centre business sells chips for the servers that run cloud services, corporate software and artificial intelligence workloads. Its main products are EPYC server processors and Instinct accelerators, which perform large volumes of parallel calculation. Customers include cloud providers and large organisations. The main rival products come from Intel and Nvidia.
Does AMD make the chips in PlayStation and Xbox consoles?
AMD designs the custom chips used in recent PlayStation and Xbox consoles, combining processor and graphics technology on a single piece of silicon. It does not generally manufacture them itself, relying on contract manufacturers instead. These sales are counted in AMD’s gaming revenue, so they can rise and fall with the console cycle.
Is AMD leaving the gaming market?
Nothing in the reported figures shows that AMD is leaving the gaming market. A 40 per cent fall in gaming revenue, as reported by Ars Technica, describes sales in one period, not a change of strategy. AMD’s plans for gaming products would need to be confirmed from its own statements.
Sources and further reading
- Ars Technica: technology publication whose report supplies the quarterly figures used in this article
- AMD investor relations: the company’s quarterly results and definitions of its business lines
- US Securities and Exchange Commission: public filings by listed companies, including AMD’s periodic reports
- Competitor and customer financial reports: published results from Nvidia, Intel, Sony and Microsoft, for market context
Surfaced from the rss:arstechnica signal “AMD quarterly earnings”. AI-assisted draft, editorially reviewed.
