Hey friends! Happy Fednesday! I wanted to share some thoughts about AMD's Q3 2022 earnings. We're seeing some interesting dynamics play out.
I believe AMD is making incredible strides in their data center and embedded sales, but PC growth is extremely disappointing, down 40% year-over-year. That all being said, while the company achieved year-over-year growth in revenue, it had sequential quarterly deceleration in both revenue and EPS.
Semiconductors remain a challenged space due to a slowing economy, high inflation, and cautious consumers all dampening spending, particularly in client-facing offerings. But there are very encouraging signs from cloud-driven business spending as well as embedded processing that are demonstrating the potential of AMD's core processing technology.
AMD's 128-core and 256-thread EPYC CPUs are significantly more advanced than Intel's 56-core and 112-thread Xeon server processor offerings. AMD has a fabrication-driven technology advantage as they are working with Taiwan Semiconductor, where Intel is using their own, older and currently less advanced fabrication capabilities.
As a result AMD's EPYC processors utilize 7 nm fabrication vs Intel with 14 nm. This is critical as it enables AMD to put far more cores on a single chip than Intel is able to do.
The technological advantages that AMD enjoys have helped to drive enormous growth for AMD in the data center, which grew 45% year-over-year and 8% quarter-over-quarter. Because of the acquisition of Xilinx, we're also seeing impressive growth in AMD's embedded offerings. A key segment as embedded processors, like their data center processors, are likely to be more resilient than AMD's client-facing offerings during tougher economic conditions.
The market seems pleased with AMD's earnings release so far today as shares are up over 6% to start the day. Perhaps they are seeing what I am seeing underneath the surface in this earnings release as well.
Below I've included my highlights from AMD's earnings call and investor presentation. The quotes are directly from AMD's CEO Lisa Su.
Despite the macro backdrop, overall revenue grew 29% year over year to $5.6 billion as our Data Center, Gaming and Embedded segments each delivered significant year-over-year growth and performed in line with our expectations.
Starting with our Data Center segment. Revenue increased 45% year over year and 8% sequentially to $1.6 billion. We delivered our 10th straight quarter of record server processor sales, driven by strong demand for third-gen EPYC processors and initial shipments of our next-generation Genoa CPU to select customers.
Now, into our Client segment. Revenue declined 40% year over year to $1 billion. Our Client processor shipments were below PC consumption in the third quarter as we worked closely with our customers to reduce downstream inventory.
Looking at our Embedded segment. Revenue increased significantly year over year to a record $1.3 billion, driven by growth from aerospace and defense, industrial, and communications customers. Demand across our core markets remain very strong.