AMD revises Q2 guidance; gross margin, revenue fall

— 4:09 PM on July 6, 2015

AMD is revising its Q2 2015 financial guidance. The company expects that sequential revenue and gross margin will both decline more than previously expected. Sequential revenue is expected to fall eight percent, as opposed to the three percent (plus or minus three percent) decrease that the company estimated at the end of the first quarter. Non-GAAP gross margin for the quarter will end up around 28 percent, as opposed to the 32-percent figure provided previously.

The reasons for the change in guidance are two-fold. First, the firm cites lower-than-expected demand for consumer PCs, which hurt its sales of APUs to big PC makers.

Second, the company is taking a charge of $33 million associated with a change in its product plans. Several of its chips currently in development were initially targeted to use TSMC's 20-nm fabrication process, but the company has decided to move those chips over to a more advanced FinFET-based process technology instead.

Here's the meat of the statement provided by AMD:

AMD announced today that revenue for the second quarter ended June 27, 2015 is expected to be lower than previously guided.  The company now expects second quarter revenue to decrease approximately 8 percent sequentially, compared to the previous guidance of down 3 percent, plus or minus 3 percent.  The sequential decrease is primarily due to weaker than expected consumer PC demand impacting the company’s Original Equipment Manufacturer (OEM) APU sales.  The company expects second quarter channel sales and channel inventory reduction efforts to be in-line with the company’s plans.

The company anticipates non-GAAP gross margin to be approximately 28 percent, compared to the previous non-GAAP guidance of approximately 32 percent primarily due to a higher mix of Enterprise, Embedded and Semi-Custom segment sales and lower than anticipated Computing and Graphics segment APU unit volumes due to weaker than expected OEM PC product demand.  Additionally the company anticipates GAAP gross margin to be further impacted by a one-time charge of approximately $33 million associated with a technology node transition from 20 nanometer (nm) to FinFET.  The company started several product designs in 20nm that will instead transition to the leading-edge FinFET node.

Cash and cash equivalents at the end of the second quarter are expected to be approximately $830 million, in line with expectations.

AMD will announce its Q2 financial results next Thursday after the markets close, and it'll hold a conference call that day to discuss the results at 2:30 PM PT. 

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