AMD's big bet to further move beyond chips for PCs has 'gone very well,' CEO says

Published Wed, Nov 2 20226:22 PM EDT

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

Advanced Micro Devices (AMD) CEO Lisa Su believes the chip designer's blockbuster Xilinx acquisition has gone to plan since it closed in February, with more benefits awaiting on the horizon. Buying Xilinx helped AMD further diversify its business away from personal computers, significantly boosting the company's ability to help power industries like aerospace, automotive and telecommunications. This is in addition to AMD's multiyear push around data center, a central reason we like the company's long-term prospects despite our more cautious view on chips stocks at present . "Things have gone very well. Our acquisition thesis has played out exactly as we had hoped for," Su said Wednesday in a CNBC interview, one day after the Club holding reported third-quarter earnings amid a tough macroeconomic environment for semiconductor companies. The results were slightly softer than analysts expected, even though AMD preannounced disappointing preliminary numbers in early October. While falling short of estimates, Q3 revenue increased 29% to $5.57 billion. AMD expects fourth-quarter revenue of around $5.5 billion to be roughly flat quarter-over-quarter. The only two segments where AMD sees revenue growing sequentially in the fourth quarter are data center and what it calls "embedded," home to Xilnix's sales in the aforementioned industries and others such as defense. By contrast, management expects AMD's traditional end markets — PCs and gaming, primarily on the graphics card side — to see further weakness in Q4 compared with Q3. This demonstrates how the company's diversification strategy can work in cyclical downturns, which the semiconductor industry is known to experience from time to time. Its more recent areas of focus — data center and embedded — are holding up for now while there's weakness in parts of the company's consumer-focused end markets. While it's not clear when these tough times in the chip sector will end, Su told Jim Cramer that the AMD-Xilinx pairing has the potential to get even better thanks to intellectual property synergies. After all, it's been less than a year since the companies began to share a roof. "With the Xilinx portfolio, we've been able to actually help accelerate the growth in that [embedded] business when you look at the supply chain and just all the dema