Xbox really is propping up AMD's GPU business

Xbox really is propping up AMD's GPU business

AMD has released its Q2 financials, and while this is better news than estimates predicted, it still tells a sad story for its GPU division. AMD's gaming business is still profitable, and it's all thanks to the work it's done to earn the bragging rights to power Microsoft and Sony's game consoles.

Both PlayStation 5 and Xbox Series X/S use semi-custom silicon from AMD, and that's part of the gaming segment from the company. AMD has been consistently earning revenue throughout this year, but due to the continued decline in Radeon GPU sales, both its revenue and operating profit are down compared to Q1 results, let alone year-over-year numbers.

We're used to seeing things go down compared to the same period last year, which for AMD was the peak of their potentially revenue results. The company's revenue was $6.6 billion in the second quarter of 2022 and is up to $5.4 billion in the second quarter of this year.

But where things seem to be looking up in the data center (thanks to upcoming AI investments in supercomputing), and more especially in the client segment – ​​CPUs and APUs – there is still a significant ongoing drop in graphics.

“Back for our gaming segment,” says AMD CEO Dr. Lisa Su, “Revenue declined 4% year-over-year to $1.6 billion as higher semi-custom revenue was more than offset by lower gaming graphic sales.
Sequentially, segment revenue dropped 10%. Semi-custom SoC sales were strong in the quarter as both Microsoft and Sony saw healthy console demand based on retail availability globally and new AAA game releases.”

Gaming is still where AMD sees its biggest revenue, although at the same time last year this was the client/CPU segment. You could argue that this paints a bleaker picture for processors as revenue has halved in twelve months, but while their operating income is actually a loss of around $69 million, this represents significant growth in compared to the start of the year.

AMD is hoping a new set of "enthusiast class" graphics cards will help turn things around to return its discrete GPU sales to something more user-friendly. Dr Su announced that we will see new products, and we expect RX 7800 and RX 7700 cards to appear at Gamescom or after September.

The RX 7800 is expected to outperform the RTX 4070, which means it should stand a good chance of regaining some of AMD's lost GPU market share.

It does seem a bit counterintuitive, though, that AMD's GPU sales are so low this year, given that since the mining demand evaporated, there were better performing graphics cards in the mass market and competitive prices.