The gaming sector’s downward trend is hitting hard, and AMD’s latest earnings report has spotlighted significant declines in their gaming revenue. AMD’s gaming solutions revenue dropped by 48% year-over-year in the first quarter of 2024, largely due to decreased sales of processors for Sony’s and Microsoft’s game consoles and diminished demand for Radeon discrete graphics cards. This slump is expected to persist throughout 2024, with a potential rebound in 2025.
Revenue Dips 48% Year-over-Year
In Q1 2024, AMD’s gaming segment generated $922 million, a 48% drop from the $1.757 billion it made in Q1 2023. This marks a 33% decline from the previous quarter, where it made $1.368 billion. While AMD’s gaming unit posted an operating income of $151 million, it pales in comparison to the $314 million from a year ago.
This steep drop has led to speculation about AMD’s plans for the Radeon RX 8000-series GPUs, which might be postponed given the weak performance of the current RDNA 3-based RX 7000-series. Jean Hu, AMD’s CFO, commented on the Q1 earnings call that semi-custom SoC sales for gaming consoles were down as anticipated due to the fifth year of the console cycle. The decline in demand for discrete GPUs further exacerbated the situation. To hear the full context of AMD’s statements
Console Sales Stagnate, GPU Demand Slows
The majority of AMD’s gaming revenue comes from its system-on-chips (SoCs) used in Microsoft’s Xbox Series X|S and Sony’s PlayStation 5 consoles. As these platforms are nearing the end of their lifecycle, it’s natural for demand to decrease. This also reflects why console manufacturers are scaling back their orders for AMD processors.
In the realm of discrete GPUs, AMD is grappling with more complex challenges. Seasonal declines in desktop add-in-board sales aren’t new, but AMD’s lack of significant design wins with its Radeon RX 7000M GPUs for laptops further dampened its gaming revenue. While AMD’s Radeon RX 7900 GRE offers strong performance, it isn’t enough to make the entire RDNA 3 lineup competitive with Nvidia’s RTX 40-series.
With console sales down and GPUs struggling, AMD anticipates a further 30% drop in gaming revenue year-over-year for the first half of 2024 and worse results in the latter half. These forecasts suggest that major console refreshes aren’t likely, nor are discrete GPU sales expected to see a substantial surge.
What’s Next for AMD and RDNA 4?
Given the bleak outlook, it’s uncertain whether AMD will release the Radeon RX 8000-series RDNA 4 GPUs this year. If they do, the question remains whether they’ll ship in substantial volumes to boost AMD’s revenue. Rumors suggest AMD might avoid producing a larger high-end RDNA 4 chip, focusing instead on the mainstream and budget markets, a strategy seen with the Polaris RX 400-series.
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