AMD Predicts Over 20% Drop in Gaming Revenue for Second Half Due to Soaring Memory Costs

AMD Predicts Significant Slowdown in Gaming Business Due to Rising Memory Costs

AMD has released its financial results for the first quarter of 2026, highlighting record-breaking revenue in its data center division while presenting a grim forecast for its consumer-facing business, particularly the gaming segment. The company predicts that the rising costs of memory and other components will cause gaming-related revenue to drop by “over 20%” in the second half of the year, sending ripples through the entire semiconductor industry.

Data Center Thrives, Gaming Faces Headwinds

AMD CEO Lisa Su emphasized the robust performance of the company’s data center business during the Q1 earnings announcement. With the surge in demand for AI-related technologies, AMD anticipates a 70% year-over-year increase in Q2 revenue from its data center CPUs.

In contrast, the consumer-facing segment is encountering challenges. AMD CFO Jean Hu stated, “Gaming demand in the second half of the year is expected to be impacted by high component and memory costs. We anticipate gaming revenue in the latter half to decline by more than 20% compared to the first half.”

The referenced “gaming revenue” pertains to AMD’s sales of GPUs and chips for gaming consoles. AMD divides its operations into three segments: Enterprise, Client & Gaming, and Embedded. The forecast specifically addresses the gaming segment. Within the broader client segment, demand for Ryzen-powered commercial laptops is partially offsetting the decline in consumer demand.

Rising Memory Prices Affecting the Gaming Console Market

The projected decline in gaming revenue is closely tied to the current state of the gaming console market. In 2025, Microsoft raised the price of the Xbox Series twice. Similarly, Sony announced a price hike for all new PS5 models in March 2026 and recently increased the price of refurbished PlayStation 5 Slim units.

These price hikes are believed to be directly linked to the rising costs of memory and semiconductor components. AMD’s forecast suggests that the shipping prices of gaming consoles may increase further or that the already implemented price hikes are leading to reduced consumer demand. However, with Microsoft and Sony not disclosing specific shipment numbers, it remains challenging to determine which factor carries more weight.

Industry-Wide Concerns Over Memory Shortages

Lisa Su’s mention of a “further memory shortage” reflects broader supply constraints affecting the industry. Executives from major memory manufacturers like Micron and SK Hynix have expressed similar concerns, as multiple companies in the semiconductor sector face mounting pressure from rising component costs.

The rapid expansion of AI-related demand has significantly shifted the supply-demand balance in the memory market. High-performance memory products such as HBM (High Bandwidth Memory) have seen surging demand, which is also impacting consumer memory markets. While investments in data centers remain strong, consumer gaming hardware is increasingly struggling to absorb these rising costs.

AMD’s Diverging Business Strategies

For AMD, the data center and gaming businesses are heading in contrasting directions. While the data center segment, fueled by AI demand, is expected to continue its upward trajectory, the gaming division faces the dual challenge of managing costs and maintaining demand.

“We are adjusting our business plans accordingly,” said Su, hinting at AMD’s efforts to develop management strategies that account for rising component costs. Although specific countermeasures were not detailed, potential strategies could include optimizing product lineups and revising pricing models.

Outlook

Industry analysts generally agree that the surge in memory prices is unlikely to be resolved in the short term. With AI demand continuing to strain the memory market, consumer hardware’s price competitiveness is expected to face even greater challenges. Particularly in product categories like gaming consoles and GPUs, which are closely tied to consumer purchasing decisions, balancing price increases against demand reduction will be a key challenge not only for AMD but for the entire industry.

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FAQ:

Q: What is the main cause of AMD’s gaming revenue decline?
A: The primary reason is the rising cost of memory and semiconductor components. The rapid expansion of AI-related demand has tightened the supply of high-performance memory, affecting the consumer hardware market. Additionally, price hikes in the gaming console market may be deterring consumers from making purchases.

Q: Why is AMD’s data center business performing well?
A: The growth is largely driven by increasing demand for AI-related technologies. AMD projects a 70% year-over-year increase in Q2 revenue from data center CPUs. This trend is part of a broader boom in the data center chip market, which has also benefited competitors like Intel.

Q: Will gaming console price increases continue?
A: Based on AMD’s outlook, the upward pressure on memory and component costs is likely to persist. Both Microsoft and Sony have already raised prices multiple times, and unless cost structures improve, further price adjustments cannot be ruled out. However, no specific plans for additional hikes have been announced by manufacturers.