It has been a tough year for Advanced Micro Devices (AMD -5.78%) investors so far. Shares of the chipmaker have dropped 43%, and the stock could face more downside pressure when it releases its second-quarter results on Aug. 2, 2022.

AMD relies on sales of central processing units (CPUs) and graphics cards used in personal computers (PCs) and notebooks for a large chunk of its revenue. The bad news for AMD: Sales of those devices reportedly plunged in the second quarter. Let's see how this headwind could affect AMD's upcoming results.

The biggest headwind AMD faces this earnings season

Market research firm IDC says that global PC sales fell 15.3% year over year in the second quarter of 2022 to 71.3 million units. Stagnating consumer demand and saturation in the education sector are the reasons behind this steep fall following two years of impressive growth that were fueled by the pandemic.

The Q2 decline is substantially steeper than the 5% year-over-year drop seen in the first quarter. As a result, AMD's computing and graphics segment, which produced 47% of its total revenue in the first quarter and recorded 33% year-over-year growth, faces stronger headwinds this time.

The chipmaker was able to defy the PC market's weakness in Q1 thanks to higher average selling prices of its processors and graphics cards, as well as a sizable increase in its share of the notebook CPU market. AMD CEO Lisa Su pointed out on the company's May earnings conference call that it has gained client CPU market share for eight consecutive quarters. Meanwhile, sales of AMD's desktop graphics cards had nearly doubled year over year.

According to Mercury Research, AMD controlled 22.5% of the notebook CPU market in the first quarter of 2022. It gained 4.4 percentage points of market share against Intel, which was enough to offset the single percentage point drop in its desktop CPU share in Q1. However, the notebook market is expected to slip big time, with Barclays analyst Blayne Curtis forecasting a 17% drop in production this year.

As such, it remains to be seen how the new AMD-powered notebooks that were supposed to hit the market perform, considering the end-market weakness. Su had admitted on the previous conference call that the company is witnessing softness in the PC market following multiple quarters of terrific growth.

However, she also added that AMD's "focus remains on the premium, gaming and commercial portions of the market where we see strong growth opportunities, and we expect to continue gaining overall client revenue share." Third-party estimates suggest that AMD gained 2.3 percentage points of share sequentially in the CPU market in the second quarter. So, there may be a way for AMD's computing and graphics segment to thrive in the second quarter as well, but that seems easier said than done given the steep decline in PC shipments.

However, AMD has a trump card that could help it achieve the impressive growth it is looking for in the second quarter.

The company can still spring a positive surprise

While AMD's focus on the high-end chips in the computing and graphics market could help it mitigate the negative effect of the sharp decline in PC sales, its enterprise, embedded, and semi-custom (EESC) segment could help it deliver impressive growth once again.

The EESC segment produced 42% of AMD's revenue in the first quarter. The segment's revenue of $2.5 billion was up 88% year over year, as sales of server processors doubled year over year. AMD says that it has more than doubled its share of the server processor market in eight of the last 10 quarters. It could continue taking server market share away from Intel in 2022 and beyond thanks to the technology lead it enjoys.

A stronger share of this market bodes well for AMD, given that global server revenues are expected to jump 17% in 2022 on the back of higher shipments, which should increase the chipmaker's addressable opportunity. On the other hand, the semi-custom business was also in fine form in the first quarter thanks to the healthy demand for gaming consoles from Sony and Microsoft, which are powered by AMD chips.

The company recorded "significant double-digit" growth in this segment in Q1 and added that it expects 2022 to be a record year for the semi-custom business. That doesn't seem surprising, considering what its console customers are forecasting. Sony, for instance, expects to sell 18 million units of the PlayStation 5 in the current fiscal year, up from 11.5 million units in the previous one. Microsoft's Xbox sales, on the other hand, have also gained impressive momentum and should play a key role in boosting the semi-custom business.

In all, it won't be surprising to see AMD hit its estimate of 69% year-over-year revenue growth this quarter to $6.5 billion. It has more than just the PC market to count on, including the acquisition of Xilinx that's going to unlock new opportunities for the company. So, there is a possibility of AMD springing a positive surprise when it releases its earnings report later this month, and that could help this tech stock arrest its slide.