Here's our initial take on Advanced Micro Devices' (AMD 1.12%) fiscal 2025 first-quarter financial report.
Key Metrics
| Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $5.47 billion | $7.44 billion | +36% | Beat |
| Earnings per share (adjusted) | $0.62 | $0.96 | +55% | Beat |
| Data center revenue | $2.34 billion | $3.67 billion | +57% | n/a |
| Gross margin (adjusted) | 52% | 54% | +2 pp | n/a |
Soaring Data Center Sales
AMD beat expectations for revenue and earnings per share in the first quarter thanks to strong demand for data center products and solid growth from its PC business segment. Overall revenue jumped 36% year over year to $7.4 billion, marking the best first quarter in AMD's history.
Data center revenue surged 57% year over year to $3.7 billion, driven by demand for EPYC server CPUs and Instinct AI accelerators. AMD didn't disclose AI accelerator sales in its earnings release, although the company may provide more details during the earnings call. AMD previously declined to provide specific guidance for AI accelerator sales in 2025. Rather, the company expects "strong double-digit growth."
AMD combined its client computing and gaming segments starting in the first quarter. Client and gaming revenue jumped 28% year over year, with CPU-related revenue rising 68% and gaming-related revenue tumbling by around 30%. The new Radeon 9070 series graphics cards weren't enough to offset declining sales of game console chips.
The embedded segment is starting to look better, with revenue down just 3% year over year. End-market demand remains mixed.
Immediate Market Reaction
Shares of AMD were trading up about 5% in early after-hours trading on Tuesday soon after the first-quarter report was released. The company beat expectations across the board and put up strong numbers in the data center and client PC businesses. The lack of AI accelerator sales figures didn't deter investors, although any sign of slowing demand that surfaces in the earnings call could change the story.
What to Watch
AMD management said it expects the company to generate revenue between $7.1 billion and $7.7 billion in the second quarter, up 28% year over year at the midpoint. The company expects its adjusted gross margin to sink to 43% due to a previously disclosed $800 million charge related to AI chip exports.
AMD saw strong demand for its Ryzen PC CPUs and EPYC server CPUs in the first quarter, but both businesses are exposed to U.S. tariff policy, both directly due to higher prices for end products and indirectly due to a potential economic slowdown. While AMD's second-quarter outlook was good enough to push up the stock in after-hours trading, investors should look to the earnings call for more details on how the macroeconomic environment is impacting AMD.
