Shares of Advanced Micro Devices (AMD -1.43%) rose 1.8% in Tuesday's after-hours trading, following the chipmaker's release of its first-quarter 2025 report.
The stock's gain is attributable to the first quarter's revenue and earnings, along with the second-quarter revenue guidance, all coming in higher than Wall Street had expected.
Image source: Getty Images.
Advanced Micro Devices' key numbers
| Metric | Q1 2024 | Q1 2025 | Change YOY |
|---|---|---|---|
| Revenue | $5.47 billion | $7.44 billion | 36% |
| GAAP operating income | $36 million | $806 million | 2,139% |
| Adjusted operating income | $1.13 billion | $1.78 billion | 57% |
| GAAP net income | $123 million | $709 million | 476% |
| Adjusted net income | $1.01 billion | $1.57 billion | 55% |
| GAAP earnings per share (EPS) | $0.07 | $0.44 | 529% |
| Adjusted EPS | $0.62 | $0.96 | 55% |
Data source: Advanced Micro Devices. GAAP = generally accepted accounting principles. YOY = year over year.
Investors should focus on the adjusted numbers, which exclude one-time items.
Wall Street was looking for adjusted EPS of $0.93 on revenue of $7.12 billion, so AMD exceeded both expectations. It also surpassed its own revenue guidance of $7.1 billion. (It doesn't issue a profit outlook.)
In the quarter, AMD generated cash of $939 million running its operations, up 80% from the year-ago period. It ended the quarter with cash, cash equivalents, and short-term investments of $7.3 billion, up from $5.1 billion in the prior quarter. The company ended the period with long-term debt of $3.2 billion, up from $1.7 billion in the prior quarter. This increase is due to the company issuing about $1.5 billion in debt to help fund its ZT Systems acquisition.
AMD closed on ZT Systems acquisition
In March, AMD closed on its $4.9 billion acquisition of ZT Systems, which it describes as a "leading provider of AI [artificial intelligence] and general-purpose compute infrastructure for the world's largest hyperscale providers."
AMD has said this acquisition will enable it to provide end-to-end AI solutions for data centers. Nvidia's massive growth in recent years is due to its expertise in such rack-scale data center AI solutions.
AMD's segment performance
| Segment | Q1 2025 Revenue | Change YOY | Change QOQ |
|---|---|---|---|
| Data center | $3.67 billion | 57% | (5%) |
| Client* | $2.29 billion | 68% |
Flat |
| Gaming* | $0.64 billion | (30%) | 15% |
| Embedded | $0.82 billion | (3%) | (11%) |
| Total | $7.44 billion | 36% | (3%) |
Data source: Advanced Micro Devices. *Client and gaming is a single reportable segment; I broke the two parts out for better clarity. YOY = year over year. QOQ = quarter over quarter.
Data center growth was driven by robust demand for the company's EPYC central processing units (CPUs) and its Instinct graphics processing units (GPUs), which enable AI capabilities.
On the earnings call, CEO Lisa Su expounded on the data center AI business:
Turning to our data center AI business, revenue increased by a significant double-digit percentage year over year, as MI325X shipments ramp to support new enterprise and cloud deployments. More than 35 MI300-series platforms are in production from all the leading service providers, supporting the expanding number of Instinct GPU deployments with cloud, enterprise, and AI customers.
Client revenue surged 68% year over year primarily due to strong demand for the latest Zen 5 Ryzen processors and a more favorable product mix. This segment sells chips for personal computers (PCs).
Gaming revenue was down 30% year over year primarily due to a decrease in semi-custom revenue.
AMD's second-quarter guidance includes impact from new U.S. export controls
For Q2, management guided for:
- Revenue of $7.4 billion, which equates to growth of 27% year over year. This outlook includes an estimated $700 million revenue reduction resulting from the new U.S. export controls, CFO Jean Hu said on the earnings call.
- Adjusted gross margin of 43%. For context, this metric was 54% in the just-reported first quarter. The big drop stems from a planned approximately $800 million in charges for inventory and related reserves due to the new export controls. Excluding these charges, adjusted gross margin would be about 54%, the company said.
Going into the report, Wall Street had been modeling for Q2 revenue of $7.24 billion, so AMD's outlook beat this estimate.
As for the export controls mentioned above, in April, the U.S. government expanded its restrictions on the export of advanced AI chips to China and select other countries, citing national and international security reasons. These controls essentially ban AMD from selling its Instinct MI308 GPU to these markets. Nvidia's H20 GPU, which it had specially designed for the China market, was also affected by the expanded export controls.
For full-year 2025, AMD expects the hit to its revenue from the new export regulations to be about $1.5 billion, Hu said on the call.
A good report
AMD turned in great first-quarter results. It's a particularly positive sign that adjusted EPS growth remains notably more robust than revenue growth, reflecting the company's expanding profit margin.
Second-quarter revenue growth guidance of 27% is very solid, especially given the loss of sales of the MI308 chip to the Chinese market.
