Advanced Micro Devices (AMD) reported fourth-quarter earnings that exceeded Wall Street expectations, but shares fell more than 6% in extended trading on , as the company’s first-quarter forecast fell short of some analysts’ predictions despite the ongoing surge in demand for artificial intelligence (AI) technologies.
The chipmaker’s earnings per share (EPS) reached $1.53, surpassing the expected $1.32. Revenue totaled $10.27 billion, also exceeding the anticipated $9.67 billion. However, the market reaction suggests investor concern over future growth trajectory.
Looking ahead to the first quarter, AMD projects revenue of $9.8 billion, plus or minus $300 million. While this figure is above the $9.38 billion expected by analysts, some had anticipated more robust guidance given the escalating investment in AI infrastructure.
Net income for AMD climbed to $1.51 billion, or $0.92 per share, a significant increase from the $482 million, or $0.29 per share, reported in the same period last year. Overall revenue increased by 34% year-over-year.
Data Center Growth and AI Demand
AMD is a key player in the development of graphics processing units (GPUs) essential for AI applications, though currently holding a smaller market share than Nvidia. The company’s data center segment experienced substantial growth, with sales reaching $5.4 billion in the fourth quarter – a 39% increase compared to the previous year. This growth is attributed to strong demand for both AMD’s central processors (CPUs) and its AI-focused GPUs.
AMD CEO Lisa Su highlighted the broader impact of the AI boom, noting that it is driving demand not only for GPUs but also for the company’s CPUs. “Server CPU demand remains very strong,” Su stated. “Hyperscalers are expanding their infrastructure to meet growing demand for cloud services in AI, while enterprises are modernizing their data centers to ensure they have the right compute required to enable new AI workflows.”
Client and Gaming Segment Performance
The client and gaming segment also demonstrated strong performance, rising 37% year-over-year to $3.9 billion. This growth is linked to increased demand for AMD’s Ryzen processors for laptops and personal computers, which have been gaining market share against Intel.
The embedded segment, however, experienced slower growth, increasing by 3% year-over-year to $950 million.
Impact of US Export Controls and China Sales
AMD has navigated challenges related to US export controls impacting its ability to ship AI chips to China. The company reported $390 million in China sales of its Instinct MI308 chips during the fourth quarter and anticipates $100 million in China revenue for the current quarter. The lifting of a previous ban by the Trump administration, reversed last month, is expected to alleviate some of these restrictions in the coming quarters.
Previously, the Trump administration’s ban on sales of AMD’s MI308 AI chips to China had resulted in an estimated $800 million impact in the second quarter of , contributing to an operating loss of $155 million during that period. Nvidia experienced a similar impact, with a $4.5 billion write-down in the first quarter and an expected $8 billion hit in the second fiscal quarter due to the ban.
Future Outlook and New Products
AMD is preparing to launch its Helios integrated server-scale AI system later in . CEO Lisa Su indicated that the company is engaged in “active discussions” regarding additional sales of Helios. The company also anticipates benefiting from the launch of its MI350 line of AI chips, designed to compete with Nvidia’s Blackwell-powered chips.
Despite the recent stock dip, AMD shares had more than doubled over the past year, reflecting the company’s growing prominence in the AI chip market. The company’s ability to capitalize on the expanding AI landscape and navigate geopolitical challenges will be crucial for its continued success.
