AI demand is strong, AMD's revenue and guidance have grown beyond expectations, and it has risen after the market is rising and falling | Financial News

Source: Wall Street Insights

Chip giant AMD's revenue in the first quarter of this year grew much stronger than expected. Although its revenue guidance for the second quarter has slowed down, it is still better than expected, indicating that the demand related to artificial intelligence (AI) applications remains robust, and the blow from the Trump administration's trade policies such as tariffs is not as severe as Wall Street expected. This has also brought hope that NVIDIA, the giant in AI chips, may also deliver excellent results.

Analysts believe that the new chip export restrictions in the United States have cast a shadow over AMD's future earnings. However, AMD's better-than-expected guidance this time has boosted investors' confidence.

AMD's strong guidance benefits from the market demand for high-end computers that can create and run AI software. AMD has not only continued to make progress in the lucrative data center processor market, seizing market share from Intel, but also benefited from the strong demand for chips in personal computers (PCs).

After the financial report was released, AMD, which had closed down nearly 2% during the regular trading session, rallied in after-hours trading and reversed its decline, once rising by more than 7%. However, during the subsequent earnings conference call, NVIDIA once again mentioned the impact of export controls, and AMD's share price turned negative and fell by more than 1% in after-hours trading, before turning positive again.

On Tuesday, May 6, Eastern Time in the United States, AMD announced its first-quarter results for 2025 and provided guidance for the second quarter.

1) Key Financial Data:

Revenue: In the first quarter, revenue was $7.438 billion, a year-on-year increase of 36%. Analysts had expected $7.12 billion, and the year-on-year growth in the fourth quarter was 24%.

EPS: Under the non-GAAP basis, the diluted earnings per share (EPS) in the first quarter was $0.96, a year-on-year increase of 55%. Analysts had expected $0.94, and the year-on-year growth in the fourth quarter was 42%.

Profit: Under the non-GAAP basis, the gross profit margin in the first quarter was 54%, the same as that in the fourth quarter, and it was 52% in the same period last year; the operating profit was $1.779 billion, a year-on-year increase of 57%, and the year-on-year growth in the fourth quarter was 43%; the net profit was $1.566 billion, a year-on-year increase of 55%, and the year-on-year growth in the fourth quarter was 42%.

2) Segment Business Data:

Data Center: Revenue in the first quarter was $3.7 billion, a year-on-year increase of 57%. Analysts had expected $3.6 billion, and the year-on-year growth in the fourth quarter was 69%.

Client: Revenue in the first quarter was $2.3 billion, a year-on-year increase of 68%. Analysts had expected $2 billion, and the year-on-year growth in the fourth quarter was 58%.

Gaming: Revenue in the first quarter was $647 million, a year-on-year decrease of 30%. Analysts had expected $540 million, and the year-on-year decrease in the fourth quarter was 59%.

Embedded: Revenue in the first quarter was $823 million, a year-on-year decrease of 3%, and the year-on-year decrease in the fourth quarter was 13%.

3) Performance Guidance:

Revenue: The expected revenue for the second quarter is around $7.4 billion, with a fluctuation range of $300 million, that is, between $7.1 billion and $7.7 billion. Analysts had expected $7.24 billion.

Gross Profit Margin: Under the non-GAAP basis, the expected gross profit margin for the second quarter is 43%, which includes approximately $800 million in expenses resulting from the new export controls in the United States. Excluding the impact of these expenses, the gross profit margin is expected to be around 54%.

The Revenue in the First Quarter Increased by 36% Exceeding Expectations, and the PC Chip Revenue Accelerated and Reached a New High

The financial report shows that AMD's revenue in the first quarter was higher than the entire revenue guidance range of the company. It not only grew faster than in the fourth quarter but also faster than what Wall Street expected. The revenue in the first quarter was 4.4% higher than the analysts' expected revenue. The year-on-year growth rate increased from 24% in the fourth quarter to 36%, and the EPS in the first quarter also grew faster than expected, with the growth rate rising from 42% in the fourth quarter to 55%.

In the first quarter, AMD's data center, client, and gaming businesses all grew beyond expectations. The acceleration of total revenue was mainly due to the significant acceleration of the client business, which includes PC chips. The year-on-year growth rate increased from 58% in the fourth quarter to 68%. The revenue of the client business also set a new record for a single quarter, surpassing that of the fourth quarter.

AMD stated that the main growth drivers of the client business are the strong demand for Ryzen processors under the "Zen 5" architecture and a more diverse product portfolio.

The growth rate of NVIDIA's top business, the data center, has slowed down. The revenue in the first quarter increased by 57% year-on-year, lower than the growth rate of 69% in the fourth quarter, but still slightly higher than what analysts expected. AMD said that the data center business in the first quarter was mainly driven by the growth of EPYC (Rome) CPUs and Instinct GPUs.

The revenue of the gaming business in the first quarter decreased by 30% year-on-year, but it was still better than expected. The decline in revenue of this business almost narrowed by half compared to the fourth quarter, and it was nearly 20% higher than the analysts' expected revenue. AMD still attributes the decline in revenue of the gaming business to the decrease in revenue from semi-custom products.

Comments believe that AMD's performance provides a window to glimpse the demand in the AI field before NVIDIA releases its financial report, which can help investors understand how the demand for AI infrastructure is before NVIDIA's financial report is released.

Microsoft, Google, and Meta, which have recently released their financial reports, either maintained the previously announced scale of planned spending or even increased their investment in AI. This shows that the engine driving the construction of AI infrastructure - the large-scale investment of major technology companies in AI applications has not slowed down, alleviating investors' concerns that the uncertainty of the macroeconomic background may lead to cuts in such capital expenditures.

The Median of the Revenue Guidance Slows Down but Remains Stronger Than Expected, and the Gross Profit Margin Guidance Drops to 43% After Considering the Impact of Export Controls

The performance guidance shows that AMD expects the revenue growth in the second quarter to slow down, but it is still stronger than what Wall Street expected.

Calculated based on the midpoint of the guidance range of $7.4 billion, AMD expects that the revenue in the second quarter will increase by approximately 26.8% year-on-year. The growth rate is slower than 36% in the first quarter, higher than the growth rate of 24.1% calculated based on the analysts' expected revenue, and also higher than the growth rate of 24% in the fourth quarter of last year.

AMD also mentioned the impact of the new export controls implemented by the Trump administration in its guidance.

On April 16, AMD announced that after preliminary assessment, the U.S. policy on export control of semiconductor products applies to the company's MI308 series products. It is expected that the export control may result in inventory, procurement, and related reserve expenses of up to approximately $800 million. Media pointed out that based on this estimate, these export controls may have a potential impact of $1.5 billion to $1.8 billion on AMD's revenue, accounting for about 20% of the company's total AI sales in the fiscal year 2025.

In this performance guidance, AMD mentioned that considering the estimated expenses of $800 million caused by the above-mentioned export controls, the gross profit margin in the second quarter will drop from 54% in the first quarter to 43%. However, if the impact of these expenses is excluded, the gross profit margin will be the same as that in the first quarter.

AMD CEO Lisa Su said that the company had an excellent start in 2025. Driven by the strong growth of its core business and the strong momentum of development in the data center and AI fields, it achieved year-on-year accelerated growth for the fourth consecutive quarter. Although the macro and regulatory environment is changing rapidly, the performance in the first quarter and the outlook for the second quarter highlight the advantages of the company's differentiated product portfolio and its continuous execution ability, laying a good foundation for strong growth throughout the year.

Disclaimer: The views in this article only represent the personal views of the author and do not constitute investment advice on this platform. This platform does not make any guarantees regarding the accuracy, integrity, originality, and timeliness of the article information, nor does it assume any liability for any losses arising from the use or reliance on the article information.