Advanced Micro Devices (AMD) reported mixed financial results for the fourth quarter of 2024, showcasing significant growth across some segments, particularly data centers, but disappointing performance elsewhere, leading to a notable drop in its stock price.
On February 4, 2025, AMD announced its earnings for the quarter ended December 28, 2024. The company reported revenue of $7.66 billion, exceeding analysts’ expectations of $7.53 billion, marking a remarkable 24% increase compared to the year prior. Earnings per share (EPS) came in at $1.09, slightly above the consensus estimate of $1.08.
Despite these strong figures, the company’s shares fell about 10% during after-hours trading, reflecting investors’ concerns, particularly over AMD's performance in the data center segment. Although the company's data center revenue reached $3.9 billion, significantly up 69% year-over-year, it fell short of analyst expectations, which had anticipated $4.15 billion. AMD’s CEO, Dr. Lisa Su, indicated during the earnings call, "We believe this places AMD on a steep long-term growthtrajectory, led by the rapid scaling of our data center AI franchise." Nonetheless, the data center results had previously sparked investor optimism about AMD's competitive edge against giants like Nvidia.
For the entire year of 2024, AMD achieved record revenue of $25.8 billion, representing a 14% increase from 2023. The data center division contributed significantly to this growth, with total annual sales soaring to $12.6 billion, up 94% compared to the previous year.
Meanwhile, not all segments showcased promise. The company's gaming segment reported revenue of $563 million for Q4, down 59% year-over-year due to declining demand for semi-custom chips. The embedded segment also saw declines, with sales dropping 13% to $923 million. Analysts have voiced concerns about AMD's ability to compete effectively against Nvidia, especially as Nvidia maintains dominant control over the AI chip market, holding nearly 80% of the segment. Kinngai Chan, a Summit Insight analyst, remarked, "AMD's AI GPU is probably not tracking to investors' expectations. We continue to believe Nvidia is opening a gap against AMD..."
Amd forecasted revenue of $7.1 billion for the first quarter of 2025, which slightly exceeds analyst estimates. Chief financial officer, Devinder Kumar, noted during the earnings call, “We expect to deliver strong performance, continuing to ramp up our data center and AI capabilities.” This perspective aligns with the company’s broader strategy to increase its capabilities amid intensifying competition.
The broader tech sector has seen increased interest from companies, such as Microsoft and Meta, as they focus on developing their own silicon to meet the growing demands of artificial intelligence and other high-performance computing tasks. AMD has realized the importance of these trends and has expanded its collaborative efforts with partners like IBM, Vultr, and Aleph Alpha to leverage AI technologies and infrastructure development for enhanced competitiveness.
Despite facing headwinds, AMD remains committed to advancing its AI roadmap, including the introduction of improved AI processors and collaboration opportunities with tech giants. AMD's efforts are viewed as strategic maneuvers to position itself effectively within the dynamic semiconductor market.
While AMD’s share price fell following its earnings report, analysts maintain a predominantly positive outlook, with 15 buys, eight holds, and one sell rating assigned across recent assessments. The average target price sits at $159.91 per share, indicating potential upside for investors. Looking back at 2024, AMD demonstrated resilience amid fierce competition with Nvidia, and its innovative developments could play a pivotal role moving forward.
Overall, AMD's strong advancement within the data center space, large-scale customer engagements, and strategic partnerships underline the company’s ambitious roadmap within the AI and high-performance computing sectors, setting the stage for potential long-term growth.