Advanced Micro Devices (AMD) has announced robust financial results for the first quarter of 2025, showcasing significant growth in revenue and earnings despite challenges posed by new export regulations. The company reported a revenue of $7.4 billion, reflecting a remarkable 36% increase year-over-year, with a gross margin of 50% and net income soaring to $709 million, translating to diluted earnings per share of $0.44.
Dr. Lisa Su, AMD's chair and CEO, expressed optimism about the company’s performance, stating, "We delivered an outstanding start to 2025 as year-over-year growth accelerated for the fourth consecutive quarter driven by strength in our core businesses and expanding data center and AI momentum." This optimistic outlook highlights AMD's resilience in a dynamic macroeconomic environment.
On a non-GAAP basis, AMD’s gross margin was reported at 54%, with operating income reaching $1.8 billion and net income at $1.6 billion, resulting in diluted earnings per share of $0.96. These figures underscore the company's strong operational performance and strategic direction.
AMD's data center segment was a significant driver of growth, contributing $3.7 billion in revenue, which is a staggering 57% increase compared to the same quarter last year. The client and gaming segments also saw notable success, with revenue hitting $2.9 billion, a 28% increase year-over-year. Client revenue alone surged by 68% to $2.3 billion, fueled by strong demand for the latest "Zen 5" AMD Ryzen processors.
However, not all segments performed equally well, as gaming revenue fell by 30% to $647 million, primarily due to a decrease in semi-custom revenue. The embedded segment also experienced a slight decline, generating $823 million, down 3% year-over-year, as demand in end markets remained mixed.
In the face of regulatory challenges, AMD recently completed the acquisition of ZT Systems, which is expected to enhance its position in the data center AI market, projected to be worth $500 billion by 2028. This strategic move aims to leverage ZT Systems' expertise in leadership systems and rack-level solutions, aligning with AMD's focus on expanding its AI capabilities.
Looking ahead, AMD anticipates revenue for the second quarter of 2025 to be approximately $7.4 billion, with a non-GAAP gross margin estimated at 43%. This estimate includes about $800 million in charges related to inventory and reserves due to new export controls, as previously disclosed in AMD's Current Report on Form 8-K filed on April 16, 2025. Excluding these charges, the non-GAAP gross margin would be around 54%.
Despite the positive financial results, AMD faces headwinds from recently imposed export restrictions by the Trump administration, which analysts describe as an "effective shipment ban" on certain AMD products, including its MI308 chips. As a result, several analysts have adjusted their price targets for AMD's stock. Bank of America Securities reduced its target from $110 to $105, while Deutsche Bank and Wedbush Securities also lowered their targets in late April.
According to Visible Alpha, the consensus price target among analysts following AMD is $123.50, representing a 25% premium over AMD's intraday price of $98.82 on May 6, 2025. Out of the 12 analysts tracked, six rate the stock as a "buy," five hold it, and one has a "sell" rating. However, it is worth noting that AMD's stock has lost nearly 20% of its value in 2025.
On a more positive note, analysts from Citi have highlighted the ongoing investment in AI infrastructure by major tech firms, which they believe bodes well for AMD. Companies like Meta have announced plans to increase their capital expenditures significantly this year, with estimates ranging from $64 billion to $72 billion for AI infrastructure. Similarly, Microsoft and Alphabet's Google have reiterated their commitments to AI spending targets of $80 billion and $75 billion, respectively.
Analysts expect AMD to report first-quarter revenue of $7.13 billion, an increase of 30% year-over-year, with adjusted earnings projected at 94 cents per share, more than 50% higher than the previous year's quarter. Data center sales are anticipated to climb 55% to $3.63 billion, indicating strong demand in that segment.
As AMD continues to navigate the complexities of the semiconductor market, its focus on innovation and strategic partnerships appears to be positioning the company for sustained growth. The upcoming teleconference scheduled for May 6, 2025, at 2:00 PM PT (5:00 PM ET) will provide further insights into AMD's performance and future outlook.
In conclusion, AMD's first-quarter results reflect a strong start to 2025, driven by growth across its core business segments, particularly in data centers and client products. While challenges from regulatory changes loom, the company’s strategic initiatives and investments in AI technology may provide a pathway for continued success in the evolving tech landscape.
