Advanced Micro Devices (AMD) experienced a significant boost in its stock price in after-hours trading on May 6, 2025, following the release of its first-quarter earnings report. The company reported earnings per share of $0.96, surpassing analysts’ consensus estimate of $0.94. This marked a positive turn for AMD, which has faced challenges in the past year, including a notable decline in its stock value.
In addition, AMD's sales increased by 36% year-over-year, reaching $7.44 billion, which also exceeded analysts’ expectations of $7.12 billion. This surge in revenue was primarily driven by the company's Data Center segment, which saw an impressive revenue jump of 57% year-over-year, totaling $3.7 billion. The increase was attributed to a steep rise in Instinct GPU shipments and robust growth in AMD EPYC CPU sales.
However, not all segments performed well. The Gaming segment experienced a 30% year-over-year decrease in revenue, falling to $647 million. This decline was largely due to a reduction in semi-custom revenue, which involves designing and manufacturing customized chips tailored to individual customer needs. Fortunately for AMD, the Data Center revenue constitutes the majority of the company's overall revenue, while the gaming segment remains its smallest.
Looking ahead, AMD's management provided guidance for the second quarter of 2025, projecting revenue between $7.1 billion and $7.7 billion, compared to analysts’ estimate of $7.24 billion. The company also indicated a non-GAAP gross margin of approximately 43%, which factors in $800 million in charges for inventory and related reserves due to new export controls. Excluding these charges, the non-GAAP gross margin would be around 54%.
In the lead-up to the earnings report, traders expected AMD stock to move nearly 8% in the days following the announcement. An 8% increase from the closing price on May 5, 2025, would place the stock at approximately $108.50, its highest price since late March. Conversely, an 8% decline would see the stock drop to around $92.50, erasing gains made in the previous week. Historically, AMD's average post-earnings swing over the last four quarters has been about 7.5%.
Despite the positive earnings report, AMD has faced significant challenges in recent months. The Trump administration tightened restrictions on semiconductor exports to China in April 2025, which could potentially cost AMD up to $800 million if it cannot secure the necessary export licenses. Analysts estimate that these restrictions could result in a revenue impact of $1.5 billion to $1.8 billion, accounting for approximately 20% of AMD's expected full-year fiscal 2025 AI sales. The company stated it would seek licenses to export to China, although the outcome remains uncertain.
In a recent interview on May 1, 2025, AMD CEO Lisa Su addressed concerns regarding the tariff policies implemented by the Trump administration. "We're not sitting in the corner crying," she stated, emphasizing that semiconductors have become a high-priority issue in recent years. Su acknowledged the challenges posed by the changing tariff landscape but remained focused on innovation and long-term growth. "The investment arcs are not changing," she added, highlighting the importance of making long-term bets in the technology sector.
Wall Street analysts have responded positively to AMD's recent performance. The consensus rating for AMD stock is a Moderate Buy, with 15 Buy ratings, seven Holds, and no Sells assigned in the past three months. The average price target for AMD is currently set at $126.40 per share, indicating a potential upside of 28% from the current trading levels.
Investment firms have been issuing research reports ahead of AMD's earnings release, with Cantor Fitzgerald recently reducing its price target for AMD from $135 to $120 while maintaining an overweight rating. Seaport Research initiated coverage of AMD with a buy rating and a price target of $110 on April 30, 2025. Meanwhile, Stifel analyst Ruben Roy lowered the firm's price target for AMD to $132 from $162 but kept a buy rating on the shares.
The semiconductor industry has shown resilience, with stocks generally outperforming the broader markets. However, analysts caution that volatility is expected to persist due to ongoing tensions between the U.S. and China, particularly regarding semiconductor restrictions and updates to AI diffusion rules. Section 232 of the Trade Expansion Act of 1962 empowers the president to restrict imports of products deemed to threaten national security, a factor that could impact AMD and its competitors.
As AMD navigates these challenges, its focus on innovation and long-term growth remains a central theme. The company has made significant strides under Lisa Su's leadership since she became CEO in 2014, transforming AMD from a struggling entity to a formidable competitor in the semiconductor market. In 2022, AMD's overall value surpassed that of its historical rival Intel for the first time, a landmark achievement that underscores its turnaround.
With robust demand for AI infrastructure investments and a strong performance in the Data Center segment, AMD appears poised to capitalize on growth opportunities. Major cloud service providers, including Microsoft, Alphabet, and Amazon, continue to invest heavily in AI technology, providing a favorable backdrop for AMD's future prospects. As the company prepares for the next quarter, investors will be watching closely to see how it responds to the evolving landscape of the semiconductor industry.
