Advanced Micro Devices Inc. (AMD) has recently issued a stark warning regarding the impact of U.S. export restrictions on its revenue, forecasting a loss of $1.5 billion due to new regulations affecting sales to China. This announcement came alongside the company's first-quarter earnings report, which, despite the grim outlook, showed positive growth and exceeded Wall Street expectations.
On May 6, 2025, AMD revealed that the U.S. government's export restrictions, particularly targeting its MI308 chips, would significantly affect its financial performance. The restrictions, which were imposed in April 2025, are expected to cost the company about $800 million in expenses this year. AMD's CEO Lisa Su commented on the situation, stating, "While we face some headwinds from the dynamic macro and regulatory environments, including the recently announced export controls for Instinct MI308X shipments to China, we believe they are more than offset by the powerful tailwinds from our leadership product portfolio."
Despite these challenges, AMD reported first-quarter earnings that topped expectations, with adjusted earnings of 96 cents per share compared to the 94 cents anticipated by analysts. The company also reported revenues of $7.44 billion, surpassing the expected $7.13 billion for the quarter ending March 29, 2025. This marks a 36% increase in revenue compared to the same period last year, when AMD earned $5.47 billion.
In the current quarter, AMD anticipates sales of approximately $7.4 billion, with a gross margin of 43%. This forecast is slightly above Wall Street's estimates, which predicted earnings of 86 cents adjusted on $7.25 billion in sales. However, AMD has warned of an additional $700 million in lost revenue for the current quarter due to the ongoing export controls.
AMD's strong performance in the first quarter was bolstered by impressive growth in its data center segment, which reported $3.7 billion in sales, a 57% increase year-over-year. The demand for AMD's Epyc processors and Instinct GPUs has been a significant driver in this growth, especially as companies continue to invest in infrastructure for artificial intelligence (AI) applications. AMD's AI GPU sales reached $5 billion in fiscal 2024, highlighting the company's competitive position in the rapidly evolving AI market.
However, not all segments of AMD's business are thriving. The company's Client and Gaming segment, which includes chips for consumer devices, saw a 28% increase in revenue to $2.9 billion. This growth was primarily due to the strong demand for the Zen 5 chips released last summer, which contributed to a 68% rise in laptop and PC chip sales. Conversely, gaming sales experienced a significant decline of 30% year-over-year, attributed to a decrease in console chip revenue.
AMD's embedded segment, largely stemming from its acquisition of Xilinx, also faced challenges, with a 3% decline in revenue to $823 million. The company is navigating a complex landscape of tariffs and regulatory changes, but Su remains optimistic about the future. "I know there are some uncertainties as it relates to tariffs and other things, but this is one of those areas where from an infrastructure standpoint, there continues to be investment," she noted during the earnings call.
In the wake of these announcements, AMD's stock initially rose by 4% in after-hours trading but later fell by about 1% as investors reacted to the potential impact of the export controls on future earnings. The stock closed at $98.62 during the regular session, down 2% from the previous day.
As AMD continues to compete with industry giants like Intel and Nvidia, the company's ability to navigate the regulatory landscape and maintain its growth trajectory will be closely watched by investors and analysts alike. The competitive landscape remains fierce, particularly in the AI and data center markets, where AMD is striving to establish itself as a leader.
Looking ahead, AMD's focus on innovation and its strong product portfolio may help mitigate some of the negative impacts of the export restrictions. As the demand for AI technology continues to surge, AMD's strategic positioning in this market could prove beneficial in the long run, despite the current regulatory challenges.
In summary, while AMD faces significant hurdles due to U.S. export restrictions on its AI chips, the company's first-quarter earnings report indicates robust growth and a strong outlook for the future. With strategic investments and a commitment to innovation, AMD aims to overcome these challenges and solidify its place in the competitive semiconductor industry.
