AMD Chips In Strong Earnings, But Data Center Shortfall Crashes the Stock

Advanced Micro Devices (AMD) reported fourth-quarter earnings that met or exceeded expectations, but concerns over data center revenue and forward-looking AI growth weighed heavily on the stock. Shares plunged over 8% in after-hours trading, breaking below the critical $115 level, which corresponds to the 200-week moving average. This marks a sharp decline from its all-time high of $227 in March 2024, with shares now cut in half from that peak.

Earnings Performance and Revenue Breakdown

AMD posted adjusted earnings per share (EPS) of $1.09, in line with estimates, and revenue of $7.66 billion, which slightly exceeded the expected $7.54 billion. However, net income fell to $482 million, or 29 cents per share, from $667 million, or 41 cents per share, a year ago. The company’s free cash flow surged to $1.09 billion from just $242 million last year, reflecting improved profitability despite margin pressures.

Among key business segments:

- Data Center Revenue: $3.86 billion, up 69% year-over-year, but missed the $4.09 billion estimate, leading to a negative stock reaction.

- Client Revenue: $2.31 billion, up 58% year-over-year, significantly beating the $1.99 billion estimate, driven by Ryzen processor demand.

- Gaming Revenue: $563 million, down 59% year-over-year but still ahead of the $487.9 million estimate.

- Embedded Revenue: $923 million, down 13% year-over-year, missing the $959.4 million estimate.

The client segment saw its fourth consecutive quarter of revenue share gains, driven by strong demand for Ryzen processors in both desktops and laptops. AMD also highlighted new strategic collaborations, including a deal with Dell to power commercial PCs with Ryzen Pro processors starting in Spring 2025.

Data Center Concerns Drive Stock Selloff

While data center revenue showed impressive 69% growth year-over-year, it still failed to meet expectations, triggering investor concerns about AMD’s ability to gain ground on Nvidia in the AI race. The company emphasized strong demand for its MI300X accelerators, which saw increasing adoption by major tech players such as Meta and Amazon. However, analysts had been looking for stronger numbers, especially given Nvidia’s dominance in the high-performance AI chip market.

AMD remains optimistic about the data center segment, forecasting "strong double-digit growth" in 2025, with the second half of the year expected to be even stronger. The company also noted "strong customer interest" in its next-generation MI400 series, which is on track for a 2026 launch. Despite this optimism, the softer-than-expected Q4 revenue and lack of a clear 2025 AI revenue forecast contributed to the stock’s steep decline.

AI, DeepSeek, and Forward-Looking AI Strategy

AMD’s earnings call included discussion of AI developments, particularly in response to competition from China’s DeepSeek and the broader AI compute landscape. CEO Lisa Su acknowledged the rapid pace of AI innovation and the massive investments required to stay competitive, including the $500 billion Stargate AI infrastructure project announced last month. AMD emphasized that these advancements create “unprecedented growth opportunities” for its business, but investors remain skeptical about the company's ability to scale its AI revenue quickly enough.

The company is on track to accelerate production of its MI350 AI chip to mid-2025, an improvement from its prior timeline of the second half of the year. This should help improve AMD’s positioning against Nvidia, but the uncertainty around near-term AI revenue remains a concern.

Capital Expenditures and Growth Outlook

AMD’s capital expenditures (CapEx) rose to $208 million in Q4, a 50% increase year-over-year, exceeding estimates of $148.8 million. This spending reflects AMD’s continued investments in AI, data center infrastructure, and future product development.

For Q1 2025, AMD guided revenue in the range of $6.8 billion to $7.4 billion, with the midpoint slightly above analyst expectations of $7.01 billion. The company expects mid-single-digit PC market growth in 2025 and believes it can outperform the broader market in this segment.

AMD is also forecasting strong overall growth for the full year, driven by data center and AI demand. However, the lack of specific AI revenue guidance has left investors uncertain about the company’s trajectory.

Stock Performance and Technical Breakdown

AMD shares had gained 4.6% during the regular trading session, closing at $119.50, but plunged over 8% in extended trading as concerns over the data center miss and future AI competitiveness weighed on sentiment. The stock has now broken below the $115 level, a key technical support area, and remains under pressure amid broader semiconductor market volatility.

Despite optimism about long-term AI growth, the near-term outlook for AMD remains clouded by competition and investor concerns about the pace of its AI revenue ramp. While the company has reiterated its confidence in scaling data center and AI-related revenue in 2025 and beyond, the stock’s price action suggests that investors are looking for more concrete evidence of market share gains before turning bullish again.

Conclusion

AMD delivered solid top-line and bottom-line results, but the disappointing data center revenue and uncertain AI outlook led to a steep selloff in after-hours trading. While the company remains well-positioned for long-term growth, near-term concerns over AI revenue ramp and competition from Nvidia continue to weigh on the stock. The break below key technical levels adds further downside risk, making it critical for AMD to demonstrate stronger AI-driven revenue growth in the coming quarters.