icon
icon
icon
icon
$300 Off
$300 Off

News /

Articles /

AMD Q1 2025 Earnings Preview: Solid Growth Expected, Spotlight on AI Guidance and China Risks

Jay's InsightTuesday, May 6, 2025 1:38 pm ET
5min read

Advanced Micro Devices (NASDAQ: AMD) is set to report its first-quarter 2025 earnings results on Tuesday, May 6, after the market close, with Wall Street and investors zeroed in on the company’s performance amid rising AI competition, geopolitical headwinds, and cautious investor sentiment.

Expectations and Consensus Estimates

Analysts are forecasting earnings per share (EPS) of $0.94, which would mark a 52% year-over-year increase, and revenue of $7.12 billion, up 30% from Q1 2024. amd previously guided Q1 revenue in a range of $6.8 to $7.4 billion, effectively bracketing consensus, with gross margins expected to hold steady at 54%. Notably, factset shows current consensus for Q2 2025 revenue of $7.2 billion and EPS of $0.88.

While AMD has a strong history of exceeding expectations—having topped EPS in 11 of the last 12 quarters and revenue in every quarter over the last two years—recent results from Intel and a patchy macro backdrop have introduced fresh caution into the setup.

Ask Aime: Will AMD's Q1 2025 earnings exceed expectations?

Key Metrics to Watch

  • Data Center Revenue and AI Accelerator Sales: Analysts expect continued growth in AMD’s Data Center segment, but the trajectory for the MI300 series—AMD’s key AI GPU product line—remains murky. Management previously indicated flat Data Center revenue in 1H25 vs. 2H24, raising concerns about a short-term air pocket in AI growth. AMD has not offered a 2025 AI revenue target, and investors will be looking for clarity on ramp timing for MI325X and the upcoming MI350, which is expected mid-year.
  • Client Segment Momentum: AMD posted record Client revenue last quarter, and with IDC reporting PC shipments rose 4.9% YoY in Q1, expectations are that the Client business will again be a positive contributor. However, commentary around channel inventory, mix shift to lower-priced SKUs, and sustainability of recent pull-ins will be crucial.
  • Gross Margin Trends: The Street expects gross margins to remain at 54%, but margin commentary will be watched closely as analysts flag pressure from China export controls, potential price competition from Intel, and shifts in product mix. Management’s ability to maintain profitability as the AI business scales—and as more sales come from higher-margin data center offerings—will be in focus.
  • China Exposure and Regulatory Risk: AMD previously disclosed a potential $800 million inventory and purchase commitment charge related to tightened U.S. export controls. KEYB estimates that up to 175,000 GPUs representing $1.4 billion in revenue may be impacted. Commentary on how China restrictions affect both AMD’s Q2 guidance and long-term AI ambitions will be closely scrutinized.
  • Market Context and Recent Performance

    Shares of AMD have declined about 17% year-to-date, underperforming the broader semiconductor sector. The stock has recovered modestly in the past month on anticipation of a stronger second half driven by the MI350 and MI400 GPU roadmap, but sentiment remains mixed. Analysts like Seaport and Mizuho remain constructive long-term, citing AMD’s competitive roadmap and execution, but firms such as Bernstein and Jeffries have expressed concerns about AI traction, competitive positioning, and over-enthusiastic Street expectations.

    There’s also increasing skepticism about how AMD stacks up against Nvidia. Despite AMD advertising superior memory bandwidth and FLOPs, recent benchmarking by Jefferies suggests Nvidia’s software stack delivers better real-world throughput, highlighting the importance of system-level optimization, not just hardware specs.

    Analyst Revisions and Risk Factors

    Over the past three months, EPS estimates have seen 14 upward and 15 downward revisions, while revenue estimates skew positively with 21 upward and just 5 downward changes. The split suggests confidence in AMD’s top-line momentum, but uncertainty on margins, AI execution, and China exposure is weighing on bottom-line forecasts.

    Risks to the upside include better-than-expected PC demand, faster MI350 ramp, or new design wins with hyperscalers. Downside risks include weak Q2 guidance tied to China sanctions, slower-than-expected AI deployment, or intensifying pricing pressure in the x86 server and PC markets.

    What to Watch on the Call

    The earnings call will likely set the tone for post-earnings sentiment. Investors will be looking for:

    • Clarity on MI325X ramp and MI350 timeline.
    • Any update on AI revenue targets for FY25 and beyond.
    • Commentary on customer adoption trends, especially at Meta, Microsoft, and other cloud providers.
    • AMD’s views on competitive threats from Intel’s 18A process and the broader AI accelerator market.

    AMD Q4 Earnings Recap: Strong Client Gains Offset by Tepid AI Outlook and Data Center Miss

    Advanced Micro Devices (AMD) delivered mixed fourth-quarter 2024 results that came largely in line with expectations but disappointed some investors on the AI growth narrative, particularly around its Instinct GPU line. Revenue came in at $7.66 billion, up 24% year-over-year and ahead of the $7.54 billion consensus, while adjusted EPS matched estimates at $1.09. However, despite solid momentum in the Client segment and improved margins, weakness in Data Center and ambiguity around 2025 AI contributions led to cautious analyst revisions and a muted stock reaction.

    Segment Highlights: Client Strength, Data Center Miss

    AMD’s standout performance came from its Client segment, which posted record revenue of $2.31 billion—up 58% year-over-year and beating the $1.99 billion estimate. The strong result reflected continued market share gains for Ryzen processors and robust demand in the PC market. This marked the fourth consecutive quarter of client share gains, positioning AMD well for further upside in the PC space.

    Data Center revenue rose 69% year-over-year to $3.86 billion but fell short of the $4.09 billion estimate. While AI-driven GPU sales contributed meaningfully, AMD’s guidance disappointed investors hoping for more clarity and upside in AI compute. Management declined to offer specific 2025 AI revenue targets, instead suggesting Data Center revenues in the first half of 2025 would be flat relative to the second half of 2024—raising concerns about a short-term “air pocket” in growth.

    Gaming and Embedded Trends

    The Gaming segment saw revenues decline 59% year-over-year to $563 million, a sharper drop than expected, although still above estimates of $488 million. Management noted some normalization in gaming trends, though no near-term rebound appears imminent. Embedded revenue came in at $923 million, down 13% year-over-year and slightly below estimates of $959 million, reflecting continued softness in industrial demand.

    Margins, Cash Flow, and CapEx

    Adjusted gross margin improved to 54%, up from 51% a year ago and in line with expectations. Adjusted operating income hit $2.03 billion, a 43% increase year-over-year, with operating margins at 26%, just shy of the 26.8% Street estimate. Free cash flow came in at $1.09 billion—better than last year’s $242 million, though missing the $1.35 billion consensus.

    Capital expenditures surged 50% year-over-year to $208 million as AMD invests in capacity and AI infrastructure, while R&D spending grew 13% to $1.71 billion, underscoring the company’s commitment to long-term innovation.

    Q1 2025 Guidance and AI Commentary

    For Q1 2025, AMD guided revenue to a range of $6.8 to $7.4 billion, essentially bracketing the $6.99 billion consensus. Gross margins are expected to hold steady at 54%. However, investor anxiety remains focused on the lack of explicit AI compute guidance, with AMD only noting that Data Center sales, including MI300-series GPU revenue, will be flat in 1H25 compared to 2H24.

    On the conference call, management reiterated confidence in their AI roadmap, highlighting progress with MI325X ramp and an earlier-than-expected launch of MI350 in mid-2025. While AMD has made inroads at key customers like Microsoft and Meta, commentary suggested some customers may be deferring purchases until MI350 and MI400 series become more broadly available.

    Street Reaction and Valuation Impact

    Shares of AMD fell roughly 9% in the premarket following the report, reflecting concern over the cautious AI trajectory and soft guidance tone. Several analysts reduced their price targets—Piper lowered its PT from $180 to $140, citing a 6-9 month air pocket in GPU growth, while others like Mizuho and RAJA also trimmed estimates but maintained bullish long-term views based on MI350 and MI400 ramp expectations in the second half of 2025.

    Bottom Line

    AMD’s Q4 print showed strength in PCs and operational execution, but an underwhelming Data Center beat and a murky near-term AI growth outlook spooked the fast money. Still, with the MI350 and MI400 roadmaps advancing and key partnerships with hyperscalers gaining traction, the back half of 2025 could provide the AI acceleration bulls are waiting for—if AMD can bridge the gap.

    Bottom Line

    AMD is poised to report solid headline numbers, but the real test lies in guidance and forward visibility on AI acceleration. With a stock still trading at a discount to historical averages and the long-term story tied to GPU execution, management’s ability to reinforce confidence in its roadmap—and address short-term China and competitive risks—will determine whether AMD extends its recent rebound or slips further behind its high-flying rivals.

    Comments

    Add a public comment...
    Post
    User avatar and name identifying the post author
    blake
    05/06
    Derisked more of my $AMD position here on this earnings pop. +22% on commons in just over a week. Stops above break even now.
    0
    Reply
    User avatar and name identifying the post author
    JPATrades
    05/06
    $AMD MOON
    0
    Reply
    User avatar and name identifying the post author
    Routine_Ask9985
    05/06
    $AMD who's staying strong during the earnings report? ✋🏽
    0
    Reply
    User avatar and name identifying the post author
    mrpoopfartman
    05/06
    OMG!The AMD stock generated the signal, from which I have benefited significantly!
    0
    Reply
    Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
    You Can Understand News Better with AI.
    Whats the News impact on stock market?
    Its impact is
    fork
    logo
    AInvest
    Aime Coplilot
    Invest Smarter With AI Power.
    Open App