AMD's Q1 Revenue Surges 57% on AI Demand, Stock Jumps 7%

Advanced Micro Devices (AMD) reported a strong first-quarter revenue growth that exceeded expectations, driven by robust demand for AI-related applications. The company's second-quarter revenue guidance, while showing a slight deceleration, still outperformed market forecasts. This performance indicates that the demand for AI applications remains robust, and the impact of trade policies, such as tariffs implemented by the Trump administration, has not been as severe as initially anticipated by the market. This positive outlook also suggests that NVIDIA, another major player in the AI chip market, may deliver impressive results.

Analysts noted that while new U.S. chip export restrictions could cast a shadow over AMD's future earnings, the company's guidance for the second quarter exceeded expectations, boosting investor confidence. AMD's strong performance is attributed to the growing market demand for high-end computers capable of creating and running AI software. The company continues to make strides in the lucrative data center processor market, gaining market share from Intel, and benefits from strong demand for PC chips.

Following the release of the earnings report, AMD's stock, which had initially declined by nearly 2%, saw a post-market surge, reversing the downward trend and rising by more than 7%. However, during the earnings call, NVIDIA mentioned the impact of export restrictions, causing AMD's stock to briefly decline by more than 1% before recovering.

AMD's data center revenue for the first quarter was $3.7 billion, a 57% year-over-year increase, surpassing analyst expectations of $3.6 billion. The client segment, which includes PC chips, generated $2.3 billion in revenue, a 68% year-over-year increase, exceeding analyst expectations of $2 billion. The gaming segment, however, saw a 30% year-over-year decline in revenue to $647 million, although this was better than expected. The embedded segment reported $823 million in revenue, a 3% year-over-year decrease.

For the second quarter, AMD expects revenue to be around $7.4 billion, with a margin of error of $300 million, indicating a range of $7.1 billion to $7.7 billion. This forecast is higher than analyst expectations of $7.24 billion. The company also noted that the new U.S. export restrictions could result in approximately $800 million in additional inventory, procurement, and related reserve costs. Excluding these costs, the gross margin for the second quarter is expected to be around 54%, in line with the first quarter.

AMD's CEO, Lisa Su, highlighted the company's strong start to the year, driven by robust growth in core businesses and the data center and AI sectors. Despite the volatile macroeconomic and regulatory environment, the first-quarter results and second-quarter outlook demonstrate AMD's competitive product portfolio and execution capabilities, setting a solid foundation for strong growth throughout the year.