AMD Shares Drop After CEO Guides Q1 Data Center Revenue Down 7%

AMD shares took a tumble in extended trading Tuesday after the chipmaker reported data center sales figures that came in below Wall Street estimates. The stock fell 9% to about $109, extending a recent trend of underperformance. AMD's guidance for the first quarter of 2025 also raised concerns, with the company expecting a sequential decline of approximately 7% in data center sales.

The chipmaker's fourth-quarter results, announced on February 4, 2025, showed strong growth in revenue and earnings, with record sales of $7.7 billion and net income of $482 million. However, the data center segment, which is a proxy for the company's artificial intelligence (AI) chip revenue, missed analyst estimates. AMD reported $3.86 billion in data center sales, up 69% year-over-year, but still short of the $4.14 billion expected by analysts.

AMD's CEO, Dr. Lisa Su, attributed the shortfall to seasonality and the cyclical nature of the data center market. She also noted that the company's guidance for the first quarter of 2025 is cautious, with a midpoint revenue estimate of $7.1 billion, plus or minus $300 million. This suggests that AMD is being conservative in its projections, possibly due to uncertainty in the market or a desire to manage investor expectations.



Despite the short-term decline in data center sales, AMD remains optimistic about its long-term growth prospects. The company expects "strong double-digit percentage revenue and EPS growth" in 2025, driven by the strength of its product portfolio and growing demand for high-performance and adaptive computing. AMD's data center segment, in particular, is expected to continue its strong growth trajectory, with revenue scaling from more than $5 billion in 2024 to tens of billions of dollars annually in the coming years.

AMD's strategic initiatives, such as expanding partnerships to deliver highly performant AI infrastructure at scale and investing aggressively in AI and innovation, are expected to drive growth across all segments, including client and gaming. The company's focus on strong demand for Ryzen processors in desktop and mobile, as well as its competitive data center GPUs, will also contribute to its growth prospects.

In conclusion, AMD's shares dropped after the company guided Q1 data center revenue down 7%. While the short-term decline in data center sales is concerning, AMD's long-term growth prospects remain strong, driven by its strategic initiatives and the growing demand for high-performance and adaptive computing. Investors should closely monitor AMD's progress and consider the company's long-term growth potential when making investment decisions.