AMD Delivers Strong Q1 2025 Earnings Amid Sector Challenges
Advanced Micro Devices (AMD) reported non-GAAP earnings of 96 cents per share for the first quarter of 2025, exceeding the Zacks Consensus Estimate by 3.23%. This reflects a robust year-over-year increase of 54.8%.
With revenues reaching $7.438 billion, AMD surpassed the Zacks Consensus Estimate by 4.45% and marked a 35.9% increase from the previous year, despite a sequential decline of 2.9%.
The significant revenue growth stemmed from strong performance in the Data Center and Client segments, although it was partially offset by slower sales in Gaming and Embedded sectors.
In pre-market trading, AMD shares increased by 1.80% due to growth in key areas. However, shares have dropped 18.4% year-to-date.
AMD Price, Consensus, and EPS Surprise
Advanced Micro Devices, Inc. price-consensus-eps-surprise-chart | Advanced Micro Devices, Inc. Quote
Data Center Growth Fuels AMD’s Q1 Performance
AMD’s Data Center revenues soared 57.2% year-over-year to $3.674 billion, representing 49.4% of its total revenues. However, this reflects a 4.8% sequential decline.
Strong Instinct GPU shipments and sales of EPYC CPUs were key drivers of the top-line performance. Major hyperscalers like Oracle Cloud Infrastructure and Google Cloud increased their usage of AMD EPYC CPUs, focusing on performance and cost-effectiveness.
The acquisition of ZT Systems further strengthens AMD’s capabilities in the data center market, aiming to tap into a $500 billion market for AI accelerators by 2028.
In Q1 2025, AMD also expanded partnerships with Meta Platforms (META), Dell Technologies (DELL), Jio Platforms, Cisco Systems (CSCO), and Nokia to enhance AI solutions.
Client Segment Growth Driven by Ryzen Processors
Revenues from the Client segment rose 67.7% year-over-year to $2.294 billion, accounting for 30.8% of total revenues. Compared to the previous quarter, revenues decreased by 0.8%.
Strong demand for AMD’s latest Ryzen CPUs, especially those based on the Zen 5 architecture, contributed to this growth. The introduction of products like the Ryzen 9 9950 X3D set new sellout records in the client segment.
Gaming and Embedded Segments Show Weakness
Gaming segment revenues fell 29.8% year-over-year to $647 million, comprising 8.7% of total revenues, while showing a 14.9% sequential increase.
This decline resulted primarily from reduced semi-custom revenues. Furthermore, revenues from the Embedded segment reached $823 million, down 2.7% year-over-year and 10.8% sequentially, representing 11.1% of total revenues.
Improved Margins Despite Rising Costs
AMD’s non-GAAP gross margin increased by 140 basis points year-over-year to 53.7%, propelled by revenue growth in the Data Center and Client segments.
Non-GAAP operating expenses rose 28.1% year-over-year to $2.213 billion, while the operating margin expanded by 320 basis points to 23.9% due to higher revenues.
Strong Balance Sheet and Cash Flow
As of March 29, 2025, AMD had $7.310 billion in cash, cash equivalents, and short-term investments, up from $5.132 billion at the end of 2024. Total debt rose to $4.16 billion, compared to $1.72 billion at the end of the previous year.
Operating cash flow was reported at $939 million, down from $1.299 billion in the previous quarter. Free cash flow stood at $727 million, with a margin of 10% for Q1 2025.
AMD returned $749 million to shareholders through its share repurchase program and has $4 billion left under its authorization.
Modest Q2 Guidance
For Q2 2025, AMD projects revenues of $7.4 billion (+/- $300 million), indicating a year-over-year growth of approximately 27% at the midpoint of the range.
Non-GAAP gross margin is expected to be around 43% with operating expenses estimated at nearly $2.3 billion.
The company anticipates a favorable demand environment for growth in both the Data Center and Client segments, along with a modest increase in Gaming and Embedded businesses, expecting double-digit revenue and earnings growth for 2025.
Zacks Rank
AMD currently holds a Zacks Rank of #3 (Hold).
