AMD’s Q4 Results Show Mixed Growth in a Competitive Landscape
Advanced Micro Devices (NASDAQ: AMD) experienced a drop in share price after its Q4 earnings report revealed strong data center revenue that still failed to meet analysts’ expectations. The stock has decreased by over 35% in the past year, as of this update.
Let’s take a closer look at AMD’s fourth-quarter performance to determine if this decline presents a buying opportunity.
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Robust Growth in Data Center Segment
A key highlight for AMD in its Q4 report was the impressive performance of its data center business, which saw a revenue increase of 69% year over year and 11% from the previous quarter, reaching $3.9 billion. This growth was spurred by sales of both AMD’s Instinct GPUs and EPYC CPUs. However, this revenue fell short of the $4.14 billion that analysts anticipated, according to FactSet.
AMD noted that its EPYC CPUs now capture more than 50% market share among hyperscalers. Major companies like Microsoft and Meta Platforms have adopted AMD’s MI300X GPUs, and interest is growing for the upcoming MI350 series GPUs expected to launch mid-year, with MI400 GPUs aimed for release in 2026.
Additionally, AMD’s client segment saw substantial growth, with Q4 revenue rising 58% year over year to $2.3 billion. It has gained significant retail market share in PCs, boasting over 70% on popular platforms such as Amazon and Newegg. Despite this success, the company reported significant declines in its gaming and embedded divisions, with gaming revenue dropping 59% to $563 million and embedded sales falling by 13% due to struggles in industrial and communication markets.
Overall, AMD’s total Q4 revenue grew by 24% year over year, totaling $7.66 billion. Its adjusted earnings per share (EPS) rose 42% to $1.09, exceeding the analyst consensus EPS forecast of $1.08 on revenues of $7.53 billion, as reported by LSEG.
Adjusted gross margins improved by 320 basis points to 54%, indicating that not only is AMD growing its revenue, but it is also enhancing profitability.
In terms of cash flow, AMD generated $1.1 billion in free cash flow for the quarter and $2.4 billion for the full year. It concluded 2024 with $5.1 billion in net cash and short-term investments, along with $1.7 billion in debt.
Looking forward, AMD projects Q1 revenue between $6.8 billion and $7.4 billion, representing expected growth of 30% at the midpoint. This growth will be mainly driven by advancements in the data center and client markets, which will help counterbalance expected declines in gaming and modest decreases in embedded segments.
For the full year, AMD predicts double-digit percentage growth for both revenue and EPS. It foresees slight growth in its gaming and embedded sectors.
Image source: Getty Images.
Is Now the Right Time to Invest?
While AMD’s data center GPUs are growing, it faces stiff competition, particularly from Nvidia, which currently leads the market due to stronger software support. AMD, however, has carved a niche in AI inference and continues to see growth in GPUs despite these challenges.
Rather than viewing AMD solely through its GPU offerings, it’s essential to recognize its leading position in the CPU market, where it continues to gain ground. CPUs may not dominate AI infrastructure as much as GPUs, but their importance remains significant, and AMD’s growth in this sector is promising.
From a valuation perspective, AMD has a forward price-to-earnings (P/E) ratio of under 24 based on 2025 estimates, with 41% predicted EPS growth. This valuation presents an appealing opportunity for investors.
If you expect AMD to become a major player in the GPU arena, you might be disappointed; Nvidia currently holds that crown. However, if you recognize AMD’s achievements in CPUs and want to invest based on its growth in that area, this stock offers an attractive option to consider on the dip.
Should You Invest $1,000 in Advanced Micro Devices Today?
Before purchasing stock in Advanced Micro Devices, consider this:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, FactSet Research Systems, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
