AMD to Announce Q1 2025 Results with Strong Growth Projections

Advanced Micro Devices AMD will report its first-quarter 2025 results on May 6. The company anticipates revenues between $6.8 billion and $7.4 billion, with a midpoint estimate of $7.1 billion, reflecting roughly 30% year-over-year growth and about a 7% sequential decline.

The Zacks Consensus Estimate for AMD’s first-quarter revenue stands at $7.12 billion, suggesting year-over-year growth of 30.11%. The earnings consensus is at 93 cents per share, unchanged over the past month, indicating a 50% increase compared to the previous year.

Over the last four quarters, AMD has consistently outperformed the Zacks Consensus Estimate for earnings, with an average surprise of 2.32%.

AMD Stock Price and EPS Surprise

Advanced Micro Devices, Inc. price-eps-surprise | Advanced Micro Devices, Inc. Quote

Growth in Data Center and Client Segments Expected

AMD’s performance for the first quarter is likely to benefit from expansion in its data center and client segments. This growth stems from the ongoing demand for EPYC processors and Ryzen chips. Notably, the data center segment has been pivotal to AMD’s success and is expected to continue this trend.

The Data Center segment’s revenues are estimated to rise significantly, driven by robust sales of chips that support hyperscalers and AI applications. The Zacks Consensus Estimate for first-quarter Data Center revenues is $3.4 billion, marking a year-over-year increase of 47.5%.

In the client segment, AMD anticipates ongoing growth fueled by rising demand for Ryzen processors across desktop and mobile markets. Collaborations, such as with Dell Technologies DELL for Ryzen Pro processors in commercial PCs, are projected to support growth in this arena.

According to the Zacks Consensus Estimate, first-quarter Client segment revenues are expected to reach $2.04 billion, demonstrating year-over-year growth of 49.3%.

Weakness in Embedded and Gaming Sectors

However, AMD’s near-term outlook is hindered by challenges in the Embedded and Gaming segments, which are anticipated to show year-over-year revenue declines.

The Zacks Consensus Estimate for first-quarter Embedded revenues is $570 million, indicating a slight 0.9% decline from the previous year. Meanwhile, Gaming revenues are projected to drop significantly to $509 million, reflecting a massive 38.1% decrease.

AMD Stock Underperforms Compared to Industry

AMD shares have decreased 17.9% year-to-date, underperforming both the Zacks Computer and Technology sector, which has fallen 9%, and the Zacks Computer – Integrated Systems industry, down 7.2%.

Year-to-Date AMD Stock Performance

Image Source: Zacks Investment Research

Currently, AMD’s stock carries a Value Score of F, signaling a potentially stretched valuation. The company’s forward 12-month price/sales ratio stands at 4.68X, significantly above the industry average of 2.90X.

Price/Sales Ratio (Forward 12 Months)

Image Source: Zacks Investment Research

Strategic Partnerships Enhance AMD’s Position

AMD’s diverse partnerships, including with Microsoft MSFT, Oracle, Dell Technologies, Hewlett Packard, Lenovo, Meta Platforms META, and IBM, bolster its business. The ongoing demand for AI accelerators like the Instinct MI300 series is expected to drive further growth in data center revenues in the upcoming quarter.

Incidents such as Meta using MI300X for its Llama 405B model and Microsoft employing MI300X for its various GPT-based services highlight AMD’s strong market position. Dell Technologies is also integrating MI300X in its AI factory solutions.

Conclusion

AMD’s growing portfolio and strategic acquisitions are anticipated to contribute positively to top-line growth despite the struggles in the Embedded and Gaming segments and competition from NVIDIA. With a Growth Score of C, AMD may not be ideal for growth-focused investors, and its valuation presents another area of concern.

Currently, AMD holds a Zacks Rank #3 (Hold), suggesting a prudent approach might be to wait for a more favorable entry point before investing.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.