AMD Shows Signs of Recovery in Q1 2025 Earnings Report
Could Advanced Micro Devices (NASDAQ: AMD) be on the road to recovery?
The chipmaker reported its earnings for the first quarter of 2025, and revenue growth is accelerating, with every segment except one showing improvements. This is positive news for a stock that currently trades over 55% below its high reached in March 2024.
The semiconductor stock is considered discounted, but is it genuinely a good value? Let’s take a closer look.
Image source: Getty Images.
AMD’s Fiscal 2025 Q1 Earnings
When examining revenue, the company reported an increase overall. For Q1 2025, AMD generated $7.4 billion in revenue, representing a 36% growth compared to the previous year. This rise marked an improvement from the 24% growth in Q4 and 14% growth overall in 2024.
Although two of its four segments experienced annual revenue declines, two growth segments drove 80% of AMD’s sales, showing strong demand for AI accelerators and central processing units (CPUs), which helped offset weaker performance elsewhere.
This revenue boost led to a notable increase in net income, with AMD reporting $709 million for Q1, a significant jump from $123 million a year earlier.
Despite a slight rise following the announcement, the stock still trades down more than 30% from its price a year ago.
With this decline, investors can acquire this stock at a notable discount. Although it has a trailing P/E ratio of 76, the forward price-to-earnings ratio stands at 26, a low valuation for a company witnessing accelerated earnings growth.
Mixed News on Revenue Front
Despite the positives, AMD’s financials present a mixed picture, which could pose challenges for its stock moving forward.
AMD forecasts revenue between $7.1 billion and $7.7 billion for Q2. While this suggests about 28% growth at the midpoint, it also indicates a potential deceleration from Q1’s growth rate.
Moreover, the data center segment, which includes AI accelerators and represents about half of AMD’s revenue, experienced slightly slower growth of 57% compared to 69% in the previous quarter. Even so, 57% annual growth remains impressive, with this segment contributing $3.7 billion, or 49%, of AMD’s total revenue.
Details on AI accelerator sales were not disclosed by management, which may worry investors, especially as AMD continues to trail Nvidia in this market.
The company’s lower-performing segments further complicate its outlook. The embedded segment saw a slight annual decline of 3%, an improvement from a 13% drop in Q4, while gaming revenue shrank by 30%, though this too is an improvement from a 58% decline in the previous quarter.
Combined, revenue from embedded and gaming segments accounted for only 20% of AMD’s total revenue this quarter, down from 32% a year ago, reflecting the downturn’s impact.
On a brighter note, AMD’s client business, which includes PC chips, delivered strong results, constituting 31% of overall revenue and achieving 68% annual growth, improving from 58% in the prior quarter.
As a result, both bullish and bearish investors can find elements to appreciate in AMD’s first-quarter 2025 earnings report. The question remains – will investors focus on the positives or the negatives?
Is It Time to Turn Bullish on AMD Stock?
Considering AMD’s strengths and challenges, the stock appears to be a buy.
While the ongoing cycles in the embedded and gaming sectors are concerning and have significantly affected performance, the impressive growth in the data center segment may counteract these issues.
The acceleration in overall revenue growth points to more positives than negatives. Additionally, lower declines in the embedded and gaming sectors could indicate that the worst may be behind these segments.
With a forward P/E ratio of 26, AMD presents as a value stock. This earnings multiple, coupled with the overall business improvements, provides solid incentives for investors to consider buying.
Should You Invest $1,000 in Advanced Micro Devices Now?
Before making any investment decisions regarding stock in Advanced Micro Devices, consider the following:
The Motley Fool Stock Advisor analyst team has identified their picks for the 10 best stocks for investors right now, and Advanced Micro Devices isn’t among them. The stocks that were selected could offer substantial returns in future years.
For instance, consider Netflix entered this list on December 17, 2004… a $1,000 investment at that recommendation point would be worth $614,911!*
Similarly, when Nvidia made the list on April 15, 2005… a $1,000 investment at that time would now be worth $714,958!*
It’s noteworthy that The Motley Fool Stock Advisor has an average return of 907%, significantly outperforming 163% for the S&P 500. Don’t miss this opportunity to explore the latest top 10 list by joining Stock Advisor.
*Stock Advisor returns as of May 5, 2025
Will Healy has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. 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.
