AMD Reports Growth Amid Challenges and Export Restrictions

When Advanced Micro Devices (NASDAQ: AMD) unveiled its first-quarter results recently, it highlighted promising indicators for some investors, even as the stock has dropped about 35% over the past year.

Strong Revenue Growth in Data Centers

The company experienced impressive revenue growth in its data center segment, with sales surging 57% to $3.7 billion. While this figure is notably smaller than that of rival Nvidia (NASDAQ: NVDA), the growth trajectory is significant. AMD attributes this success to gaining market share in central processing units (CPUs) for servers and strong performance from its Instinct graphics processing units (GPUs).

AMD has solidified its position as a leader in the data center CPU arena. Although the market for CPUs is smaller than that for GPUs, it remains a crucial and expanding sector. Recent partnerships with cloud computing providers introducing new computing options based on AMD’s EPYC chips further illustrate this growth. Additionally, AMD’s CPUs have seen strong adoption in the enterprise segment.

AI and Generative Tasks

The company reported that several hyperscalers expanded their use of AMD’s GPUs for generative artificial intelligence (AI) applications, including AI search, rankings, and recommendations. Notably, one of the largest AI model companies is now relying on AMD’s GPUs for a significant portion of its daily inference traffic. Both major tech firms and AI startups are leveraging these GPUs to develop next-generation AI models.

Although AMD is unlikely to surpass Nvidia in the near term, it continues to witness robust growth in the data center arena. The AI training market has garnered attention as companies strive to enhance their AI models, but the inference market is anticipated to grow even larger over time. AMD has traditionally performed well in this sector, positioning itself favorably for this shift.

Export Restrictions Affecting Revenue

While AMD’s data center growth is commendable, the company faces challenges due to new export controls impacting its MI308 GPU shipments to China. AMD estimates that it will lose approximately $700 million in revenue in the second quarter alone, with an expected total headwind of $1.5 billion for the year, predominantly affecting the second and third quarters.

Despite these challenges, AMD anticipates strong revenue growth of double digits percentage-wise in 2025. For Q2, the company projects revenue at $7.4 billion, plus or minus $300 million, representing a 27% increase. To capitalize on its growth opportunities, AMD plans to boost investments in its product and technology initiatives.

Q1 Financial Highlights

In the first quarter, AMD reported a 36% rise in overall revenue to $7.44 billion. Adjusted earnings per share (EPS) climbed 55% to $0.96, exceeding the analyst consensus of $0.94 on sales of $7.13 billion, as reported by LSEG.

The client and gaming segments contributed to this growth, with total segment revenue increasing by 28% to $2.9 billion. Notably, client revenue jumped 68% to $2.3 billion, driven by high demand for new Ryzen CPUs in gaming desktop PCs and AI-powered notebooks. Conversely, gaming revenue dropped 30% to $647 million, reflecting reduced semi-custom revenue amid a lengthy video game console cycle. However, significant growth is expected in the console segment with anticipated launches in late 2027 or 2028. The embedded segment also saw a slight revenue dip of 3% to $823 million.

Image source: Getty Images.

Investment Considerations for AMD

Although export restrictions pose a challenge for AMD, the company remains optimistic due to strong momentum in the data center sector. It continues to lead in the server CPU market, a segment likely to grow steadily.

A major opportunity for AMD lies in the increasing demand for AI chips focused on inference. The firm has established a significant presence in this market, with expectations that the inference market will eventually surpass training in scale.

Currently, AMD shares are trading at a forward price-to-earnings (P/E) ratio of 26.5 based on 2025 analyst estimates and about 18 times for 2026 estimates, indicating a notable drop in valuation over the past year to a more attractive level.

AMD PE Ratio (Forward) data by YCharts.

Given the opportunities in AI, now might be a strategic time to accumulate AMD shares. If the company captures additional market share in the inference market, it could see significant upside moving forward.

Should You Invest in Advanced Micro Devices?

Before making an investment in Advanced Micro Devices, it’s important to consider potential challenges and market dynamics.

Despite the export hurdles, AMD demonstrates promising growth prospects in the data center space and the AI chip market. As the industry landscape shifts, AMD’s focus on outstanding performance in inference may yield substantial returns for long-term investors.

Geoffrey Seiler has no position in any of the stocks mentioned. The views expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.