Solid Beat on Revenue, Led by Data Center and Client Segments

Advanced Micro Devices (AMD) reported strong Q1 2025 results, continuing its growth momentum. Revenue reached $7.44 billion — a 36% year-over-year increase and above Wall Street expectations of $7.12 billion. Adjusted EPS came in at $0.96, beating the consensus estimate of $0.93 and reflecting a 55% jump from the prior year.

Growth was primarily driven by the Data Center and Client segments. Data center revenue surged 57% to $3.67 billion, fueled by strong demand for EPYC CPUs and Instinct GPUs. Client segment revenue rose 68% to $2.3 billion, thanks to the successful launch of the new Ryzen processor lineup.

Weakness in Gaming and Embedded Segments

While the core businesses delivered strong performance, the Gaming and Embedded segments lagged. Gaming revenue dropped 30% year-over-year, and Embedded revenue declined by 3%. This shift reflects AMD’s strategic pivot toward high-growth markets like AI and cloud computing.

Gross Margin Below Expectations

Despite the topline beat, AMD missed on gross margin (GPM), which came in at 53.7%, 20 basis points below expectations and 40 basis points lower than Q4 2024. The decline was attributed to product mix and higher costs associated with advanced components.

Q2 Outlook: Resilient Revenue, but One-Time Charge Will Weigh on EPS

For Q2 2025, AMD expects revenue of $7.4 billion — above analysts’ estimates of $7.2 billion. However, the company announced an $800 million inventory charge due to new U.S. export restrictions on AI chips to China.

With that charge included, AMD’s adjusted EPS could drop to $0.47, below the consensus of $0.88. According to Truist Securities, excluding the charge, EPS would have been $0.90 — a strong result, reflecting underlying business strength.

Stock Reacts to Mixed Sentiment

AMD stock closed down 2% at $98.62 on Tuesday. In after-hours trading, the stock initially climbed but later pulled back, down around 1% to $97.66. While investors appreciated the strong top-line and growth narrative, concerns over China exposure weighed on sentiment.

CEO Commentary: Strong Execution Amid Headwinds

CEO Lisa Su stated, “We delivered an outstanding start to 2025, with year-over-year growth accelerating for the fourth consecutive quarter, driven by strength in our core businesses and expanding AI and data center momentum. Despite a dynamic macro and regulatory environment, our results highlight the resilience of our differentiated product portfolio and consistent execution.”

Conclusion

AMD continues to deliver strong fundamentals, posting double-digit revenue and profit growth across strategic verticals. However, export controls on AI chip sales to China could present material headwinds in the quarters ahead. Investors will be watching closely to see whether AMD’s momentum can overcome these new regulatory challenges.