AMD Q1 Earnings Top Estimates, Revenues Up Y/Y, Shares Rise

Advanced Micro Devices AMD reported first-quarter 2025 non-GAAP earnings of 96 cents per share, beating the Zacks Consensus Estimate by 3.23%. The figure surged 54.8% year over year. Revenues of $7.438 billion beat the Zacks Consensus Estimate by 4.45% and increased 35.9% year over year, but declined 2.9% sequentially. The top-line growth benefited from robust Data Center and Client revenues that were partially offset by sluggishness in the Gaming and Embedded segments.AMD shares have risen 1.80% in pre-market trading, driven by strong growth in the key segments. In the year-to-date period, AMD shares have plunged 18.4%.Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise Advanced Micro Devices, Inc. price-consensus-eps-surprise-chart | Advanced Micro Devices, Inc. QuoteAMD Q1 Top Line Rides on Data Center GrowthData Center revenues surged 57.2% year over year to $3.674 billion, accounting for 49.4% of total revenues. Sequentially, revenues decreased 4.8% year over year.AMD’s top line benefited from strong Instinct GPU shipments and robust EPYC CPU sales.In the first quarter of 2025, leading hyperscalers such as Oracle Cloud Infrastructure and Google Cloud expanded their use of AMD EPYC CPUs. OCI Compute E6 shapes offered cost-to-performance gains, while Google Cloud launched C4D and H4D virtual machines for enhanced performance, scalability, and efficiency in general-purpose and HPC workloads.Exiting first-quarter 2025, AMD completed its acquisition of ZT Systems, combining its leadership in systems and racks with AMD’s powerful GPUs, CPUs, networking silicon, and open-source software to tap into the $500 billion data center AI accelerator market by 2028.In the first quarter of 2025, AMD expanded its partnerships with Meta Platforms META Dell Technologies DELL, Jio Platforms, Cisco Systems CSCO, Nokia and others to deliver advanced AI solutions and enhance infrastructure.AMD enhances support for frontier AI models on Instinct GPUs with ROCm software, offering day-zero support for the latest Meta AI Llama 4 and Google Gemma 3 models.  Dell Technologies also announced the expansion of its AI for Telecom offering, powered by AMD.AMD, Jio Platforms Limited, Cisco, and Nokia have partnered to form a new Open Telecom AI Platform, aiming to deliver AI-driven solutions that enhance efficiency, security, and capabilities.AMD’s Client Revenues Ride on Ryzen and Mobile ProcessorsThe Client segment’s revenues soared 67.7% year over year to $2.294 billion, accounting for 30.8% of total revenues. Sequentially, revenues decreased 0.8% year over year.AMD’s latest Ryzen CPUs, particularly those based on the Zen 5 architecture, have seen strong demand, especially for gaming and high-performance desktops and laptops. The launch of new products, like the Ryzen 9 9950 X3D, helped set sellout records and boosted the client segment.The sales of higher-end products, including Ryzen processors for both desktop and mobile, led to higher average selling prices and contributed positively to revenues.AMD Suffers From Weak Gaming & Embedded RevenuesThe Gaming segment’s revenues declined 29.8% year over year to $647 million, accounting for 8.7% of total revenues. Sequentially, revenues increased 14.9% year over year. The decline in year-over-year was primarily due to a decrease in semi-custom revenues.The Embedded segment revenues were $823 million, down 2.7% year over year and 10.8% sequentially. The segment accounted for 11.1% of total revenues.The decline can be attributed to a gradual recovery in demand across various markets, including test and measurement, communications, and aerospace. Additionally, inventory levels among customers in certain areas, such as the industrial sector, remained elevated, which contributed to the slower recovery.AMD’s Margins Expand Y/Y in Q1Non-GAAP gross margin expanded 140 basis points (bps) on a year-over-year basis to 53.7%, driven by growth in the Data Center and Client segments’ revenues.Non-GAAP operating expenses increased 28.1% year over year to $2.213 billion.Non-GAAP operating margin expanded 320 bps on a year-over-year basis to 23.9% in the first quarter, driven by higher revenues and gross margin.AMD’s Balance Sheet & Cash Flow Remains StrongAs of March 29, 2025, AMD had cash, cash equivalents and short-term investments of $7.310 billion compared with $5.132 billion as of Dec. 28, 2024.As of March 29, 2025, total debt was $4.16 billion compared with $1.72 billion as of Dec. 28, 2024.Operating cash flow was reported at $939 million compared with $1.299 billion in the fourth quarter of 2024.Free cash flow was $727 million in the first quarter of 2025 compared with $1.091 billion in the fourth quarter of 2024. In the first quarter, free cash flow margin was 10%.In the first quarter of 2025, AMD returned $749 million to shareholders through a share repurchase program. The company has $4 billion remaining under its current authorization.AMD’s Q2 Guidance UnimpressiveAMD expects second-quarter 2025 revenues of $7.4 billion (+/-$300 million). At the mid-point of the revenue range, this represents year-over-year growth of approximately 27%.For the second quarter, AMD expects non-GAAP gross margin to be roughly 43%. Non-GAAP operating expenses are expected to be nearly $2.3 billion.For 2025, AMD expects a strong demand environment to drive growth in both the Data Center and Client businesses, as well as a modest increase in the Gaming and Embedded businesses. The company believes a strong demand environment will help to deliver double-digit percentage revenue and earnings growth year over year.Zacks RankCurrently, AMD carries a Zacks Rank #3 (Hold). 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