TLDR:
- AMD exceeded Q4 earnings expectations with $7.56 billion revenue but stock fell 9% due to data center growth concerns
- Company’s data center segment revenue of $3.9 billion fell short of $4.09 billion analyst expectations
- Client segment outperformed with $2.3 billion revenue versus expected $1.98 billion
- Q1 2025 forecast of $6.8-7.4 billion revenue surpassed Wall Street’s $7.0 billion estimate
- AMD stock down 33% over 12 months while competitor Nvidia up 80%
Advanced Micro Devices (AMD) reported better-than-expected fourth quarter earnings on Tuesday, but its shares fell sharply in pre-market trading Wednesday as investors focused on slower growth in its data center business.
The chipmaker posted revenue of $7.56 billion for the quarter, beating analyst estimates of $7.5 billion. Earnings per share matched expectations at $1.09.
AMD’s data center segment, which represents its largest revenue stream, generated $3.9 billion in the quarter. This fell short of Wall Street’s projected $4.09 billion, raising concerns about the company’s competitive position against Nvidia in the artificial intelligence chip market.
The client segment, which includes PC processors, delivered stronger results with revenue of $2.3 billion, exceeding analyst expectations of $1.98 billion. The gaming division also outperformed, bringing in $563 million compared to projected revenue of $487 million.
Looking ahead to the first quarter of 2025, AMD forecast revenue between $6.8 billion and $7.4 billion, above Wall Street’s estimate of $7.0 billion. Despite this positive outlook, the stock dropped almost 9% in pre-market trading.
The company’s stock performance has lagged behind its main rival over the past year. AMD shares have declined 33% while Nvidia’s stock has surged 80% during the same period. Intel, another competitor, has seen an even steeper decline of 54%.
The earnings report came on the same day President Trump implemented a 10% tariff on Chinese-made goods. While high-end chips manufactured in places like Taiwan won’t be directly affected, the broader electronics market could feel the impact.
Many servers and PCs are assembled in China, making them subject to the new tariffs. This could lead to higher prices for consumers and businesses, potentially affecting demand for AMD’s processors.
The announcement also follows recent developments in the AI sector, with China-based DeepSeek introducing low-cost AI models. This highlights the increasing competition in the artificial intelligence market where AMD is working to gain ground against Nvidia’s dominant position.
AMD continues to navigate challenges in the PC market, which has experienced a prolonged slowdown. The industry is pushing toward AI-enabled PCs featuring specialized processors, but adoption rates remain uncertain.
The data center segment’s performance is particularly important as AMD attempts to capture market share from Nvidia in AI chips. Nvidia currently leads the market for high-powered processors used in artificial intelligence applications.
President Trump has also suggested implementing specific tariffs on semiconductors to encourage U.S.-based manufacturing. However, building new chip facilities is a complex process that typically takes several years to complete.
The company’s gaming division showed resilience in the quarter, with revenue exceeding analyst expectations by $76 million. This suggests continued strength in the consumer graphics card market.
For comparison, AMD’s overall quarterly revenue of $7.56 billion represents continued growth from previous periods, though investors appear focused on the data center segment’s performance relative to expectations.
The pre-market stock decline of 9% brought AMD shares to $109.78, down from the previous day’s closing price of $119.50.
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