Advanced Micro Devices (NASDAQ: AMD) will report its Q1 earnings on Tuesday, May 6 after the closing bell. The stock is down 33% YTD at the time of writing.
The chip giant is facing tighter restrictions on chip exports, pressure from competitors, and tariff concerns. AMD Q1’s performance will provide crucial insights into the business’s continuous development, recent highlights and challenges.
Earnings Outlook and Estimate
Wall Street is expecting AMD to report its Q1 earnings with EPS forecasted at $0.94 per share, a 52% increase YoY, while revenues are expected to come in at $7.12 billion, which would mark an increase of 30% YoY. ⁽¹⁾
AMD has an encouraging earnings surprise history. The company missed earnings estimates just twice out of the previous nine quarters.
AMD’s first-quarter performance is expected to have benefited from growth in both its data center and client segments, driven by continued demand for its EPYC processors and Ryzen chips.
The data center segment in particular has been a major contributor to AMD’s success, and the company expects this trend to have continued in its most recent quarter.
AMD closed its $4.9 billion deal in March to buy ZT Systems, a maker of hyperscale servers. The move brings together AMD’s chips and networking tech with ZT’s strength in building large server systems and AI setups. This deal helps speed up the design and rollout of large AI clusters, strengthening AMD’s position in the fast-growing AI space. ⁽²⁾
Key Factors to Watch
Data Center Segment
AMD’s data center segment remains a key driver for revenue growth, making up 50% of its revenue. AMD’s data center segment revenue increased by 69% last quarter, amounting to $3.9 billion. This was a result of high sales and shipments of GPU and EPYC CPU chips in Q4 2024. However, it was less than the $4.14 billion anticipated. ⁽³⁾
The company’s MI300X system is being utilized for AI and generative AI applications by hyperscalers like Microsoft, Meta Platforms, and IBM. Microsoft is customizing the system for its GPT-4-based Copilot services, while Meta uses it to power its Llama 405B model.
AMD’s competitive advantage is demonstrated by its 50% market share among hyperscalers with EPYC CPUs. AMD expects the Data Center segment’s revenues to increase by $3.4 billion. ⁽⁴⁾
Client Segment
The company is likely to see continued growth in its client business, with an estimate of $2 billion in revenue, driven by higher demand for Ryzen processors across desktop and mobile platforms. AMD’s collaborations, such as the one with Dell Technologies for Ryzen Pro processors in commercial PCs, are expected to have boosted growth in this segment. ⁽⁵⁾
Embedded and Gaming Segments
AMD’s embedded industry solutions revenues, which are designed to meet the demanding needs of industrial and commercial applications such as gaming, healthcare, transportation, and automation are expected to come in at $570 million. The expected revenue is down 0.9% YoY, indicating less demand. ⁽⁶⁾
The gaming segment’s expected revenue is $510 million, indicating a decline of 38% YoY, due to market shifts and competitive pressures. ⁽⁷⁾
AI Infrastructure Expected to Increase Due To High Demand
Analysts from Citi group have stated that major hyperscalers like Meta, Microsoft and Google are planning to raise their capital expenditures to build AI infrastructures due to higher demand. Meta is expected to spend between 64-72 billion dollars while Microsoft and Google are expected to spend $80 billion and $75 billion. ⁽⁸⁾
“AI infrastructure buildouts remain key priorities for hyperscalers with the companies’ willingness to absorb the costs of tariffs,” Citi said. “We view this as positive for AI-exposed stocks, including AMD “, they wrote.
Tariff Risks Could Impact Q1 Earnings
AMD is facing challenges due to tariff concerns and heavy pressure from its competitors. AMD’s MI308 chip exports to China could cause the firm to pay a charge of $800 million, along with Nvidia’s $5.5 billion charge, as US President Trump cracks down on chip exports to China.
AMD’s exposure to suppliers from China and Taiwan, especially for chip packaging and testing, could place the hardware supply chain at risk due to US tariffs, which could lead to disruptions and higher costs.
Any new developments may impact AMD’s momentum in scaling its global data center business, particularly across Asia. As such, AMD’s management view will be crucial in addressing such concerns at the upcoming earnings call.
Bottom Line
AMD’s Q1 earnings could be set for robust growth in its data center and client segments, due to high demand in AI and strategic partnerships. However, weaknesses in embedded solutions and gaming, with pressure from tariffs and restrictions on exports, could pose risks to the chip giant.
Traders and investors will be watching the revenues of each segment with management’s comments on the current economic climate and future guidance.
