Advanced Micro Devices (AMD) reported better-than-expected earnings and revenue for the fourth quarter of 2024, surpassing Wall Street’s consensus estimates. However, despite these positive figures, the company’s stock fell by approximately 6% in extended trading, primarily due to a shortfall in its crucial data center revenue.
Key Financial Results
For the quarter ended December 28, AMD reported earnings of $1.09 per share on an adjusted basis, slightly ahead of the $1.08 expected by analysts. Revenue for the quarter totaled $7.66 billion, surpassing the forecast of $7.53 billion. Despite this beat, overall performance in the data center sector missed expectations, which dampened investor sentiment.
The company also provided a forecast for the first quarter of 2025, expecting sales to be around $7.1 billion, with a margin of plus or minus $300 million. This guidance was in line with analysts’ projections, who had anticipated revenue of approximately $7 billion. gross margin is projected to be about 54% for the first quarter.
Data Center Sales Miss Expectations
One of the most anticipated figures from earnings report was its data center sales, which are considered key to the company’s future growth. Data center division achieved $3.86 billion in revenue during the fourth quarter, a 69% increase compared to the same period last year. The company credited this growth to strong sales of its Instinct GPUs and EPYC processors, which compete directly with Intel’s offerings.
Despite the impressive year-over-year growth, AMD fell short of analysts’ expectations. FactSet analysts had predicted $4.14 billion in data center sales for the quarter. This discrepancy in expectations contributed to the drop in stock price in after-hours trading.
On a full-year basis, AMD’s data center division posted a 94% increase in revenue, reaching $12.6 billion. Of this total, $5 billion came from sales of AMD’s Instinct GPUs, which are increasingly sought after for AI applications. However, the company still lags behind Nvidia, the dominant player in the data center GPU market, although it has made notable strides with products like the MI300X, which have been embraced by large infrastructure players such as Meta and Amazon.
AMD’s Future Outlook
Despite the setback in its data center revenue, AMD remains optimistic about its future prospects. CEO Lisa Su expressed confidence during the earnings call, stating that the company is on a “steep long-term growth trajectory.” She emphasized that expects “strong double-digit percentage revenue and EPS growth” in 2025, driven largely by the scaling of its data center AI business. Su believes that AMD’s AI-related revenue could expand from over $5 billion in 2024 to tens of billions of dollars annually in the coming years.
The company is focusing heavily on its data center business, which it considers its most important segment. AMD’s continued growth in this sector will be critical as it competes with Nvidia and Intel for market share in the rapidly expanding AI and cloud computing markets.
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Client and Gaming Segments
AMD also reported positive results in its client segment, which includes chips for PCs, laptops, and other consumer devices. Revenue from this division grew by 58% year-over-year, totaling $2.3 billion. The company noted strong demand for both desktop and mobile computing chips, reflecting the ongoing recovery in the PC market.
In the gaming sector, however, AMD experienced a significant decline. Revenue from gaming GPUs fell by 59%, totaling $563 million. This drop is largely attributed to weaker demand for GPUs amid a slowdown in the gaming market. AMD is the second-largest producer of gaming GPUs, behind Nvidia, which continues to dominate the market.
AMD’s smaller embedded chips division also experienced a decline, with revenue falling 13% year-over-year to $923 million. This segment, while still a significant part of AMD’s business, has been underperforming compared to other areas.
Conclusion
AMD’s fourth-quarter results reflect a company that continues to perform well overall but faces challenges, particularly in its data center segment. While the company’s growth in client and gaming revenue has been positive, it will need to address its data center shortfall to maintain investor confidence. Looking ahead, AMD is betting heavily on the growth of its AI-related offerings, with CEO Lisa Su’s optimistic guidance setting high expectations for 2025 and beyond. However, competition from Nvidia and Intel will likely keep the pressure on as AMD seeks to capture a larger share of the lucrative data center and AI markets.
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