AMD Earnings: Data Center and PC Shine

Here's our initial take on Advanced Micro Devices' (NASDAQ: AMD) fourth-quarter financial report.

Key Metrics

Data center and PC growth

AMD's overall revenue shot up 24% year over year in the fourth quarter. The data center segment, which accounts for AMD's EPYC server CPUs and its Instinct AI accelerators, was the star performer. Revenue rose a whopping 69% to $3.9 billion in the fourth quarter, driven by both product lines. For the full year, AMD sold more than $5 billion worth of its Instinct accelerators.

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AMD's PC-centric client segment also shined, with revenue up 58% year over year to $2.3 billion. The company is likely benefiting from Intel's (NASDAQ: INTC) struggles. Intel's PC chips have been a mixed bag as of late in terms of performance, with its Arrow Lake desktop CPUs particularly disappointing.

While AMD's two largest segments grew rapidly, the gaming and embedded segments continued to struggle. Gaming revenue, which includes PC GPUs and semi-custom game console chips, tumbled 59% year over year to $563 million. The decrease was largely due to a slump in semi-custom chip revenue, and a rebound isn't coming until the next generation of game consoles is ready for launch.

In the embedded segment, AMD is still working against excess client inventories. Revenue was down 13% year over year to $923 million, with the company pointing to mixed end-market demand as another factor driving the decline. While AMD's segments were a mixed bag, the company's overall results were solid.

Immediate Market Reaction

Share prices of AMD were down nearly 4% in early after-hours trading soon after the earnings report was released. AMD met expectations for adjusted earnings per share while beating on revenue, but that wasn't enough to push up the stock. AMD stock has been weak over the past year, down 33% going into the earnings report.

What to Watch

AMD expects to generate revenue between $6.8 billion and $7.4 billion in the first quarter of 2025, which represents year-over-year growth of 30% at the midpoint. That's an acceleration from the fourth quarter, although revenue is forecast to be down sequentially.

AMD will likely provide more detail on its outlook during the earnings call. Investors are particularly interested in AMD's forecast for AI accelerator sales this year. Nvidia (NASDAQ: NVDA) continues to dominate the market, and Intel recently toned down its AI chip ambitions. For AMD stock to rebound, the company's AI momentum will need to continue into 2025.

Helpful Resources

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The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.