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Date

May 09, 2025

Category

Research Insights

AMD Reports Strong Q1 2025 Results

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AMD Q1 2025 Earnings Beats Estimates, but Faces $1.5 Billion Revenue Hit from China Chip Curbs

Advanced Micro Devices delivered a robust first-quarter performance in fiscal 2025, exceeding Wall Street expectations on both earnings and revenue. While the company’s growth was powered by surging demand for AI and data centre chips, U.S. export restrictions to China pose a significant headwind for the remainder of the year.

Q1 Financial Highlights

  • Earnings per share (EPS) adjusted: $0.96 vs. $0.94 expected
  • Revenue: $7.44 billion vs. $7.13 billion expected
  • Net income (adjusted): $1.57 billion vs. $1.55 billion expected

AMD reported adjusted earnings per share (EPS) of $0.96, topping the consensus estimate of $0.94. Revenue for the quarter came in at $7.44 billion, a 36% year-over-year increase and ahead of analyst forecasts of $7.12 billion, according to data compiled by Bloomberg.

The company’s net income jumped to $1.57 billion (or $0.96 per diluted share), compared to $1.01 billion (or $0.62 per diluted share) in the same period a year earlier. This sharp improvement underscores AMD’s continued efficiency in cost management and operational scaling despite global supply chain challenges and increased regulatory scrutiny1.

Segment Summary

  • Data Centre Segment Soars 57% on AI Chip Demand
A key driver of AMD’s performance was its Data Centre segment, which recorded $3.7 billion in revenue, up 57% from a year earlier. This growth reflects expanding deployments of Epyc server CPUs and Instinct GPUs, both essential to powering large-scale AI training and inference. CEO Dr. Lisa Su confirmed that AMD’s AI chips are being actively used by top-tier AI developers including OpenAI and DeepSeek, reinforcing AMD’s growing credibility in the high-performance AI hardware market.
  • Client Segment Growth Outpaces Expectations, Gaming Revenue Declines

AMD’s Client segment, which includes laptop and desktop processors, posted $2.3 billion in revenue1, surpassing analyst estimates of $2 billion. This represented a 68% annual growth rate, driven by strong adoption of AMD’s Zen 5 chips, released in the summer of 2024.

However, the Gaming segment declined 30% year over year to $647 million1, as revenue from console chips softened. AMD attributed this decline to weaker sales in the second half of console life cycles and the impact of tariff pressures. Console sales were further affected by rising prices from partners like Microsoft and Sony, who are adjusting pricing strategies in response to changing cost structures.

  • Embedded Segment Sees Mild Decline Amid Macroeconomic Uncertainty
The Embedded segment, which comprises revenue from the 2022 Xilinx acquisition, recorded $823 million, down 3% year over year1. The segment’s slight contraction reflects broader demand moderation in industrial and telecom markets, where embedded chips are typically used. While still a strategic part of AMD’s diversified business, the segment faces temporary headwinds amid global economic softness.

U.S. Export Controls Trigger $1.5 Billion Revenue Risk

While AMD’s product momentum remains strong, the company warned of significant regulatory headwinds. Due to new U.S. export restrictions on AI chips bound for China, AMD expects a $1.5 billion reduction in revenue for fiscal 2025, nearly 5% of Wall Street’s projected full-year revenue of $31 billion2.

The company reported an $800 million Q1 charge related to inventory reserves and purchase commitments and anticipates $700 million in lost sales in Q2 due to the new rules, which affect shipments of AMD’s Instinct MI308X AI processors1.

While the company faces some headwinds from the macro and regulatory environments, including the recently announced export controls for Instinct MI308X shipments to China, they could be more than offset by the powerful tailwinds from AMD’s leadership product portfolio.

AMD Provides Positive Q2 2025 Guidance

AMD issued a strong Q2 revenue forecast of $7.4 billion, plus or minus $300 million, which is above the consensus estimate of $7.25 billion3. Gross margin guidance stands at 43%, impacted by the aforementioned export-related charges.

Dr. Su expressed confidence that, despite export restrictions, the company expects AI-related revenue to grow at a “strong double-digit rate” in 2025, supported by high demand from enterprise and hyperscaler customers including Microsoft and Meta.

Source: TradingView, as of May 8, 2025

AI Trade Faces Near-Term Volatility

The chip sector has seen significant turbulence in recent months. Stocks like AMD and Nvidia have faced pressure amid speculation that AI growth is overhyped, while announcements like DeepSeek’s efficient AI model using less advanced chips have raised concerns about future hardware demand.

Compounding concerns are ongoing tariff threats: while laptops and desktops remain exempt from current tariffs, semiconductors are under review for potential duties under the U.S. Commerce Department’s Section 232 investigation4.

Following the earnings release on Tuesday, AMD shares are modestly higher reflecting investor uncertainty over how much of the AI opportunity AMD can capture in light of U.S.-China tensions and strong competition from Nvidia. The risks from slowing AI growth and inventory stockpiling ahead of regulatory changes also weigh on investor’s minds.

AMD’s share price has been trading within the boundaries of a down trend channel over the past year, declining from its all-time high of $227.30 in March 2024 to $76.48 in April 2025. In our view, the stock appears poised to rebound to its down trend line crossing at $131.00 in the near-term; however, at this juncture in time, there are no signs the long-term down trend has reversed course yet. From a technical analysis point of view, a break above this level of dynamic resistance is needed, before investors can gain confidence that a new up trend is emerging.

Conclusion:

AMD’s Q1 2025 earnings confirm its strength in next-generation data centre and AI hardware, positioning the company to capture significant share in one of the fastest-growing areas of tech. However, regulatory and geopolitical risks, particularly surrounding China exports, may limit near-term upside and inject volatility into the stock.

Investors with a long-term horizon may view the current regulatory turbulence as an entry opportunity, while short-term traders will likely remain sensitive to headline risk.

Footnotes:

1AMD Investor Relations, AMD Reports First Quarter 2025 Financial Results, as of May 6, 2025

2AMD Conference Call, AMD Fiscal First Quarter Year 2025 Financial Results, as of May 7, 2025

3AMD Earnings Estimates, as of May 8, 2025

4Federal Register, Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Semiconductors and Semiconductor Manufacturing Equipment, as of April 16, 2025

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