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AMD Data Center Revenue Soars 80%, Shares Dip 3%

AMD's data center business soars by 80%, despite a mixed segment performance and a slight stock decline post-earnings report.

By Bill Bullington

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4/30, 16:44 EDT
Advanced Micro Devices, Inc.
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Key Takeaway

  • AMD's Q1 sales slightly beat expectations with a 2% increase to $5.47 billion, driven by an 80% surge in Data Center revenue.
  • The MI300 AI chip's success contributed over $1 billion, highlighting AMD's strong position in the AI and server processor market.
  • Despite diverse segment performance and a positive outlook for Q2, AMD shares fell more than 3% in extended trading.

Q1 Performance Exceeds Expectations

Advanced Micro Devices (AMD) reported first-quarter sales that slightly surpassed Wall Street predictions, showcasing a modest year-over-year revenue increase. The company announced earnings of 62 cents per share on an adjusted basis, marginally above the consensus expectations of 61 cents. Total revenue for the quarter was $5.47 billion, against expectations of $5.46 billion, marking approximately a 2% increase from the previous year. This performance comes in the context of a challenging market environment, with AMD navigating through various sector dynamics.

Data Center Growth and AI Chip Success

A significant highlight from AMD's quarterly report was the 80% year-over-year growth in its Data Center segment, with sales reaching $2.3 billion. This surge was largely attributed to the successful sales of its MI300 AI chip, which competes directly with Nvidia’s AI graphics processors. Since its launch in the fourth quarter of 2023, AMD has sold over $1 billion of these AI chips. The MI300 AI chip's success underscores AMD's competitive stance in the rapidly evolving AI and server processor market, reflecting strong demand for advanced computing capabilities.

Diverse Segment Performance

While the Data Center segment flourished, AMD's gaming division experienced a downturn, with sales dropping 48% annually to $922 million. This decline was attributed to reduced chip sales for game consoles and PCs, including those for Sony’s PlayStation 5. Conversely, the client segment, encompassing processors for chips and PCs, reported a robust 85% annual increase in sales, reaching $1.4 billion. This suggests a recovery from the previous year's PC market slump. However, the embedded segment, which includes products from the 2022 Xilinx acquisition, saw a 46% decrease in sales year-over-year, totaling $846 million.

Forward-Looking Statements and Market Reaction

Looking ahead, AMD anticipates sales of about $5.7 billion for the current quarter, aligning with Wall Street estimates and representing a 6% annual growth. This guidance reflects AMD's strategic focus on expanding its data center business and integrating AI capabilities across its product portfolio. Despite these positive indicators, AMD shares experienced a more than 3% drop in extended trading. This market reaction might be attributed to investors' reactions to the overall guidance and the mixed performance across different business segments.