AMD’s first-quarter revenue rose 38% to a record $10.3bn ($9.9bn expected). Growth was led by a 57% rise in Data Center revenue to $5.8bn, followed by a 23% rise in Client and Gaming revenue to $3.6bn.
Underlying operating profit rose 43% to $2.5bn ($2.4bn expected), as the increase in revenue more than offset higher operating expenses.
Free cash flow rose to a record $2.6bn, supported by record cash from operating activities of continuing operations of $3.0bn. Net cash, including lease liabilities, improved from $6.7bn to $8.5bn.
For the current quarter, AMD expects revenue of around $11.2bn at the midpoint of guidance ($10.9bn expected).
The shares rose 16.5% in pre-market trading.
Our view
AMD delivered a strong quarter, with both results and guidance ahead of market expectations. The bigger change is where the strength is coming from. A few months ago, the AMD debate was still largely framed around whether its AI GPUs could become a credible alternative to Nvidia. That remains important, but the narrative has broadened quickly.
CPUs are back in the spotlight, helped by growing evidence that they play a much bigger role in AI inference and agentic workloads than markets had previously assumed.
AMD designs high-performance computer chips for laptops, game consoles, and data centres. The data centre space still holds the key to future growth, but the opportunity now looks broader than once thought.
Demand for CPUs has taken off, with AMD seeing strong growth from cloud and enterprise customers. Management has also doubled its view of the long-term market, helped by rising AI workloads and the growing need for CPUs to help orchestrate, manage, and connect increasingly complex AI systems.
Already a major player in the market, this resurgence in demand is playing right into AMD's hands. That takes some pressure off the AI GPU story, with OpenAI and Meta deals expected to ramp later this year, and its Helios rack-scale platform still on track for the second half. Those deals are useful proof points that AMD’s AI products are, at least in theory, good enough to win business.
But there’s more than just chips these days, with networking, software and full-system performance becoming increasingly important. Nvidia still has a clear lead in these areas, especially in AI software, and AMD remains relatively unproven in the GPU market at scale. The opportunity is large enough for more than one winner, but AMD still needs to show it can execute consistently as products ramp and customer expectations rise.
Outside AI, AMD still has large exposure to PC and gaming markets, where performance has been encouraging but not risk free. Higher memory and component costs could weigh on demand in the second half, and gaming is also facing some near-term pressure.
AMD is on a much stronger footing than it was just a few months ago, and earnings estimates will likely shift materially higher in the coming days/weeks. That, coupled with a higher earnings multiple, means we are constructive on the outlook even after a significant shift in sentiment.
But the lower-hanging fruit of weak sentiment from 6 months ago has been plucked. Execution now needs to keep pace with the much bigger opportunity investors have priced in – meaning risk of disappointment has stepped up a notch.
Environmental, social and governance (ESG) risk
The semiconductor sector is medium-risk in terms of ESG. Overall, this risk is managed adequately in Europe and North America but has considerable room for improvement in the Asia-Pacific region. Its reliance on highly-specialised workers means labour relations is one of the key risk drivers. Other risks worth monitoring include resource use, business ethics, product governance, and carbon emissions.
According to Sustainalytics, AMD’s management of material ESG risks is strong.
AMD has relatively low ESG risk relative to both the wider sector and the global stock market. It’s managing its own risk well; with board level oversight, strong environmental policies, and a robust whistleblower policy. There are also no ongoing events that pose a financially material risk to the business.
AMD key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.