TLDR:
- AMD beat Q1 earnings expectations with adjusted EPS of $0.96 and revenue of $7.4 billion
- Data Center segment showed impressive 57% growth to $3.7 billion compared to prior year
- The company faces $1.5 billion revenue impact from Chinese export controls in 2025
- Stock initially rose up to 7% after earnings announcement but settled at around 2.7% gain in premarket trading
- AMD provided optimistic Q2 guidance with midpoint revenue of $7.4 billion, above analyst expectations
AMD reported better-than-expected first-quarter earnings on Tuesday, showing the strength of its AI chip business. The company continues to perform well despite regulatory challenges from export controls.
The chip maker posted adjusted earnings per share of $0.96, exceeding Wall Street’s consensus estimate of $0.94.
Revenue came in at $7.4 billion, above analysts’ expectations of $7.1 billion. This represents substantial growth from the $5.4 billion reported in the same quarter last year.
AMD’s Data Center segment was the star performer. Revenue in this division rose by 57% to $3.7 billion compared to the prior year.
CEO Lisa Su highlighted the company’s performance during challenging conditions. “Despite the dynamic macro and regulatory environment, our first-quarter results and second-quarter outlook highlight the strength of our differentiated product portfolio,” she stated in the release.
Export Control Challenges
The strong results come despite significant headwinds from government regulations. During the earnings call, AMD’s CFO revealed that export controls would cost the company $1.5 billion in revenue this year.
These challenges stem from the Trump administration’s tighter restrictions on AI chips destined for China. The rules effectively cut off AMD’s ability to ship its MI308 AI processor to the region.
In April, AMD disclosed it would take a charge of up to $800 million related to inventory and purchase commitments affected by these export control license restrictions.
Despite these obstacles, AMD remains optimistic about offsetting the regulatory impact through its product differentiation.
The stock’s initial reaction to the earnings was strongly positive. AMD shares rose as much as 7% in late trading following the release.
However, the stock pared some gains during the conference call when executives detailed the export control impact. Premarket trading on Wednesday showed the stock up 2.7%.
Strong Outlook Across Segments
For the second quarter, AMD provided guidance for revenue between $7.1 billion and $7.7 billion, with the $7.4 billion midpoint exceeding analyst expectations of $7.2 billion.
The Client segment, which includes laptop and desktop chips, generated $2.3 billion in revenue, outperforming analyst projections of $2 billion. This represents significant growth from $1.3 billion in Q1 last year.
AMD’s gaming business brought in $647 million versus expectations of $540 million, though this segment faces challenges as console life cycles mature.
Both Sony and Microsoft’s gaming consoles are entering the second half of their life cycles, typically a period when sales decline compared to launch periods.
Console manufacturers have also begun raising prices in response to tariffs. Microsoft announced a $100 price increase for its Xbox Series X, now $599, while Sony has increased PlayStation prices in Europe.
AMD’s share performance this year reflects broader trends in the semiconductor sector. The stock is down about 18% year-to-date as of Tuesday’s close, compared with a 13% decline for the iShares Semiconductor ETF.
The AI chip market has faced pressure in recent months amid concerns the sector might be overhyped. Additionally, developments like DeepSeek’s January announcement that it produced high-performance AI models using less than top-tier chips have raised questions about future demand.
The company competes directly with Intel, which also recently reported better-than-expected earnings but provided lighter guidance for Q2. Nvidia, another major competitor, is scheduled to report earnings on May 28.
PC manufacturers, which use AMD chips, are facing challenges from a 145% tariff on products made in China. While computers are currently exempt from Trump’s tariffs, the administration has indicated it might implement duties on semiconductors based on the Commerce Department’s investigation.
Despite these macroeconomic and regulatory challenges, AMD’s latest results demonstrate the company’s ability to execute effectively in a complex environment, positioning it well for growth throughout 2025.
