Advanced Micro Devices (AMD) reported first-quarter earnings and sales slightly above Wall Street expectations and provided an in-line forecast for the current quarter. Despite meeting estimates and signaling growth in AI chip sales, shares dropped 7% in extended trading. The company reported earnings per share of 62 cents adjusted versus the expected 61 cents, and revenue of $5.47 billion compared to the expected $5.46 billion. AMD anticipates about $5.7 billion in sales in the current quarter, representing a 6% annual growth.
AMD’s Data Center segment experienced an 80% year-over-year growth to $2.3 billion, driven by sales of its MI300 series AI chips that compete with Nvidia’s graphics processing units. Companies such as Microsoft, Meta, and Oracle have used AMD’s MI300X chips. The company expects $4 billion in AI chip sales for 2024, up from an earlier forecast of $3.5 billion. While rival Nvidia reported $18.4 billion in AI server chip sales for the January quarter, AMD is working on new AI chip models and successors to the current generation based on feedback from top customers.
AMD’s client segment revenue, consisting of processors for chips and PCs, saw an 85% annual increase with $1.4 billion in first-quarter sales. This growth suggests that the PC slump from last year is over. Additionally, the company’s gaming segment, which includes chips for game consoles and PCs, experienced a 48% year-over-year decline to $922 million due to lower chip sales. However, AMD’s PC processors are capable of running AI programs locally, positioning the company to power “AI PCs” and potentially drive new sales in the laptop and desktop markets.
The company’s embedded segment, comprising products acquired through the Xilinx acquisition, reported falling sales, dropping 46% year over year to $846 million. This result fell short of Wall Street expectations of $942 million. AMD also stated that it believes it has gained market share in the server CPU segment, likely taken from Intel, indicating improving demand for its CPUs as a result of the AI server boom. CEO Lisa Su emphasized AMD’s proximity to top AI customers, who provide significant feedback on the company’s product roadmap.
Looking ahead, AMD continues to work on new AI chips and successors to the current generation to meet the evolving demands of customers in the data center segment. The chipmaker’s focus on innovation and customer feedback, particularly in the Data Center segment, positions it well for future growth opportunities. Despite the drop in share price following the earnings report, AMD’s strategic initiatives and commitment to developing cutting-edge products for the AI market indicate a positive outlook for the company’s performance and market position in the coming quarters.
