Despite robust demand for AI technology, Advanced Micro Devices (AMD, Financial) experienced a decline in stock value following its Q1 earnings report. The results, which aligned with initial forecasts, and the Q2 guidance failed to meet investor expectations, pushing the stock toward a three-month low. Notable highlights included the increased adoption of AMD's EPYC processors and a positive adjustment in the FY24 revenue guidance for data center GPUs.
In detail, AMD's Q1 earnings per share rose by 3.3% year-over-year to $0.62, with revenue growth slowing to 2.2% at $5.47 billion. This growth was slightly above expectations but marked a deceleration from the previous quarter's 10.2% increase. The Gaming and Embedded segments were particularly weak, with revenues declining by 48% and 46% respectively, due to ongoing customer inventory adjustments.
Conversely, the Data Center segment saw an 80% revenue increase to a record $2.3 billion, driven by strong sales of the MI300X GPU, which competes with NVIDIA's (NVDA, Financial) Hopper GPU. AMD also reported significant gains in server CPU sales, suggesting a continued market share capture from Intel (INTC, Financial), despite Intel's report of soft demand in traditional data center chips.
The Client segment, reflecting AMD’s PC market exposure, surged by 85% year-over-year to $1.4 billion. This growth is attributed to robust demand for Ryzen processors and the anticipated recovery of the PC market, spurred by enterprise upgrades and AI adoption.
Looking forward, while AI's popularity continues to rise—prompting AMD to increase its FY24 data center GPU revenue forecast by $0.5 billion to over $4.0 billion—the company anticipates modest year-over-year revenue growth in the near term, projecting Q2 sales between $5.4 billion and $6.0 billion.
AMD's report reflected a split between short-term challenges and long-term opportunities in AI, a sentiment echoed across the semiconductor industry. Despite the long-term optimism, immediate guidance fell short of invigorating investor confidence, leading to a pullback in share prices.
