Key Takeaways:
Advanced Micro Devices (NASDAQ: AMD) reported first-quarter revenue of $10.25 billion, a 38 percent year-over-year increase that beat analyst expectations, and raised its outlook for the second quarter on the strength of its data center business.
"The age of data center CPUs is here," company management said on its earnings call, citing surging demand linked to the build-out of artificial intelligence infrastructure. AMD's stock is up more than 90 percent year to date.
The company's results surpassed consensus estimates for both earnings and revenue, driven by a significant acceleration in its data center segment. AMD's client and gaming segments also posted double-digit growth.
The results show AMD's growing competition with rivals like Nvidia and Intel in the high-stakes AI chip market. Data center revenue surged 57 percent from a year ago to $5.8 billion, as sales of server central processing units (CPUs) climbed more than 50 percent. The company expects that growth to accelerate to 70 percent in the second quarter.
AMD management now projects the total addressable market for server CPUs will reach $120 billion by 2027, a significant increase from its previous forecast, attributing the revision to the demands of agentic AI. The company believes it can capture more than half of this market. This growth is supported by a shift in data centers toward a 1-to-1 ratio of graphics processing units (GPUs) to CPUs, a departure from the previous 8-to-1 standard.
For the second quarter, AMD guided for revenue of $11.2 billion, plus or minus $300 million, which would represent 46 percent year-over-year growth. It is also targeting an adjusted gross margin of 56 percent, up from 55 percent in Q1.
The updated forecast suggests management expects demand from AI customers to accelerate. Investors will watch for the ramp-up of large GPU deals with OpenAI and Meta Platforms, set to begin in the second half of the year, as a key indicator of continued momentum.
This article is for informational purposes only and does not constitute investment advice.
