AMD beats Q1 estimates and predicts well above (at least for revenue) Q2 Wall Street forecasts due to massive uptake in the demand for its data centre chips. The stock increased 12% in after-hours trades, adding to a 65 per cent advance already recorded this year.
Key Highlights
- AMD provided an outlook for Q2 revenue of $11.25 billion.
- In Q1 revenue from the data centre segment surged 57% to $5.8 billion, topping the $5.64 billion estimate.
- AMD now sees the total addressable market (TAM) for server CPUs growing over 35%.
- AMD already has a $60 billion contract to sell AI chips to Meta over five years.
- The company expects a significantly reduced revenue from gaming by over 20% in the second half.
AMD Moves into Q1 and Guides a Stronger Q2
AMD reported first-quarter revenue of $10.25 billion, beating analysts’ expectations of $9.89 billion. Adjusted earnings per share came in at $1.37, above the expected $1.29. The data centre part was the winner, growing 57% to $5.8 billion as cloud players ramped up spending on AI infrastructure.
For Q2, AMD is projecting revenue of $11.2 billion (above Wall Street’s $10.52 billion forecast), with server CPU revenue rising more than 70%. Year-on-year adjusted margins are predicted at 56%, ahead of 55.4% analyst estimate.
The CPU Market Is Booming, AMD Upgraded Its Forecast Dramatically
The company now expects the server CPU market to grow more than 35% a year, topping $120 billion by 2030, said AMD CEO Lisa Su in answering a question from analysts, as it predicted only an 18 per cent annual growth rate for the segment back in November.
That’s because many of the changes are tied to a migration from training AI models to running them, or, as it’s known in the industry, inference, which is dominated by CPUs instead of GPUs. AMD has established a five-year agreement that will provide Meta with AI chips worth as much as $60 billion in exchange for being able to purchase up to 10% of the chip company. Last year AMD, too, cut a deal with OpenAI.
The Competition is Getting Tough, and Memory Prices are Rising Trend
Intel, which advanced its own in-house manufacturing, boosted a quarterly revenue forecast last month and shares jumped as high as 4.5% in expanded trading, while AMD is already very well positioned in the CPU market. Daniel Newman, CEO of Futurum Group, commented that because TSMC is tight on capacity AMD should explore qualifying Intel as a manufacturing partner sooner rather than later.
AMD’s Client and Gaming segment revenue increased 23% to $3.6 billion in Q1, but the company is already warning that PC shipments in the second half will be impacted by higher memory and component costs. It also expects gaming revenue to drop more than 20% in the second half.
FAQs
- How much revenue did AMD report in Q1?
AMD reported $10.25 billion, above expectations of $9.89 billion.
- What did AMD say about how big the server CPU market will be in 2030?Â
It will be $120 billion, growing more than 35% climbing from its November forecast of 18%.
- Who are the biggest customers of AMD AI chips?Â
Meta, with an agreement of up to $60 billion (over five years) at the latest, alongside OpenAI (last year).
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