(Image Credit: Lin Zhijia)
TMTPOST — AMD posted better-than-expected first-quarter earnings on Tuesday, fueled by strong AI chip demand and record data center growth — even as looming U.S. export restrictions to China threaten to weigh heavily on future sales.
The chipmaker reported Q1 fiscal 2025 revenue of $7.44 billion, up 36% year-over-year and beating Wall Street expectations of $7.12 billion. Net income soared 476% to $709 million, while operating income surged over 21-fold to $806 million. Diluted earnings per share came in at $0.96 on a non-GAAP basis, with gross margin holding steady at 54%.
Shares of AMD initially jumped over 7% in after-hours trading following the release but later pared gains to close up 1.72%. The stock is still down 18% year-to-date.
"We delivered strong Q1 results and expect to achieve double-digit revenue growth in 2025," said AMD Chair and CEO Lisa Su during the earnings call. "Demand for our latest AI and CPU products remains strong, and we are ramping up production of our next-gen accelerators in the second half of the year."
Despite the upbeat quarter, AMD revealed that newly imposed U.S. government export restrictions on its Instinct MI308X AI chips to China could slash second-quarter revenue by $800 million and lead to a full-year revenue hit of $1.5 billion.
The MI308X joins NVIDIA's H20 chip on the growing list of advanced AI semiconductors barred from the Chinese market under tightened U.S. trade policies.
"Including these controls, we estimate our Q2 revenue will be approximately $7.4 billion, plus or minus $300 million," said CFO Jean Hu. The non-GAAP gross margin is projected at 43%, down from the prior quarter's 54%, with export-related inventory reserves accounting for the 11-point gap.
Lisa Su emphasized that while regulatory headwinds are intensifying, AMD's long-term outlook remains intact. "We've already factored China export controls into our $500 billion total addressable AI market," she said. "We're working closely with the U.S. government to strike the right balance and ensure global adoption of our ecosystem."
AMD's Data Center segment led growth in Q1, generating $3.7 billion in revenue — up 57% year-over-year — driven by strong demand for EPYC server chips and Instinct accelerators.
Su confirmed that AMD has started sampling its next-gen Instinct MI350 accelerators with customers, touting a 35-fold performance leap over the MI300X. Volume production will scale in the second half of 2025. Meanwhile, the MI400 series remains on track for a 2026 debut.
AMD also closed its acquisition of ZT Systems in Q1, a move aimed at capturing a larger slice of the AI-focused data center infrastructure market, which the company estimates will reach $500 billion by 2028.
The Client and Gaming segment posted $2.9 billion in revenue, up 28% year-over-year. Ryzen desktop and laptop processor sales powered a 68% jump in client revenue. However, gaming revenue fell 30% to $647 million amid weaker semi-custom console demand.
Embedded segment sales dipped 3% to $823 million amid market softness.
Lisa Su reiterated her bullish outlook on the AI boom, citing robust infrastructure buildouts. "The second half will see gross margins rebound as data center demand accelerates," she said. "Our diversified product portfolio and ramping MI350 output will help offset export-related challenges."
However, AMD continues to trail NVIDIA in the red-hot AI chip race. Bloomberg noted that while AMD has grown fivefold under Su's decade-long leadership, it remains far behind NVIDIA in AI accelerator market share.
On CNBC earlier Tuesday, NVIDIA CEO Jensen Huang warned that U.S. export controls have already cost his company $5.5 billion in lost revenue, with China's AI market alone poised to reach $50 billion in the next few years.
"If the U.S. doesn't resolve this, it risks handing the Chinese AI market to Huawei," Bernstein chip analyst Stacy Rasgon said in a research note.