Advanced Micro Devices, Inc. (NASDAQ: AMD) encountered a notable decline in its stock price following the release of its fourth-quarter earnings report, despite surpassing analysts' expectations on key financial metrics. The shares fell nearly 10% during Wednesday's trading session, marking one of the day's weaker performers in the market.
AMD reported adjusted earnings per share (EPS) of $1.53 for the quarter, exceeding the consensus estimate of $1.32. Revenues reached $10.27 billion, outpacing the forecasted $9.66 billion figure. These strong results were propelled by robust performance across the company’s main business units.
The Data Center segment stood out with a 39% year-over-year revenue increase, generating $5.4 billion. This uptick was underpinned by expanding demand for AMD’s EPYC processors and a continued ramp-up in shipments of AMD Instinct GPUs. In parallel, the Client and Gaming segment reported revenues of $3.9 billion, reflecting a 37% increase compared to the previous year. Within this segment, client revenue rose to $3.1 billion while gaming revenue grew to $843 million. The Embedded segment saw more modest growth of 3%, reaching $950 million in sales during the quarter.
In her commentary, CEO Lisa Su emphasized that 2025 has emerged as a pivotal year for AMD, highlighting strong execution and broad demand for the company's high-performance and artificial intelligence platforms.
AMD issued guidance for the first quarter of 2025, projecting revenue in the range of $9.50 billion to $10.10 billion. While this outlook surpasses the consensus estimate of $9.38 billion, it was perceived as conservative given the market’s elevated expectations. This cautious forecast contributed to the stock's downward pressure despite the solid quarterly performance.
Analyst responses reflected a mix of confident long-term outlook and slight adjustments to shorter-term earnings estimates. The consensus rating for AMD remains a Buy, with an average price target of $262.76. Following the earnings announcement, some firms raised their price targets:
- KeyBanc's John Vinh maintained an Overweight rating and increased his price target from $270 to $300.
- Evercore ISI Group sustained an Outperform rating and raised the price target from $283 to $328.
- Rosenblatt's Kevin Cassidy kept a Buy rating and a $300 price target unchanged.
- Benchmark’s Cody Acree reaffirmed a Buy rating with a price target of $325.
Despite the generally positive outlook, Rosenblatt noted that the company's new product introductions have led to operating expenses exceeding prior models, prompting a minor reduction in EPS estimates. Conversely, Benchmark highlighted that AMD's technology roadmap is gaining substantial traction with customers requesting higher volumes of high-performance computing resources. Benchmark analysts expressed that the market's immediate adverse reaction does not fully reflect AMD's strong quarterly results, positive outlook, or increasing leverage in the rapidly expanding AI data center market.
Market data at the time of reporting indicated AMD shares trading down approximately 9.83% to a price near $218. This reaction occurred against a backdrop of heightened expectations, as AMD's stock had more than doubled over the previous year.
The recent quarterly report confirms AMD’s solid execution across its key business units, particularly in Data Center and Client & Gaming segments. However, the market’s sensitivity to guidance details reflects the dynamic nature of growth projections in the semiconductor and AI sectors. Investors and analysts will likely continue monitoring AMD’s operating expenses related to new product launches and its ability to sustain momentum in high-growth markets.