AMD’s fourth quarter revenue increased by 24% to $7.7bn. Performance was driven by strong growth in both Data Center and the personal computing focussed Client division, which helped to offset large declines in Gaming.
Underlying operating profit grew by 43% to $2.0bn, with operating margin improving from 23% to 26%.
Free cash flow was $1.1bn up from £0.5bn last quarter and ended the period with a net cash position of $2.9bn.
First quarter revenue for 2025 is expected to land between $6.8-$7.4bn with Data Center sales expected to fall around 7% quarter-on-quarter, with no specific guidance given for AI focused chips.
The shares fell 8.6% in pre-market trading.
Our view
AMD’s fourth quarter numbers were hard to fault, but news that the high bar set won’t be met in the first quarter of this year left the market unimpressed.
We think Data Center sales will remain the key growth driver for some time to come, driven by not just the boom in all things Artificial Intelligence (AI), but also our relentless thirst for digital content. But a vague outlook for the current year suggests that AMD is not likely to make a dent in the frontrunner’s market share any time soon.
That increases the risk of its technology becoming obsolete if it’s not adopted at sufficient scale. For now, that’s not deterring core customers such as Meta and Microsoft. But growth in AI driven Data-Center sales will be a key factor for investors to monitor, and one that will be harder to track after a change in the company’s disclosures.
But in PCs and laptop processors the company is making greater strides towards catching the competition. These sit in the Client division where the integration of AI at the device level is helping to reignite growth after a torrid time for the personal computing industry. And its upgraded AI processor is being rolled out by the likes of HP and Lenovo.
AMD doesn’t manufacture its own products. That means supply chain challenges and the industry’s ongoing reliance on Taiwan, where geopolitical tensions are elevated, remain a risk to be mindful of.
There are other ongoing headwinds. Weak sales of AMD’s gaming chips are detracting from the strong growth seen elsewhere. And with no major console releases on the immediate horizon, this may remain the case for some time. There’s also weak demand from some customers in the Embedded segment like automobile manufacturers.
The pace of innovation in the industry is high and AMD is ploughing some $1.7bn per quarter into research & development. The strong balance sheet means it can afford to do this and stomach fluctuations in demand, but for now payouts to shareholders are unlikely to be a priority.
In terms of both commercial traction and technological prowess we think AMD has played a second fiddle at times to its closest rival NVIDIA. While AMD’s valuation does lag the peer group a little, it’s still not in bargain basement territory which means there is some pressure for it to close the gap when it comes to growth rates. That leaves the shares a little exposed to any sign of a slowdown in business.
AMD key facts
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