Advanced Micro Devices Inc (NASDAQ:AMD) shares were little moved by an earnings report that showed quarter-on-quarter decline in revenues and profits, with the semiconductor group's AI sales better than feared.
Analysts said AMD significantly outperformed in its traditional markets and provided a constructive outlook for its GPU business that may alleviate investor concerns on that front.
Revenues in the first quarter of 2025 came to $7.4 billion, up 36% year-on-year but down 3% from the last quarter of 2024.
Net income of $709 million was up almost 500% versus last year and 47% on the preceding quarter, on a GAAP basis, or on a non-GAAP basis down 12% to $1.6 billion.
Diluted earnings per share of $0.96 were down 12% quarter on quarter, but better than the $0.94 Wall Street estimate.
Capital expenditure of $212 million was higher than the Street's forecast of $172.6 million and R&D expenses of $1.7 billion were broadly in line.
“We delivered an outstanding start to 2025 as year-over-year growth accelerated for the fourth consecutive quarter driven by strength in our core businesses and expanding data center and AI momentum,” said chair and CEO Lisa Su.
“Despite the dynamic macro and regulatory environment, our first quarter results and second quarter outlook highlight the strength of our differentiated product portfolio and consistent execution positioning us well for strong growth in 2025.”
On the outlook, second-quarter revenue are expected to be around $7.4 billion, plus or minus $300 million, with non-GAAP gross margin is estimated to fall from 54% in the first quarter to 43% due to around $800 million in charges for inventory and related reserves due to the new export controls. Excluding this charge, non-GAAP gross margin would be expected to remain at 54%.
Analysts at Wedbush said management was "much more upbeat than we expected" on expected GPU momentum in the second half of theyear, despite the loss of the China market, effectively guiding for flattish sales in the third quarter and a resumption of growth in the fourth.
"This better than expected outlook should moderate investor fears that AMD may not participate in future AI market growth (or participate enough to drive the future model)," the analysts said.
They noted that, unlike some of its peers, AMD "did not appear to bake in extra conservatism for the unknown next US administrative action", with a potential semiconductor tariff on the docket.
"While management is naturally cautious, we would note the possibility that the administration opts for another self-inflicted economic wound (this time targeting semiconductors) and that the conservatism AMD typically bakes into forecasts isn't enough to account for the impact of new tariffs/policy."