ADVANCED MICRO DEVICES INC (AMD)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 was strong on growth and margins: revenue $7.44B (+36% y/y), GAAP EPS $0.44 and non-GAAP EPS $0.96; both revenue and EPS exceeded S&P Global consensus (rev: $7.12B*, EPS: $0.93*) driven by Data Center (+57% y/y) and Client strength (+68% y/y client sub-segment) .
• Guidance flagged export-control headwinds: Q2 revenue ~$7.4B ± $300M, non-GAAP GM ~43% including ~$800M inventory-related reserves tied to new export controls; excluding the charge, GM ~54% .
• Management quantified ~$700M Q2 revenue headwind and ~$1.5B full-year impact from China export licensing; Data Center GPU remains second-half weighted with MI350 ramp, while Client and Gaming expected to grow sequentially double digits in Q2 .
• Strategic positioning advanced: ZT Systems acquisition closed Mar 31, adding rack-scale systems capabilities to accelerate AI deployments; AMD plans to divest ZT manufacturing while retaining design teams .
• Key beat/miss catalysts: non-GAAP EPS and revenue beats vs consensus*, but guidance optics weighed by one-time export-control charge—AI accelerator and EPYC momentum vs regulatory headwinds likely to drive stock debate near term (consensus via S&P Global).

What Went Well and What Went Wrong

What Went Well

• Data Center momentum: segment revenue $3.67B (+57% y/y), with higher EPYC CPU share gains and growing Instinct GPU deployments; operating income rose to $932M (25% margin) .
• Client strength and mix: Client revenue $2.29B (+68% y/y) with record CPU ASPs from richer “Zen 5” Ryzen mix, strong desktop sell-through and early AI PC traction; management: “We delivered record client CPU ASP… strong desktop performance” .
• Profitability and cash: non-GAAP GM 54% (+200 bps y/y), non-GAAP op margin 24% (+300 bps y/y); free cash flow $727M with cash and ST investments $7.31B .

What Went Wrong

• Export controls headwind: new MI308 export license requirements reduce Q2 revenue by ~$700M and ~43% Q2 non-GAAP GM includes ~$800M inventory/reserve charges (ex-charge ~54%) .
• Gaming and Embedded softness: Gaming revenue $647M (-30% y/y) on semi-custom decline; Embedded $823M (-3% y/y) as end-market demand remained mixed .
• Sequential Data Center dip and inventory build: Data Center down 5% q/q; inventory increased to support second-half GPU ramp; management acknowledged long lead times for Q3–Q4 ramps .

Financial Results

Headline P&L vs Prior Periods and Estimates

Values with asterisk (*) are from S&P Global consensus estimates.

Segment Revenue (oldest → newest)

KPIs and Cash Flow (oldest → newest)

Non-GAAP reconciliation details provided in company materials .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered an outstanding start to 2025… driven by strength in our core businesses and expanding data center and AI momentum.” – Dr. Lisa Su .
• “Client revenue grew 68% y/y, marking our fifth consecutive quarter of revenue share gains. We delivered record client CPU ASP… strong desktop performance.” – Dr. Lisa Su .
• “We expect revenue to be approximately $7.4B ± $300M [in Q2], including an estimated $700M revenue reduction as a result of the new export license requirement.” – Jean Hu .
• “We completed our acquisition of ZT Systems… to provide ready-to-deploy rack-level AI solutions based on industry standards.” – Dr. Lisa Su ; closing PR context .

Q&A Highlights

• Export Controls Impact: ~$700M Q2 revenue headwind; ~$1.5B FY impact; most of the remainder falls in Q3, with little in Q4 as MI350 ramps non-China .
• Data Center GPU Trajectory: Q1 DC GPU down modestly q/q (expected); MI350 to launch midyear with strong interest; Oracle cluster partnership highlighted .
• Gross Margin Outlook: Excluding the ~$800M Q2 charge, non-GAAP GM ~54%; H2 GM seen improving slightly on mix (Data Center growth, favorable enterprise mix) .
• Inventory Build: Elevated to support strong Client/Server ramps and second-half DC GPU ramp given long lead times .
• Embedded Recovery: Signs of improvement in test/measurement, communications, aerospace; H2 y/y growth expected (especially Q4) .

Estimates Context

• Q1 2025 vs S&P Global consensus: revenue $7.44B vs $7.12B* (beat); non-GAAP EPS $0.96 vs $0.93* (beat) (consensus via S&P Global).
• Q2 2025 S&P Global consensus (current): revenue $7.43B*, EPS $0.48*; company guided ~$7.4B ± $300M revenue and ~43% non-GAAP GM including ~$800M charge (ex-charge ~54%) (consensus via S&P Global).
  Values with asterisk (*) are from S&P Global.

Key Takeaways for Investors

• Core momentum intact: Data Center (+57% y/y) and Client (mix-led) lifted Q1 above consensus*, with non-GAAP GM steady at 54%—demonstrating earnings leverage as scale improves .
• Near-term headwinds are largely policy-driven: Q2 revenue and GM optics are depressed by export controls/one-time inventory charges (~$700M revenue; ~$800M GM charge), but ex-charge margin run-rate (~54%) and H2 ramp remain intact .
• AI roadmap accelerates: MI325 deployments broaden; MI350 sampling now, accelerated production mid-2025; MI400 rack-scale solutions positioned for 2026 with ZT integration—expanding TAM and system-level competitiveness .
• Client/Gaming optionality: AI PC adoption, record CPU ASPs, and strong Radeon RDNA4 launch offer incremental margin and revenue support while console inventory normalization stabilizes semi-custom .
• Balance sheet capacity: $7.31B cash/ST investments, $727M FCF in Q1, and new $6B repurchase authorization (May 14 PR) enhance capital return flexibility into the AI cycle .
• Watch catalysts: MI350 production ramp, enterprise DC mix, AI inference wins, regulatory developments, and execution on ZT systems-led rack-scale offerings—all likely to drive estimate revisions and multiple debate .

Values from S&P Global are marked with an asterisk (*) and sourced via S&P Global.