Advanced Micro Devices Inc Earnings - Q1 2025 Analysis
Positives
- Revenue for Q1 was $7.4 billion, up 36% YoY, driven by 57% revenue growth in the Data Center segment and 28% revenue growth in the Client and Gaming segment.
- The company delivered strong top-line revenue growth, expanded gross and operating margins, and closed the key acquisition of ZT Systems to expand and accelerate its Data Center GPU and the systems roadmaps.
- The company expanded gross margin YoY for the fifth straight quarter and increased net income by 55%, driven by a higher overall percentage of Data Center product sales and a richer Ryzen processor mix.
- The company is confident it can deliver strong double-digit percentage revenue growth in 2025 based on accelerating share gains with its latest-generation of Zen 5 EPYC and Ryzen CPUs and Radeon GPUs, and ramping production of its Instinct MI350 series accelerators in the second half of the year to support an expanded set of customers and AI workloads.
- The company is pleased with its record first quarter revenue of $7.4 billion, exceeding the high end of its guidance, up 36% YoY.
Q&A Highlights - Q1 2025
Analyst asked about the performance of Instinct in Q1 and the company's expectations for the first half of 2023.
Instinct's performance in Q1 was in line with expectations, and the company is excited about the upcoming MI350 launch, which is on track for a mid-year launch. Customer interest in Instinct is high, and the company believes it is well-positioned in the market. The company expects strong growth in the AI business in the second half of the year, despite some uncertainties around tariffs and other factors.
Analyst asked about the additional $800 million that has to come out from the ban and when it will come out.
The vast majority of the $800 million will come out in the September quarter, with very little in Q4. The company had always expected that Q4 would be focused on the MI350 family and non-China revenue.
Analyst asked about AMD's approach to addressing ease of deployment with the MI400 rack-scale solution and the overall feedback on the product.
AMD is actively planning with customers and their design teams to ensure that the MI400 series meets their needs. The company is also learning from past deployments to avoid any challenges that may arise. The enthusiasm from customers is high, and AMD is working to ensure that the product meets their expectations.
Analyst asked about AMD's go-to-market strategy for enterprise customers and how it has driven strong share momentum in a tough market segment.
AMD's strength in the product cannot be undersold, with the 5th Gen EPYC processor offering excellent performance and cloud adoption. The company has also broadened its product portfolio to include low core count and high core count and frequency ranges. Additionally, AMD has added significant headcount and capability to address end users directly, and is learning from each deployment to replicate successful use cases across industrial partners. The company feels good about the opportunities in enterprise and is still in the early stages of its efforts.
Analyst asked about the impact of the $700-million revenue loss from China on the Data Center revenue for the year.
The company expects the Data Center revenue to be flat in the first half of the year, excluding the $700-million impact from China. The company sees strong double-digit growth in the Data Center business and the GPU business in the second half of the year, driven by the launch of MI355.
Analyst asked about the need for more interconnect capabilities in the company's portfolio.
The company has all the pieces required, including deep partnerships in the ecosystem, to address system-based architectures. The company is investing in system-level optimization between CPU, GPU, networking capability, and rack-scale architecture, and partnering with others in the industry to offer these capabilities. The company is focused on ensuring interoperability across the spectrum, including different solutions in the market.
Analyst asked about the company's share gains in the Client business and how they compare to market growth.
The company is seeing unit growth, particularly in desktop, and revenue share growth in high-end notebook and commercial segments. They are gaining share in the right places and believe they have a good inventory position. The company is spending time aligning with customers and ensuring they have a good overall inventory position.
Analyst asked about the addressable market for AI accelerators, specifically the portion in China, and how it is impacted by the China export controls.
The company expects some limitation on leading-edge GPUs going into China, but they don't think it dramatically changes the TAM. They are actively working with the government on the AI diffusion rules and want to ensure that the rest of the world can use them as the primary platform. They are spending efforts to ensure the importance of the overall ecosystem and having the rest of the world adopt the US ecosystem.
Analyst asked about the GPU business growth in Q2 and Q3 given the China data center GPU headwinds.
The GPU business is not expected to grow year-over-year in Q2 due to the $700 million headwind from China data center GPU. However, the company expects to grow year-over-year in Q3 and Q4, and for the full year with strong double-digit growth.
Analyst asked about the OpEx for the ZT side and the full year.
The company views the ZT design team's incremental OpEx as quarterly, with a $50 million increase. The $2.3 billion OpEx includes everything from ZT, as the transaction closed on March 31st. The company expects to continue to drive revenue growth and increase more than OpEx, and will be disciplined in managing OpEx.
