AMD Faces Challenges Amid Data Center Revenue Shortfall and AI Market Competition

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Advanced Micro Devices (AMD) recently announced its fourth-quarter and full-year 2024 financial results, showcasing both achievements and challenges that have influenced its stock performance.

Financial Highlights

In the fourth quarter, AMD reported record revenue of $7.7 billion, with a gross margin of 51%. Operating income was $871 million, and net income stood at $482 million, resulting in diluted earnings per share of $0.29.

On a non-GAAP basis, the company achieved a gross margin of 54%, operating income of $2.0 billion, net income of $1.8 billion, and diluted earnings per share of $1.09.

For the full year 2024, AMD’s revenue reached $25.8 billion, with a gross margin of 49%. Operating income was $1.9 billion, net income was $1.6 billion, and diluted earnings per share were $1.00.

On a non-GAAP basis, the annual gross margin was 53%, operating income was $6.1 billion, net income was $5.4 billion, and diluted earnings per share were $3.31.

Data Center Segment Performance

The data center segment, a critical area for AMD, reported revenue of $3.9 billion, marking a 69% year-over-year increase. However, this figure fell short of the projected $4.14 billion. CEO Lisa Su forecasted a 7% sequential decline in data center sales for the upcoming quarter.

AI Chip Market Outlook

In the AI chip sector, AMD faces significant competition from industry leaders. The company has decided to stop providing specific revenue forecasts for its AI chips, a move that has raised concerns among investors.

Analysts note that while AMD’s forthcoming AI chips appear competitive, their late launch has put the company at a disadvantage.

Stock Market Reaction

Following the earnings announcement, AMD’s stock experienced a decline. The stock closed at $112.01 on Tuesday, February 4, 2025. By Friday, February 7, 2025, AMD’s stock had decreased to $107.56, marking a decline of approximately 4% over the week.

Future Outlook

Looking ahead, AMD anticipates first-quarter 2025 revenue to be approximately $7.1 billion, plus or minus $300 million.

At the midpoint, this represents a year-over-year growth of about 30% but a sequential decline of approximately 7%. The company expects a non-GAAP gross margin of around 54% for the upcoming quarter.

Investors are advised to monitor AMD’s performance closely, especially in the data center and AI segments, as these areas are critical for the company’s future growth.

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