AMD: The Market Missing Forest For The Trees - Once Again

Advanced Micro Devices (AMD) delivered a revenue beat ($7,65B vs $7.5B) and an EPS beat ($1.09 vs $1.08) for the Q4 and provided a Q1 guide slightly above consensus ($7.1B vs $7.0B). Just about the only disappointment was that the Company did not meaningfully exceed the 2024 Instinct bogey of $5B. Outside of that, CEO Lisa Su’s commentary painted a strong picture for 2025 and beyond. Nonetheless, after rising by about 3% after results, the stock fell almost 9% by the end of the after-hours session. The stock reaction is puzzling as the Company’s commentary indicated a bright future that is well beyond current investor expectations.

Fourth quarter revenue increased 24% year-over-year, led by record quarterly data center and client segment revenue, which grew sequentially by 9% and 23% respectively (image below). Embedded revenues were flat, and Gaming grew strongly but off a small base.

To be sure, the results and guidance, while above street expectations, were below Beyond The Hype expectations. The shortfalls were from EPYC (estimate $2B at ~12% growth), which was a touch short of BTH expectations, and Instinct (estimate $1.7B at ~6% growth) which was well short of the expected $2B. It appears that some problems with HBM and softer demand likely led to the shortfall. As disappointing as it is, the short falls were not execution issues at the Company, and likely mostly an AI macro situation buffeted by the recent changes in training demand.

Full year growth was respectful despite meltdown in Gaming and Embedded (image below).

Two quarters in a row now, AMD posted higher revenues than Intel in the Data Center revenues ($3.859B vs $3.387B). AMD noted strong demand for its last three generations of EPYC hardware and commented that it exited 2024 with well over 50% share at the majority of the largest hyperscale customers. Enterprise adoption EPYC in the cloud nearly tripled from 2023 and on-prem adoption grew by a strong double-digit percentage year-over-year. AMD’s enterprise gains now have strong momentum, and management expects 2025 to be another year of share gains. EPYC server share likely grew by about 3%.

On the client front, AMD seemed to have gained between 3% and 4% market share during the quarter. Notably, AMD did not see any tariff related pull-in of the business like Intel. This suggests a potentially accelerated share gain for AMD in Q1.

Note that if AMD keeps up both server and client market share gains, it could gain more than 10% share in 2025 – consistent with the commentary in the earnings preview.

As discussed previously, near term numbers are not that important and semiconductor investing is mainly about products and applications and the news on those fronts was extremely positive. Some highlights of the call are follows:

AMD’s Strong Product Story Keeps Getting Better

Products and product market fit are the leading indicators that tell us where a company is likely to go. On these counts, AMD is moving from strength to strength.