AMD’s Q4 2024 Earnings: Strong Performance with a Key Weakness

AMD’s latest earnings report delivered a mix of strong financial results and a critical shortfall, leading to a sharp market reaction. The company, led by CEO Lisa Su, posted impressive revenue and profit numbers but missed expectations in its data center business—an area crucial to its long-term growth.

### Solid Earnings with a Notable Weak Spot

On February 4, 2025, AMD announced its fourth-quarter earnings, reporting adjusted earnings per share of $1.09, slightly exceeding analysts’ expectations of $1.08. Revenue reached $7.66 billion, surpassing the forecasted $7.53 billion. These numbers indicated a solid financial performance overall.

However, the company’s data center division, a key focus area as AI adoption accelerates, underperformed. Analysts had expected $4.14 billion in revenue from this segment, but AMD reported only $3.86 billion. Despite this miss, the data center revenue still represented a strong 69% year-over-year increase.

Investors reacted swiftly, leading to a 6% drop in AMD’s stock during extended trading. The market’s disappointment suggests high expectations for AMD to challenge Nvidia’s dominance in AI chips more aggressively.

### Competing in the AI Landscape

AMD has been making strategic moves in AI, particularly with its MI300X GPU, designed to compete with Nvidia. Major customers like Meta and Amazon have already integrated these AI-focused GPUs into their data centers, signaling trust in AMD’s technology.

During the company’s earnings call, Lisa Su emphasized AMD’s vision for long-term AI-driven growth. She highlighted that AMD’s AI data center revenue reached $5 billion in 2024 and projected that it will expand to “tens of billions” in the coming years. This growth potential showcases AMD’s ambition to establish itself as a leader in the AI chip market.

### Mixed Performance in Other Segments

Outside of data centers, AMD’s other business units produced mixed results:

– The **PC and laptop chip** division performed exceptionally well, generating $2.3 billion in revenue, a 58% year-over-year increase, fueled by strong demand.
– **Gaming GPUs** struggled, with revenue plunging 59% year-over-year to $563 million due to intensified competition.
– **Embedded chips**, used in industrial and automotive applications, also saw a small decline, bringing in $923 million, down 13% year-over-year.

### Outlook for 2025 and Beyond

Despite the data center miss, AMD remains optimistic about its future growth. The company’s first-quarter 2025 guidance estimates revenue of $7.1 billion (± $300 million), slightly above analyst expectations. In addition, AMD projects a healthy gross margin of about 54%, reinforcing confidence in profitability.

Lisa Su described 2024 as a “transformative year” for AMD, with AI and data center expansion being central to the company’s strategy. Moving forward, AMD aims to strengthen its position against Nvidia while capitalizing on the rapidly growing AI market.

### Conclusion: Foundation for Long-Term Growth

Although AMD faced a setback in data center revenue, its overall financial performance remained strong. The company’s AI-oriented strategy, backed by partnerships with industry giants like Meta and Amazon, signals long-term growth potential.

The key challenge now is whether AMD can continue scaling its AI business and achieve its ambitious revenue targets in this highly competitive market. If it succeeds, the company could solidify its role as a major force in the evolving AI-driven computing landscape.