• Advanced Micro Devices, Inc (AMD) finished the fiscal year of 2024 with 14% top-line growth, driven by a strong performance in the Data Center and Client segments, despite declines in the Gaming and the Embedded segments.
• AMD is well-positioned for accretive growth in CPU & GPU sales, as it rolls out the next generation of GPUs in the coming quarters.
• AMD's financial outlook for Q1'25 is robust, with anticipated growth in the Data Center and Client segments as more AI applications are run at the edge, CSPs, and in private data centers.

AMD reported GAAP revenues of $7.7 billion for Q4 2024, a 12% QoQ and 24% YoY increase which beat Wall Street’s expectation by $130 million. For the fiscal year, revenues were $25.7 billion, a 14% YoY increase. Client revenue was up 23% QoQ and 58% YoY in Q4 2024 (up 26% QoQ and 29% YoY in Q3 2024). For the fiscal year, client revenue was $7.1 billion, a 52% YoY increase.

For Q4 2024, AMD generated a net income of $482 million, a 37% QoQ and a 28% YoY decline, compared to a net income of $771 million in Q3 2024. Gross margin was 54.0%, a 380-basis-point increase from Q3 2024 and a 680-basis-point increase from Q4 2023 due to a favorable shift in revenue mix with higher data center and client revenues, and lower gaming and embedded revenues.

On notebook PCs, AMD believes that it had a record OEM PC sell-through share in the fourth quarter on the Ryzen AI 300 Series ramp. In addition to growing share with existing PC partners, AMD was very excited to announce a new strategic collaboration with Dell that marks the first time they will offer a full portfolio of commercial PCs powered by Ryzen Pro processors. The initial wave of Ryzen-powered Dell commercial notebooks is planned to launch this spring, with the full portfolio ramping in the second half of the year, as AMD focuses on growing commercial PC share.

At CES, AMD showed and expanded its Ryzen portfolio with the launch of 22 new mobile processors that deliver leadership compute, graphics and AI capabilities. AMD also noted that for AI PCs, it is the only provider that offers a complete portfolio of CPUs, enabling Windows Copilot-plus experiences on premium ultrathin, commercial, gaming and mainstream notebooks. As we show in the Advanced IT Display Shipment and Technology Report, we cover all brands, display technologies and sizes for notebook PCs and much more. For 2025, AMD expects the PC TAM to grow by a mid-single-digit percentage YoY. Based on the breadth of its leadership client CPU portfolio and strong design win momentum, AMD believes it can grow client segment revenue well ahead of the market.

During the earnings call, AMD Chairman and CEO Lisa Su noted, “2024 was a transformative year for AMD as we delivered record annual revenue and strong earnings growth. Data Center segment annual revenue nearly doubled as EPYC processor adoption accelerated and we delivered more than $5 billion of AMD Instinct accelerator revenue. Looking into 2025, we see clear opportunities for continued growth based on the strength of our product portfolio and growing demand for high-performance and adaptive computing.”

During the Q&A, AMD was asked to provide its perspective on the recent DeepSeek AI news from China. AMD responded that it had been a pretty exciting first few weeks of the year. AMD thinks the DeepSeek, Allen Institute as well as some of the Stargate announcements indicate the rate and pace of innovation happening in the AI world. Specifically relative to DeepSeek, AMD thinks that innovation in the models and algorithms is good for AI adoption. The fact that there are new ways to bring about training and inference capabilities with less infrastructure actually is a good thing because it allows the industry to continue to deploy AI compute while allowing broader application space and more adoption. From AMD’s standpoint, it is a big believer in open source.

On a question regarding the drivers for the client segment growth in Q4 2024, AMD noted that it did not believe there was substantial inventory buildup. AMD thinks what it is seeing is very strong adoption of its new products. On the desktop side, AMD saw its highest sell-out in many years as it went through the holiday season, launching new gaming CPUs. AMD noted that it has been constrained in the market, but it has continued shipping very strongly through January as it is catching up with some demand. On the notebook side, AMD also saw a number of its OEM partners launching new AI PCs with the slew of new bulk mobile part numbers that it announced at CES. Noting that there had been some commentary about whether there were pull-ins relative to tariffs, AMD said it did not see that in the fourth quarter.

Comparing inventory to the Cost Of Goods Sold (COGS), the inventory-to-COGS ratio went from 1.43 in Q4 2023 to 1.63 in Q4 2024. Too much inventory can lead to continued price cuts and lower margins.

AMD Income Statement Highlights, Q4 2022-Q4 2024

Source: AMD GAAP Financial Statements, DSCC Analysis

AMD Gross, Operating, Pre-tax and Net Margins, Q4 2022-Q4 2024

Source: AMD GAAP Financial Statements, DSCC Analysis

In Q1 2022, AMD started reporting revenues for its business segments in terms of Data Center (which includes chip sales for cloud computing and to larger enterprise customers), Client (which includes chip sales for desktop PCs and notebook PCs), Gaming (which includes chip sales for the PlayStation 5 and Xbox Series X) and Embedded (which includes embedded processors such as GPUs and FPGAs for commercial applications). Prior to Q1 2022, AMD used to report revenues for the Computing and Graphics, Enterprise, Embedded, Semi-custom and Xilinx segments.

AMD Revenue by Business Segment, Q4 2022-Q4 2024

Sources: AMD GAAP Financial Statements, DSCC Analysis

For Q4 2024, by business segment:
•    Data Center revenue was up 9% QoQ and 69% YoY to $3.9 billion, driven by strong growth in sales of both AMD Instinct GPU and the fourth and fifth generations of the AMD EPYC CPU. The data center segment primarily includes server microprocessors (CPUs) and graphics processing units (GPUs), data processing units (DPUs), field programmable gate arrays (FPGAs) and adaptive system-on-chip (SoC) products for data centers. The segment’s operating income was $1.2 billion versus $666 million a year ago. The segment accounted for 50% of AMD’s total revenue in the fourth quarter and 49% of the revenue for 2024.

•    Client revenue was up 23% QoQ and 58% YoY to $2.3 billion, driven by significantly higher demand for both Ryzen desktop and mobile processors. The client segment primarily includes CPUs, accelerated processing units that integrate microprocessors and GPUs (APUs), and chipsets for desktop and notebook personal computers. The segment’s operating income was $446 million versus $2,765 million in Q3 2024 and $55 million in Q4 2023, driven primarily by operating leverage due to higher revenue. The client segment accounted for 30% of AMD’s total revenue in the fourth quarter and 27% of the revenue for 2024.

•    Gaming revenue was up 22% QoQ but down 59% YoY to $563 million, primarily due to a decrease in semi customer revenue. Operating income was $50 million versus $12 million in Q3 2024 and $224 million in Q4 2023.

•    Embedded revenue was flat QoQ and down 13% YoY to $923 million. The segment primarily includes embedded CPUs and GPUs, FPGAs and adaptive SoC products. Operating income was $362 million compared to $461 million a year ago.

•    All other operating income, which includes certain expenses and credits that are not allocated to any of the operating segments, such as amortization of acquisition-related intangible assets, employee stock-based compensation expenses, acquisition-related and other costs, inventory loss at contract manufacturers and licensing gain. These together had an operating loss of $871 million.

Source: AMD Q4 2024 Presentation

On guidance for the first quarter of 2025, AMD EVP and CFO Jean Hu commented that AMD expects its revenue to be approximately $7.1 billion plus or minus $300 million, up 30% YoY driven by strong growth in the data center and client segments, more than offsetting a significant decline in the gaming business and a modest decline in the embedded business. AMD expects its revenue to be down sequentially by approximately 7%, driven primarily by seasonality across its businesses. In addition, AMD expects Q1 non-GAAP gross margin to be approximately 54%. Non-GAAP operating expenses are expected to be approximately $2.1 billion.

AMD shares fell about 5% in extended trading on Tuesday following the earnings release. At the opening bell on Wednesday, the stock was trading at $107.54, compared to $174.23 on February 5, 2023.

Wrapping Up

• For 2025, AMD seems to be back to growth mode as the Data Center and Client growth overcomes the weakness in the Embedded and Gaming sectors. The expectation going forward is for the Embedded segment to contribute to growth while Gaming is likely to remain weak.
• The Data Center business has reached the point to where revenues are more than 50% of the company revenues. AMD is poised to grow with the Data Center having limited headwinds from other segments and with a big shift to AI GPU sales.
• The news that was somewhat overlooked is that AMD has decided to start volume production of the MI350 series in mid-2025 which was originally scheduled for the second half of 2025. The MI350 is slated to compete with the DGX B200 system from Nvidia. From the earnings call, AMD noted, "our next-generation MI350 series featuring our CDNA 4 architecture is looking very strong. CDNA 4 will deliver the biggest generational leap in AI performance in our history, with a 35 times increase in AI compute performance compared to CDNA 3."