AMD surges on AI growth in Q1 2025—But $1.5bn China export hit clouds outlook

Advanced Micro Devices, Inc. (NASDAQ: AMD) reported its financial results for the first quarter of 2025 on May 6, showcasing significant growth across its AI, client computing, and data center segments. The company generated $7.44 billion in revenue, up 36% from the prior year, as demand for Ryzen processors and EPYC CPUs accelerated. GAAP net income came in at $709 million with diluted earnings per share of $0.44. On a non-GAAP basis, net income stood at $1.57 billion, translating to earnings per share of $0.96.

The company reported a GAAP gross margin of 50% and a non-GAAP gross margin of 54%, reflecting a more profitable product mix led by enterprise and AI-centric products. Operating income on a GAAP basis rose to $806 million, compared to $36 million a year earlier. Adjusted EBITDA reached $1.95 billion, a sharp improvement from $1.3 billion in Q1 2024. Despite a sequential revenue decline of 3% from the fourth quarter, AMD’s strong execution enabled consistent profitability, particularly in capital-intensive markets like cloud infrastructure and gaming hardware.

Which Segments Delivered the Highest Growth in Q1?

AMD’s Data Center segment emerged as the strongest performer in the quarter, posting revenue of $3.67 billion, a 57% year-on-year increase. The surge was fueled by robust sales of AMD EPYC server processors and AMD Instinct GPUs. Both products saw increased adoption by hyperscale cloud providers, research institutions, and telecom operators, driving high-margin revenue growth and strategic wins across global compute markets.

In the Client segment, revenue grew 68% to $2.29 billion, marking a major rebound in the PC and notebook space. Demand for AMD’s Zen 5-based Ryzen processors significantly outpaced expectations, aided by a richer mix and a notable shift toward high-performance computing needs among consumers and commercial buyers. AMD’s share gains in desktop and premium notebook markets underpinned this segment’s strong year-on-year expansion.

Conversely, revenue from the Gaming segment fell 30% to $647 million, largely due to lower semi-custom shipments. This softness reflects the normalization of console demand and limited refresh cycles among gaming hardware partners. The Embedded segment reported a slight 3% drop to $823 million amid continued mixed demand across networking, automotive, and industrial applications.

How Is AMD Positioning for AI and Cloud Infrastructure Growth?

AMD has placed significant emphasis on developing a holistic AI compute stack. The completion of its acquisition of ZT Systems in the quarter strengthens its end-to-end system integration capability, which will be crucial in addressing the forecasted $500 billion AI accelerator market opportunity by 2028. With this move, AMD has fortified its ability to offer full rack-level infrastructure solutions integrating its CPUs, GPUs, and networking silicon.

Its software ecosystem is evolving in parallel. AMD ROCm now supports frontier AI models such as Meta’s Llama 4 and Google’s Gemma 3, facilitating broader adoption of Instinct GPUs in enterprise AI workloads. Core42’s deployment of AMD GPU technology in France represents one of the largest European AI supercomputing initiatives. Other collaborations include efforts with Dell Technologies, the French CEA, and Jio Platforms, alongside Cisco and Nokia, to build a global Open Telecom AI Platform. These initiatives point to AMD’s ambition to position itself not merely as a chip supplier, but as a strategic enabler of scalable AI compute infrastructure.

Public cloud providers continued to expand their AMD-based offerings. Oracle Cloud introduced new OCI Compute E6 shapes powered by 5th Gen EPYC CPUs, while Google Cloud rolled out C4D and H4D virtual machines designed to meet the growing demand for high-performance and general-purpose workloads. These strategic wins further solidify AMD’s presence in global cloud infrastructure ecosystems.

What Are the Financial Implications of Export Restrictions?

Despite a strong start to 2025, AMD faces headwinds from newly imposed U.S. export restrictions on advanced AI chips destined for China. The company has projected a $1.5 billion decline in annual revenue as a direct result of these controls, which require licenses for certain GPU exports. For Q2 2025, AMD anticipates revenue to remain flat at approximately $7.4 billion, with a temporary dip in non-GAAP gross margin to 43%, largely driven by an $800 million charge related to inventory write-downs and reserve adjustments.

However, excluding the charge, the underlying non-GAAP gross margin would have remained consistent at 54%, suggesting operational efficiency and product strength outside of regulatory impacts. Management reaffirmed that AMD’s diversified pipeline and global partnerships mitigate concentration risks and provide long-term visibility, even as Chinese sales face disruption.

How Are Investors and Analysts Responding?

Investor sentiment toward AMD remains cautiously optimistic. Following the Q1 earnings release, AMD stock fell by over 1% in after-hours trading to $97.66. This price action reflected a mix of strong earnings and lingering concerns over the export controls. Year-to-date, AMD stock has declined by roughly 18%, underperforming the broader Nasdaq and SOX indices, mainly due to ongoing China-related uncertainties.

Analyst ratings are currently mixed. UBS and Wedbush raised their price targets to $155 and $120 respectively, citing strong performance in the compute and client segments. In contrast, Jefferies and Citi lowered their targets to $100, noting potential margin erosion and lowered AI revenue projections. The consensus from market analysts appears to lean toward a “Hold” recommendation, with upside potential tied to AI execution and downside risk centered on geopolitical volatility.

How Are Institutional and FII/DII Trends Shaping AMD’s Outlook?

Institutional activity in AMD saw increased volume surrounding its Q1 results, particularly in options trading and equity accumulation by large-cap tech funds. The upcoming 13F filings are expected to shed more light on net positioning shifts by U.S. asset managers. The appetite for AI infrastructure plays has continued to attract capital, although some institutional repositioning away from China-exposed tech names has tempered inflows.

Looking at broader institutional trends, data from Indian markets indicates that Foreign Institutional Investors (FIIs) recorded a net purchase of ₹9,648 crore in May 2025, while Domestic Institutional Investors (DIIs) added ₹7,060 crore. While these figures are not AMD-specific, they reflect the broader confidence in the technology and semiconductor space among institutional allocators, suggesting that AI-led growth names like AMD remain strategically relevant in global portfolios.

How Does AMD’s Stock Chart and Technical Setup Look?

Technically, AMD’s stock remains in a descending price channel that began in late 2024. The $116 level serves as a key resistance point, aligned with prior highs and Fibonacci retracement zones. On the downside, support levels exist at $93 and $78, with the latter representing April 2025 lows. A breakout above $116 could trigger a rally toward $132, but failure to hold above $93 may extend the consolidation phase.

Traders and short-term investors are likely to approach AMD with a range-bound bias in the near term. Long-term investors will watch for catalysts such as AI contract wins, margin normalization, and easing of export-related pressures as potential re-rating triggers.

Is AMD a Buy, Hold, or Sell in 2025?

With strong growth across core business lines, resilient margin performance, and a growing share in cloud and AI infrastructure, AMD remains a fundamentally sound company. The $1.5 billion expected impact from U.S.-China trade restrictions poses a real earnings risk, but the company’s product roadmap, cash reserves exceeding $7.3 billion, and improving free cash flow of $727 million offer downside protection.

The prevailing sentiment from institutional analysts suggests a Hold-to-Accumulate stance. AMD’s long-term story remains intact, but near-term volatility—driven by regulatory actions and macroeconomic sentiment—warrants a measured investment approach. Investors looking to initiate or add positions may find opportunities around support levels, while those already holding may wait for clarity on regulatory developments and margin recovery.