Nvidia has already estimated its losses from the ban on the supply of H20 accelerators to China at $5.5 billion based on the results of just one quarter. AMD presented its quarterly report this week, the management estimated the corresponding losses at $1.5 billion for the year. Overall, the first quarter was successful for AMD, revenue increased by 36% to $7.4 billion.
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AMD CFO Jean Hu said the revenue growth dynamics reflect the company’s successful scaling of its business. CEO Lisa Su emphasized that this success was made possible by a differentiated product portfolio and execution discipline, and AMD’s financial performance is expected to grow significantly this year.
AMD’s profit margin increased from 47% to 50% year-on-year, operating profit soared 22-fold to $806 million, although operating expenses increased by 16% to $2.93 billion. Operating profit margin increased from 1% to 11%. Net profit according to GAAP increased more than five-fold to $709 million. In its investor presentation, AMD explains this dynamic by the growth of revenue from sales of EPYC and Ryzen processors, as well as Instinct accelerators. AMD’s total revenue for the first quarter was higher than analysts expected.
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The revenue dynamics in the data center segment deserve special attention, as it increased by 57% to $3.7 billion in this area. In fact, it was in the server segment that the company received half of its entire revenue in the first quarter. Operating profit in this segment increased by 73% to $932 million, and the operating profit margin increased from 23 to 25%. By the middle of this year, AMD promises to begin increasing the mass production of Instinct MI350 computing accelerators.
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The client and gaming segment in AMD’s reporting is now mentioned as a general result, but some division allows us to understand that in the gaming segment itself, the company’s revenue in annual comparison decreased by one and a half times to $600 million due to a decrease in demand for aging gaming consoles. However, high demand for Ryzen processors with Zen 5 architecture allowed revenue in the client segment to increase by 64% to $2.3 billion. Accordingly, the gaming and client areas together increased revenue by 28% to $2.9 billion compared to the same period last year. Operating profit more than doubled to $496 million, the operating profit margin increased from 10 to 17%. The embedded solutions segment accounted for $823 million of revenue, which formally decreased by 3% in annual comparison. Operating profit in this area decreased from $342 to $328 million.
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AMD ended the first quarter with $7.3 billion in cash and highly liquid assets, up 42% from the previous quarter. The value of inventory increased by 12% to $6.4 billion, while debt obligations increased almost two and a half times to $4.2 billion. The company spent $749 million on repurchasing its own shares during the period.
In the current quarter, AMD expects to earn between $7.1 and $7.7 billion, but due to export restrictions in the Chinese direction, it may lose at least $800 million. Accordingly, because of this, its profit margin in the second quarter will fall to 43%. For the year as a whole, AMD management estimates losses due to new US export restrictions at $1.5 billion. Since April, the company has lost the ability to supply Instinct MI308X accelerators to China, which were created taking into account previous US export restrictions. In the current quarter, AMD’s revenue in the data center segment will decrease by at least $700 million due to the cessation of Instinct MI308X deliveries to China.
Nevertheless, Lisa Su expressed confidence that the new products AMD is introducing to the market will allow the company to increase revenue in the second half of the year. The stock market reacted to these statements with mixed movements in AMD shares. At first, they rose in price by 7%, but then fell due to the release of information about the amount of damage from US export restrictions. In part, these losses were recouped after Lisa Su’s statements about the ability of demand for components for AI systems to outweigh the uncertainty caused by export restrictions and customs tariffs. In general, if we rely on third-party analysts’ forecasts for AMD’s revenue for the current year, the new US export restrictions will cost the company approximately 5% of the corresponding amount. Lisa Su believes that in the data center segment, the company’s revenue for the year as a whole will grow by a significant double-digit percentage. According to her, in the first quarter, there was no increased customer activity caused by the imminent introduction of higher duties in the United States.