What Should AMD Investors Watch in Earnings?

TL;DR

AMD investors should focus on 2025 data center AI revenue guidance, with at least $10 billion or a statement that revenue will double from 2024 presented as a potentially satisfactory signal. Analysts expect quarterly revenue of $7.43 billion, EPS of $0.48, EBIT just above $1 billion, and free cash flow near $796 million.

Transcript

Hey everyone and welcome back to another video for today. So on Tuesday after the market closes, AMD, previously known as Advanced Money Destroyer, now known as Advanced Money Doubler, is going to report their quarterly figures and give us guidance for next quarter and hopefully give us guidance on that AI, data center, GPU accelerator, all of that... Read More

Key Insights

• Analysts expect AMD to report $7.43 billion in quarterly revenue, compared with company guidance of approximately $7.4 billion. The remaining consensus estimates include EPS of $0.48, EBIT just above $1 billion, and free cash flow of roughly $796 million.
• Specific 2025 AI revenue guidance is the central issue for investors because AMD provided only broad growth language during the previous two quarters. The presenter believes guidance of at least $10 billion, or at least twice the 2024 figure, could satisfy the market.
• AMD's reported gross margin was reduced by a one-time charge to 43%, while the margin excluding that charge would have been 54% and represented a beat. Investors therefore need to distinguish the temporary accounting impact from the underlying operating performance.
• The data center AI accelerator market is projected in AMD's presentation to grow at more than 60% compounded from 2023 through 2028 and reach $500 billion. Inference is projected to grow even faster, at more than 80% over the same period.
• AMD's accelerator roadmap includes the MI350 ramp, the MI400 series, and the Helios AI rack planned for 2026. Helios combines EPYC Venice CPUs, MI400 GPUs, Pensando Volcano AI NICs, ROCm 7, and UALink capabilities for large-scale training and inference.
• Client revenue growth is an important supporting factor because the client business grew 67.7% year over year and contributed to improving client and gaming operating income. Gaming remained weaker, while embedded products were expected to provide tailwinds during the back half of the year.
• AMD remains substantially behind Nvidia on profitability metrics, with an approximately 10% trailing free cash flow margin versus Nvidia's 46.6%. AMD's expected 54% gross margin also remains well below Nvidia's level near 75%, suggesting that closing the profitability gap will take time.
• The stock had risen 123% from its April lows and remained somewhat overbought on the daily chart after a small pullback. Earnings could therefore trigger a large move in either direction, especially with the share price near an area that previously acted as resistance.

Questions & Answers

Q: What should AMD investors watch in the earnings report?

AMD investors should prioritize specific 2025 data center AI revenue guidance, quarterly performance against consensus, and management's outlook for accelerator demand. The presenter views guidance of at least $10 billion, or a statement that 2025 AI revenue should at least double the 2024 figure, as potentially sufficient after two quarters of less precise growth commentary.

Q: What are analysts expecting from AMD's quarterly results?

Analysts expect AMD to report quarterly revenue of $7.43 billion, EPS of $0.48, EBIT just above $1 billion, and free cash flow of approximately $796 million. AMD had guided for roughly $7.4 billion in revenue. The presenter hopes for another sizable beat after AMD exceeded consensus by 4.7% in the first quarter.

Q: Why is AMD's 2025 AI revenue guidance so important?

AMD's 2025 AI revenue guidance matters because earlier analyst expectations around $12 billion were reduced to approximately $8.4 billion to $8.5 billion. Management previously described high double-digit growth and tens of billions of dollars over future years without supplying a precise annual figure. A concrete number would help investors evaluate near-term accelerator adoption and expectations.

Q: How should investors interpret AMD's gross margin decline?

AMD's gross margin decline should be considered alongside the one-time charge identified in the discussion. The reported gross margin was 43%, producing a miss of 927 basis points, but it would have been 54% without that charge and would have represented a beat. This distinction separates a temporary impact from the underlying margin performance.

Q: How could the MI350 and MI400 support AMD's growth?

The MI350 is ramping with what the presenter expects to be a higher average selling price, while the MI400 is planned for introduction in 2026, potentially around the middle or back half of the year. AMD presented the MI400 series as offering up to ten times more performance for advanced frontier models, supporting future training and inference opportunities.

Q: What is AMD Helios and when is it expected?

AMD Helios is an AI rack offering expected to become available in 2026. It combines next-generation EPYC Venice CPUs, MI400 GPUs, Pensando Volcano AI NICs, ROCm 7, and UALink capability. AMD positions the system as an open scale-up networking platform for large-scale training and inference, although the discussion suggests meaningful availability may come later in 2026.

Q: Which AMD businesses could contribute beyond data centers?

AMD's client business is a notable contributor beyond data centers, having grown 67.7% year over year and supported recent improvement in client and gaming operating income. Gaming remained weaker, while embedded products had been a drag but were expected to gain tailwinds in the back half. Embedded is also described as a high-margin business.

Q: Why is comparing AMD directly with Nvidia premature?

Comparing AMD directly with Nvidia is premature because their profitability metrics remain far apart. AMD's trailing free cash flow margin was around 10%, compared with Nvidia's 46.6%, while AMD's expected gross margin of 54% remained below Nvidia's level near 75%. The presenter believes AMD could improve over time, but closing those gaps will require patience.

Summary & Key Takeaways

• AMD is expected to report quarterly revenue of $7.43 billion after guiding for approximately $7.4 billion. Analysts also project EPS of $0.48, EBIT just above $1 billion, and free cash flow around $796 million. The discussion emphasizes whether AMD can repeat the sizable consensus beat achieved in the preceding quarter.

• The most important potential announcement is specific 2025 data center AI revenue guidance. Earlier analyst expectations near $12 billion were lowered to approximately $8.4 billion to $8.5 billion. The presenter argues that guidance of at least $10 billion, or revenue doubling from 2024, could be enough to satisfy the market.

• AMD has opportunities across data center accelerators, client processors, embedded products, and renewed sales into China. However, its free cash flow and gross profit margins remain far below Nvidia's. Following a 123% rise from April lows, the stock appears somewhat overbought and could move sharply after earnings.