Advanced Micro Devices (AMD)’s recent earnings report showed strong results but disappointed on guidance, leading to a 17% drop in stock price. The company reported earnings per share (EPS) of $1.53 on revenue of $10.3 billion. Wall Street was expecting EPS of $1.32 on revenue of $9.6 billion, according to Bloomberg estimates. The company also saw revenue of $7.7 billion in the same quarter last year.
Looking to the future, AMD said Q1 revenue would come in between $9.5 billion and $10.1 billion. That’s better than the Street’s estimate of $9.4 billion, though some forecasts had called for over $10 billion, according to Bloomberg. This miss is where analysts viewed the report as bearish, and sent AMD stock crashing over 17%. Some analysts anticipated a far stronger outlook from the company, fueled by heightened AI spending and massive data center buildouts.
“Our AI business is accelerating, with the launch of MI400 series and Helios representing a major inflection point for the business as we deliver leadership performance and [total cost of ownership] at the chip, compute tray, and rack level,” said AMD CEO Lisa Su during the earnings call. “Based on the strength of our EPYC and Instinct roadmaps, we are well-positioned to grow data center segment revenue by more than 60% annually over the next three to five years and scale our AI business to tens of billions in annual revenue in 2027.”
Also Read: Qualcomm (QCOM) Earnings: Buy the AI Stock Before the Report?
Several Wall Street analysts revised their forecasts for AMD stock after the report was announced. JPMorgan analyst Harlan Sur called AMD’s report “a mixed bag.” He also questioned AMD’s ability to generate operating leverage, especially with the upcoming ramp of MI450 systems later this year, likely to weigh on gross margins. Sur reiterated his neutral rating on AMD stock with a price target of $270.
Meanwhile, Bank of America analyst Vivek Arya and his team updated their opinions on AMD stock after earnings. The analysts said that according to data from the Bank of America Strategy team, AMD stock remains relatively under-owned (just two of 10 investors) and underweighted (0.16x relative weightage to SPX) in U.S. large-cap portfolios.