Complex Micro Gadgets (AMD -2.36%) stocks fell following its This fall revenue file as its knowledge heart income soared however nonetheless got here in under analysts’ consensus expectancies. The inventory is now down greater than 35% over the last yr, as of this writing.
Let’s dive into the chipmaker’s fourth-quarter effects to peer if this dip in fee generally is a purchasing alternative.
Knowledge heart expansion in focal point
AMD’s knowledge heart trade was once in focal point when the corporate reported its This fall effects. The section’s income surged 69% yr over yr and 11% sequentially to $3.9 billion. Each AMD’s Intuition graphics processing gadgets (GPUs) and EPYC central processing gadgets (CPUs) helped pressure the expansion. On the other hand, analysts had been anticipating knowledge heart income to be $4.14 billion, as compiled by means of FactSet.
The corporate mentioned that its EPYC CPUs proceed to realize marketplace percentage within the knowledge heart. Amongst hyperscalers, AMD now has a marketplace percentage smartly above 50% for its EPYC CPUs. In the meantime, AMD mentioned Microsoft and Meta Platforms are each the use of its MI300X GPUs. It mentioned it’s seeing sturdy hobby in its next-generation MI350 collection GPUs, which it plans to ramp up round mid-year. AMD will release its MI400 GPUs in 2026.
AMD’s shopper section, in the meantime, additionally grew strongly, with This fall income hiking 58% yr over yr to $2.3 billion. AMD mentioned it persevered to realize marketplace percentage within the private pc (PC) retail house, together with having over 70% marketplace percentage on common platforms similar to Amazon, Newegg, and MindFactory. It’s having a look to outpace PC marketplace expansion in 2025, which it sees emerging by means of mid-single digits. The corporate persevered to peer weak spot in its online game and embedded segments. Gaming section income plunged 59% to $563 million as its consumers Microsoft and Sony labored on normalizing stock. Embedded gross sales fell by means of 13%, harm by means of weaknesses in business and conversation markets.
General, AMD’s This fall income jumped by means of 24% yr over yr to $7.66 billion. Adjusted EPS, in the meantime, soared 42% to $1.09. That beat the analyst consensus for EPS of $1.08 on income of $7.53 billion, as compiled by means of LSEG.
Adjusted gross margins rose 320 foundation issues to 54%. This presentations that the corporate is not only rising income however that its income is changing into extra winning as smartly.
For the quarter, AMD generated loose money drift of $1.1 billion and and $2.4 billion for the total yr. It ended 2024 with web money and momentary investments of $5.1 billion and $1.7 billion in debt.
Having a look forward, the corporate guided for Q1 income of between $6.8 billion to $7.4 billion. That will constitute expansion of 30% on the midpoint, appearing persevered income expansion acceleration. The expansion shall be powered by means of sturdy expansion in its knowledge heart and shopper companies, offsetting an important decline in its gaming trade and a modest decline in its embedded trade.
For the total yr, it forecast double-digit proportion income and EPS expansion yr over yr. It sees each its gaming and embedded segments having modest expansion.
Symbol supply: Getty Pictures.
Will have to traders purchase the dip?
AMD could be very not going to make any large inroads in opposition to rival Nvidia within the knowledge heart GPU marketplace. The corporate simply does no longer have the tool platform to compete in opposition to Nvidia’s dominance, particularly in coaching. The corporate has carved a good area of interest in AI inference as a viable selection and must proceed to peer GPU expansion because of this.
On the other hand, as a substitute of viewing AMD as a GPU afterthought, possibly it is best to view the corporate because the main knowledge heart CPU corporate. That is the world the place AMD has been thriving and taking marketplace percentage. CPUs aren’t as large an element as GPUs when development out AI infrastructure, however they nonetheless play the most important function, and AMD is seeing sturdy expansion because of this. The corporate could also be gaining percentage within the PC marketplace as smartly.
From a valuation standpoint, AMD trades at a ahead price-to-earnings ratio (P/E) of beneath 24 occasions 2025 analyst estimates, with 41% EPS expansion projected. That is a slightly horny valuation.
When you assume AMD goes to be the following large GPU winner, you’ll be able to most certainly finally end up being upset. If you wish to play the GPU marketplace and its expanding computing energy wishes, Nvidia remains to be the most suitable choice. On the other hand, if you’ll recognize AMD for its sturdy place in CPUs and its expansion on this house, then the inventory looks as if a forged choice to shop for in this dip.
John Mackey, former CEO of Complete Meals Marketplace, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Randi Zuckerberg, a former director of marketplace construction and spokeswoman for Fb and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. Geoffrey Seiler has no place in any of the shares discussed. The Motley Idiot has positions in and recommends Complex Micro Gadgets, Amazon, FactSet Analysis Techniques, Meta Platforms, Microsoft, and Nvidia. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
