AMD’s Q4 2024 Results Disappoint: Shares Fall 8%

TradingKey - For tech investors, it’s all about being invested in the Artificial Intelligence (AI) space and, particularly, semiconductor stocks.

However, in reality, the gains in semis have been rather concentrated. One of the previous big winners from the pandemic-era boom in tech was fabless chip firm Advanced Micro Devices Inc (NASDAQ: AMD), also known as simply AMD.

But it’s been largely left out of the AI-driven rally in chip stocks, with AMD actually down over 30% in the past year. The company reported its Q4 2024 earnings on Tuesday (4 February) after the market closed and it wasn’t pretty for investors.

A miss on data centre revenue and doubts over whether the company can chip away at the dominance of AI semis leader Nvidia Corporation (NASDAQ: NVDA) saw AMD’s stock fall over 8% in after-hours trading. Here’s what investors should know about the company’s latest results.

Revenue beats slightly but data centre falls short

For Q4 2024, AMD posted revenue of US$7.66 billion which was up 24% year-on-year from the same period in 2023. Meanwhile, adjusted earnings per share (EPS) for the period came in at US$1.09 and that was broadly in line with expectations from the market.

But it was the data centre side of AMD’s business which was the catalyst for the sell-off. AMD’s data centre business posted revenue of US$3.86 billion for the quarter – up 69% year-on-year – but this came in below the market’s average expectation of US$4.09 billion.

Hopes that AMD would beat that bar fell flat, despite the fact that the company said the growth in its data centre revenue was due to demand for its Instinct GPUs and EPYC CPUs – that compete with processors from Intel Corp (NASDAQ: INTC).

Analysts are expecting that AMD’s data centre unit will deliver revenues of US$18.4 billion for the whole of 2025. AMD CEO Lisa Su told investors on the earnings call that the firm believes it will report “strong double-digit percentage revenue and EPS growth in 2025”.

Transition period for AMD

On the guidance side of the equation, AMD projects that sales for Q1 2025 will be between US$6.8 billion and US$7.4 billion, with the mid-point (US$7.1 billion) coming in slightly ahead of analysts’ expectations.

AMD insists that 2025 will be a year of growth and stated that demand for all its product groups would improve this year. It also revealed that it will have better products being released in the middle of the year, which should boost its second half numbers.

On that front, CEO Su did say that revenue from AI chips in the first half of this year will be similar to where it was in the second half of 2024. That certainly disappointed investors who were hoping for more of an “AI boost” in AMD’s short-term outlook.

In that regard, Su did clarify to investors that “clearly, we’re going through a little bit of a product transition”. In the PC market, the company is planning to release accelerator chips in the near future and apparently customer interest is strong. 

Gaming revenue remained weak for AMD during Q4 2024, with the gaming unit’s revenue falling 59% year-on-year to US$563 million for the period. However, with new releases of gaming consoles likely in the not-too-distant future, this could be a turning point (or bottoming out) for AMD’s gaming business.

Worries over hardware demand

One of the bigger worries this quarter was the recent news about China’s DeepSeek developing a new AI model that requires much less computing power and hardware than equivalent US-developed models.

That has hung over companies like AMD on concerns that AI firms won’t need to spend massively on infrastructure and semis. 

Combined with the existential worry that AMD won’t be able to meaningfully take away business from top dog Nvidia has resulted in the company’s shares getting hammered. Until AMD can convincingly back up its bullish projections with tangible cash flows, investors will likely remain doubtful whether the chip firm can fully prosper in the age of AI.