Advanced Micro Devices (AMD) stock is falling Wednesday after the semiconductor company beat top- and bottom-line expectations for its fourth quarter but came up short on data center revenue.
In the three months ending December 28, AMD's revenue increased 24.2% year over year to $7.7 billion, boosted by 69.1% growth in its Data Center segment to $3.9 billion. Earnings per share (EPS) rose 41.6% from the year-ago period to $1.09.
"2024 was a transformative year for AMD as we delivered record annual revenue and strong earnings growth," said CEO Dr. Lisa Su in a statement. In addition to data center growth, Su highlighted acceleration of EPYC processor adoption and $5 billion of AMD Instinct accelerator revenue.
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Investors, however, are focusing on the relative weakness in AMD's AI-related business rather than the strength in its core personal computing segment.
And data center revenue came up short of expectations of $4.1 billion, though headline results beat analysts' expectations. Wall Street was anticipating revenue of $7.5 billion and earnings of $1.08 per share, according to CNBC.
For its first quarter, AMD said it expects to achieve revenue of approximately $7.1 billion, plus or minus $300 million. Meanwhile, analysts were anticipating $7 billion.
"Looking into 2025, we see clear opportunities for continued growth based on the strength of our product portfolio and growing demand for high-performance and adaptive computing," Su said.
Is AMD stock a buy, sell or hold?
AMD stock struggled in 2024, generating a loss of more than 18% vs a gain of more than 25% for the S&P 500. Yet Wall Street remains bullish on the semiconductor stock.
According to S&P Global Market Intelligence, the average analyst target price for AMD stock is $154.55, representing implied upside of about 44% to current levels. And the consensus recommendation is Buy.
Financial services firm Wedbush maintained its Outperform rating (equivalent to a Buy) and $150 price target on the large-cap stock after the earnings release.
"We view the sell-off post AMD's report as overdone," wrote Wedbush analyst Matt Bryson in a Wednesday morning note.
Bryson notes that "investors were already assuming softer forward AI sales" and says "more attention should be paid to AMD's robust client compute business."
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