AMD's revenue for the fourth quarter and the entire year exceeded expectations and reached an all-time high. The core businesses: Datacenter and client segments, including PCs, both set new records for quarterly and annual revenues. However, the Datacenter's Q4 revenue fell short of market expectations, leading to a quick decline in Post-Market Trading. Nevertheless, Su Zifeng is optimistic that affordable AI models will accelerate the application of AI technology. The company stated that Instinct accelerators are expected to generate $5 billion in revenue for the entire year of 2024, marking a key milestone in challenging NVIDIA's dominance in the AI Chip sector.
On February 4th, Tuesday, Post-Market Trading, a chip manufacturer making a major advance into AI. $Advanced Micro Devices (AMD.US)$ After releasing last year's fourth-quarter Earnings Reports, although most Indicators and forward guidance exceeded expectations, the Q4 revenue, annual revenue, and both quarterly and annual revenues from the Datacenter reached new highs, the Datacenter revenue was below expectations. After a rise of more than 5% in Post-Market Trading, the stock quickly turned downwards, with losses expanding to over 9%.

Specifically:

1) Key financial data:
Revenue: In the last quarter of last year, revenue reached 7.66 billion USD, a new high, with a year-on-year growth of 24%, exceeding market expectations of 7.54 billion USD.
EPS: For the fourth quarter, the non-GAAP diluted EPS was $1.09, meeting market expectations.
Profit: In the fourth quarter, the non-GAAP gross margin was 54%, up from 51% in the same period last year; non-GAAP operating profit increased by 43% year-on-year to a record high of $2 billion; non-GAAP net income reached a new high of $1.8 billion.
Full Year: Revenue for the full year 2024 also reached a record $25.8 billion, a year-on-year increase of 14%; non-GAAP gross margin reached a record 53%, up 3 percentage points year-on-year; non-GAAP operating profit was $6.1 billion, net income $5.4 billion, and non-GAAP diluted EPS was $3.31.

2) Segment Business Data:
Datacenter Division: In the fourth quarter, revenue grew 68% year-on-year to a new high of $3.9 billion, but fell short of the analyst's expectation of $4.097 billion; full year datacenter revenue nearly doubled to $12.6 billion.
Client Division including PC chips: Fourth quarter revenue reached a new high, growing 58% year-on-year to $2.3 billion, exceeding the analyst's expectation of $1.98 billion.
Gaming Division: In the fourth quarter, revenue decreased 59% year-on-year to $0.563 billion, but was higher than the analyst's expectation of $0.487 billion.
Embedded Division: In the fourth quarter, revenue decreased 13% year-on-year to $0.923 billion.
3) Performance Guidance:
The company expects revenue for the first quarter of 2025 to be between 6.8 billion and 7.4 billion dollars, with the midpoint of the range at 7.1 billion dollars exceeding the market expectation of 7.04 billion dollars, which represents more than a 31% year-on-year increase compared to 5.4 billion dollars in the first quarter of 2024.
The non-GAAP gross margin is expected to be 54%.
AMD is betting on strong demand for AI Chips, with Lisa Su optimistic that low-cost AI models will accelerate the application of AI technology.
Analysts pointed out that other disappointing data points in AMD's quarterly report include: a year-on-year decrease in GAAP Net income for the fourth quarter by 28% to 0.482 billion dollars, and a year-on-year decline in GAAP diluted EPS for the quarter by 29% to 0.29 dollars, both below expectations.

However, AMD's guidance for next quarter's revenue exceeded expectations, indicating that as technology giants continue to invest in AI infrastructure, the company is betting on strong demand for its AI Chips. The Earnings Reports also stated that although the gaming and embedded sectors face short-term challenges, the overall financial condition remains strong, with record annual revenue and improved profit margins, demonstrating the company's effective cost management and pricing power.
The Earnings Reports stated that AMD attributed the record revenue for Datacenter in the fourth quarter to strong demand for AI Chips, thanks to a surge in shipments of AMD Instinct GPUs and growth in EPYC CPU sales, marking the company's successful entry into the AI accelerator market. AMD also expanded its AI partnerships with IBM, Vultr, and Aleph Alpha, focusing on the development and deployment of AI infrastructure.
"The revenue from Instinct Accelerators reaching 5 billion dollars in 2024 is a key milestone in challenging NVIDIA's dominance in the AI Chip sector."
At the same time, the significant year-on-year growth in client revenue also reflects the strong performance of Ryzen processors in desktop and mobile devices, as well as AMD's growing support in the AI-enabled personal computer market.
The expansion of the Ryzen AI product line and the strategic partnership with Dell in commercial PCs indicate a significant increase in AMD's market share in the enterprise sector.
AMD Chairman and CEO Lisa Su stated that 2024 will be a transformative year for the company, achieving record annual revenue and strong profit growth. With the accelerated adoption of EPYC processors, Datacenter annual revenue nearly doubled, with AMD Instinct accelerator revenue exceeding $5 billion.
Looking forward to 2025, based on the strength of our product portfolio and the growing demand for high-performance and adaptive computing, we see clear opportunities for continued growth.
During the earnings call, Lisa Su emphasized that those inexpensive AI models will accelerate the application of AI technology. Being bullish on the overall AI cycle, the company sees clear growth opportunities for server CPUs in 2025.
The company also stated that it expects revenue, EPS, and Datacenter Business to achieve strong double-digit percentage growth in 2025, with a projected strength in Datacenter Business in the second half of the year. Analysts had revised their expectations for the company's 2025 revenue to grow by 25%. AMD has already begun mass production of the MI325X in the fourth quarter, and the ramp-up is progressing well, on track for the launch of the MI400 in 2026.
How does Wall Street view it? Before the earnings reports, many large investment banks lowered their target prices, but the overall rating remains as Shareholding.
Over the past 12 months, AMD's stock price has cumulatively dropped by 33%, outpacing its longtime rival Intel's cumulative drop of 54%. However, during the same period, competitor NVIDIA surged by 80%. In 2024, AMD has accumulated a decline of about 18%, while NVIDIA has skyrocketed by over 171%.
Many analysts have pointed out that the disparity in stock price performance is mainly due to doubts about AMD's AI Chip design roadmap and its ability to compete with NVIDIA's products in the emerging Business of AI Datacenter, as well as a pessimistic outlook on the performance of the PC market in the first half of this year.
Overall, Wall Street's bullish sentiment towards AMD outweighs the bearish outlook, believing that AMD and its competitors may continue to benefit from strong spending in AI. Bank of America and Raymond James both pointed out that competition from Chinese companies like DeepSeek in the field of artificial intelligence may prompt U.S. technology companies to invest more funds in AI, thus benefiting chip manufacturers like AMD.
However, last week Keybanc warned that AMD's main competitor Intel's guidance for the first quarter of this year was below expectations due to global economic weakness, which may put AMD in a short-term predicament of sluggish laptop shipments and weakened demand for server processors. Moreover, investors trying to prepare for potential tariffs from the Trump administration may have partially advanced their purchasing behavior for the first quarter to last year.
Investment bank Cantor Fitzgerald also lowered AMD's target price ahead of the earnings report, from $150 to $135, believing datacenter revenue will fall short of expectations.
Previously, Bank of America had already lowered its target price from $180 to $155 in December, and the rating was downgraded from 'Buy' to 'Neutral,' worrying that limited supply of NVIDIA's Blackwell GPU will increase demand for Marvell Technology and Broadcom's custom AI chips, thus reducing AMD's market share.
HSBC and Goldman Sachs also lowered their target prices, with HSBC believing that AMD's AI GPU roadmap is less competitive than previously expected, limiting its penetration in the AI GPU market. Goldman Sachs is concerned about the impact of ARM-based chips on AMD's products, fearing that the rise of such products will put pressure on AMD's profit margins, revenue growth, and PE.
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