After the bell on Tuesday Eastern Time, AMD announced its fourth-quarter financial results. Although AMD's revenue and earnings performance exceeded Wall Street expectations, the company's stock price still fell by more than 8% in after-hours trading. The reason behind this is that the performance of Wall Street's most concerned growth business, its key data center business, failed to meet expectations.


Revenues and profits were better than expected

In the fiscal quarter ended December 28, AMD's performance compared with consensus analyst expectations according to LSEG statistics is as follows:

Adjusted earnings per share: $1.09, slightly better than expectations of $1.08

Revenue: $7.66 billion, slightly better than expectations of $7.53 billion


Looking forward to the first quarter of this fiscal year, AMD expects revenue to be US$7.1 billion (plus or minus US$300 million); its gross profit margin is expected to be approximately 54%. Analysts expect first-quarter revenue of $7 billion.

However, AMD's net profit in the fourth fiscal quarter was US$482 million, down from US$667 million in the same period last year.

AMD CEO Su Zifeng told investors on the earnings call that AMD believes it will achieve "strong double-digit revenue growth and earnings per share growth" in 2025.


Data center unit performance falls short of expectations

Despite strong revenue and earnings growth, the earnings report still didn't score well in the eyes of Wall Street. The reason behind this is that the growth of the company's most important division, the data center division, is less than expected.

The data center segment, which sells data center chips, has been growing strongly in recent quarters due to surging demand for AMD's GPUs for artificial intelligence.

AMD’s financial report showed that its data center revenue in the fourth fiscal quarter was US$3.86 billion, a year-on-year increase of 69%. The company said growth in the segment comes primarily from Instinct GPU and EPYC CPU - both of which are strong competitors to Intel processors.

However, although the 69% year-on-year growth rate is already very fast, it still fails to meet the expectations of Wall Street analysts: analysts surveyed by FactSet originally expected AMD's data center revenue to reach $4.14 billion in the quarter.

AMD's data center division's full-year revenue increased 94% year-on-year to $12.6 billion. AMD said $5 billion of that sales came from its Instinct GPUs for artificial intelligence.

"We believe AMD will be on a steep long-term growth trajectory thanks to the rapid expansion of our data center segment," Su said on an earnings call with analysts.

PC chip demand grows strongly

In addition to the data center segment, AMD categorizes its chips used in PCs, laptops and other computer equipment as a customer segment, and revenue in this segment increased 58% year over year to $2.3 billion. AMD said it has seen strong demand for its chips used in mobile computers such as desktops and laptops.

AMD is also the second largest gaming GPU manufacturer after Nvidia. However, in the fourth fiscal quarter, revenue from the gaming GPU division fell 59% year-on-year to $563 million. AMD said this was mainly due to reduced semi-custom revenue.

Sales of embedded chips, another small segment of the company, were $923 million, down 13% year over year.