AMD surpasses earnings expectations but faces $700 million revenue loss due to chip restrictions in China.

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Advanced Micro Devices reported first fiscal-quarter earnings on Tuesday that exceeded expectations, along with a promising forecast for current-quarter revenue. Shares of AMD rose 4% in extended trading before dropping to decline less than 1% after the company addressed the impact of AI chip export controls.

Here’s how the chipmaker performed against LSEG expectations for the quarter ending March 29:

<ul>
    <li>Earnings per share: 96 cents adjusted vs. 94 cents expected</li>
    <li>Revenue: $7.44 billion vs. $7.13 billion expected</li>
</ul>

For the forthcoming quarter, AMD anticipates around $7.4 billion in sales with a gross margin of 43%, compared to Wall Street estimates for adjusted earnings of 86 cents on $7.25 billion in sales. AMD CEO Lisa Su noted that the company achieved its first-quarter results while navigating regulations on advanced AI chip exports. The forecast includes $800 million in costs due to U.S. restrictions on the export of certain artificial intelligence chips during the quarter. AMD also expects approximately $700 million in lost revenue this current quarter from these export controls, totaling $1.5 billion through its fiscal third quarter.

"While we face some headwinds from the dynamic macro and regulatory environments, including the recent export controls for Instinct MI308X shipments to China, we believe these challenges are more than offset by the strong tailwinds from our leading product portfolio," Su remarked during an earnings call with analysts.

The company reported net income of $709 million, or 44 cents per diluted share, compared to net income of $123 million, or 7 cents per share, during the same period last year. Revenue increased 36% on an annual basis.

AMD stands as the second-largest server central processing unit vendor behind Intel, with its Epyc line of processors gaining market share in recent years. The company also contends closely with Nvidia for "big GPUs," or graphics processing units. These chips are deployed en masse in data centers to support generative AI applications, achieving $5 billion in AI GPU sales in its fiscal 2024.

Both categories are included in the company’s data center segment, which recorded $3.7 billion in sales, surpassing estimates. Data center sales rose 57% annually, driven by strong demand for both Epyc processors and Instinct GPUs.

"I understand there are uncertainties regarding tariffs and other factors, but this is an area where infrastructure investment continues to thrive," Su stated. During the earnings call, she highlighted that AMD’s chips are utilized for AI training, noting that a significant AI model developer is employing AMD chips for a service deployment process known as inference.

"The depth and breadth of our customer engagements continues to grow as breakthroughs in large-scale AI models drive increased demand," Su added.

The company’s other major segment, Client and Gaming, includes chips for consumer devices such as laptops, gaming PCs, and consoles. This segment rose 28% annually to $2.9 billion. AMD reported a surge in client revenue, which encompasses laptop and PC chips, up 68% year over year due to robust demand for its Zen 5 chips released last summer. However, gaming sales saw a decline of 30% on an annual basis, attributed to decreased revenue from console chips. AMD’s embedded segment, primarily from its 2022 acquisition of Xilinx, declined 3% annually to $823 million.

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