modern micro devices (NASDAQ:AMD) The stock fell on Wednesday following the company’s first-quarter earnings release. According to S&P Global Market Intelligence, the semiconductor company’s share price ended the daily trading session down 9%.
AMD released its Q1 report after the market closed on Tuesday, delivering revenue and profit for the period that were slightly above the average analyst target. On the other hand, performance fell short of what some analysts expected, and questions remain about what kind of artificial intelligence (AI) boost the company will see in the near future.
Why was AMD stock hit hard today?
AMD reported first-quarter non-GAAP (adjusted) earnings per share of $0.62 on revenue of $5.47 billion. Meanwhile, the average analyst estimate was for the company to report earnings per share of $0.61 on revenue of $5.45 billion.
AMD’s first-quarter revenue rose 2.2% year over year, with growth in the company’s data center segment helping to offset declines in its gaming and embedded segments. Revenue in the data center segment rose 80% year over year to about $2.3 billion, a new record for the unit. Sales of AMD’s MI300 AI processor as well as Ryzen and EPYC processors contributed to the segment’s growth.
But while AMD’s data center business posted encouraging year-over-year growth, sharp declines in other segments led the processing specialist to report relatively subdued growth in the first quarter. AMD is clearly lagging behind Nvidia in the data center graphics processing unit market, and its relatively slow growth momentum is prompting some investors to sell the stock today.
What’s next for AMD?
For the second quarter, AMD forecasts sales between $5.4 billion and $6 billion. At the midpoint of the guidance range, this would represent year-over-year revenue growth of around 6%. Management is also targeting an adjusted gross margin of 53% for the period – an increase from the 52% margin achieved in the first quarter of this year.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
Why AMD Stock Sank Today was originally published by The Motley Fool