By Tae Kim and Elsa Ohlen

Advanced Micro Devices reported better-than-expected earnings results, but soft data center revenue sparked a selloff in the stock.

The semiconductor company reported fourth-quarter adjusted earnings per share of $1.09 on Tuesday, compared with Wall Street's consensus estimate of $1.08, according to FactSet. Revenue came in at $7.7 billion, which was above analysts' expectations of $7.5 billion. In the December quarter, the chip maker's data-center unit generated $3.86 billion in revenue, which was below the $4.14 billion estimate.

AMD shares plummeted 9.8% to $107.81 in early trading Wednesday.

The deceleration in AMD's artificial intelligence business took the shine off share gains in the market for personal computing, Jefferies analysts led by Blayne Curtis said. Even as AI revenue missed in the fourth quarter, Curtis predicts a ramp in the second half of 2025 led by the launch of its MI350x accelerator.

Yet, the market share gains in the core business weren't enough to offset the AI miss, Curtis wrote as he lowered his price target to $135 from $190, maintaining a Buy rating on the stock.

AMD forecast sales in the current quarter to a range with $7.1 billion at the midpoint versus the $7 billion analysts' estimate.

"2024 was a transformative year for AMD as we delivered record annual revenue and strong earnings growth," AMD CEO Lisa Su said in the news release. "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."

On a conference call with analysts and investors, Su said AI models such as DeepSeek and AI infrastructure buildout announcements like Stargate are highlights showing the "rapid pace of AI innovation across every layer of the stack, from silicon, to algorithms." All these developments will drive more AI compute demand, providing AMD with growth opportunities, she said.

Not everyone seemed convinced. Citi analyst Christopher Danely downgraded the stock to Neutral from Buy following the report. He lowered his price target on shares to $110 from $175, citing slowing AI growth, poor leverage, and the risk of an inventory correction.

As of Tuesday's close, AMD stock was down 33% over the past 12 months, compared with the 9% gain for the iShares Semiconductor ETF.

Write to Tae Kim at tae.kim@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com

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February 05, 2025 10:04 ET (15:04 GMT)

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