AMD (NASDAQ:AMD) just dropped record-breaking Q4 2024 numbers$7.7 billion in revenue, up 24% year-over-year, and full-year revenue hitting $25.8 billion. Data center sales nearly doubled, raking in $12.6 billion, with more than $5 billion from Instinct accelerators alone. CEO Lisa Su is doubling down on AI, securing key partnerships with IBM (NYSE:IBM), Dell (NYSE:DELL), and Fujitsu to expand AMD's AI footprint. But while the revenue numbers shine, the margin story isn't as prettyoperating leverage isn't keeping pace with sales, raising concerns about long-term profitability.
Wall Street isn't impressed. Citi just downgraded AMD from Buy to Neutral, slashing its price target from $175 to $110. The firm sees slowing AI growth, weaker margin leverage, and a looming CPU inventory glut as red flags. Citi's latest forecast has AMD's AI revenue flat or even declining in early 2025bad news when competitors are ramping up. While Q4 revenue topped expectations, gross margins only inched up despite a 31% second-half sales jump. That's not the kind of efficiency investors want to see, and it's putting serious pressure on AMD's valuation. Its shares plunged by nearly 9% as of 11.24am today.
AMD's Q1 2025 revenue guidance of $7.1 billion was slightly above estimates, but Citi isn't buying the optimism. The firm slashed its 2025 revenue by nearly 8% and EPS estimates by 21%, citing a weaker AI outlook and potential CPU sales slowdown. With AI demand cooling and operational efficiency under scrutiny, AMD has an uphill battle aheadone that investors will be watching closely.
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