Advanced Micro Devices (AMD) shares fell early Wednesday as the chipmaker forecast a sequential decline in revenue for the first quarter and reported weaker-than-expected data center sales for the fourth quarter despite upbeat top- and bottom-line results.

The company anticipates revenue to come in at about $7.1 billion, plus or minus $300 million, in the ongoing quarter, it said late Tuesday. The midpoint of the guidance range implies annual growth of around 30% and a sequential decline of roughly 7%. The current consensus on FactSet is for sales of $7.05 billion.

The sequential decline in revenue is mainly driven by "seasonality" across the company's businesses, Chief Financial Officer Jean Hu said during an earnings call, according to a FactSet transcript.
The company expects its data center division to experience declines in line with the overall corporate average, Chief Executive Lisa Su said in response to a question by an analyst on the call.

The first-quarter outlook implies data center is 8.5% below the market consensus and senior management's commentary suggests the division's revenue in the second quarter will be 11.5% below the previous consensus, Truist Securities said in a Tuesday client note. "We don't want to get too pessimistic about AMD's data center opportunity, but the near-term trend is discouraging," according to the brokerage.

AMD's stock dropped 8.2% in the most recent premarket activity.

For the three months through Dec. 28, the company's revenue advanced to $7.66 billion from $6.17 billion the year before, topping the Street's view for $7.53 billion. Adjusted earnings jumped 42% year over year to $1.09 a share, just ahead of the average analyst estimate of $1.08 for the quarter.

Data center revenue jumped 69% year over year to $3.86 billion, boosted by a "strong ramp" of Instinct GPU shipments and growth in EPYC central processing unit sales, according to the company. However, the result fell short of the FactSet-polled consensus for sales of $4.14 billion. Revenue from the client segment climbed 58% to $2.31 billion amid strong demand for the company's Ryzen processors.

Gaming sales fell 59% to $563 million amid lower semi-custom revenue as Microsoft (MSFT) and Sony "focused on reducing channel inventory," Su said on the call. Revenue in the embedded segment declined 13% to $923 million with gains in aerospace and defense and test and emulation offset by softness in the industrial and communication markets, the CEO added.

For 2025, AMD is targeting "strong double-digit" growth in EPS and revenue, Su told analysts. The Street is looking for non-GAAP EPS of $4.85 and sales of nearly $32 billion. In the previous year, AMD recorded 25% and 14% annual increases in adjusted EPS and revenue, respectively.

"We expect the demand environment to strengthen across all of our businesses, driving strong growth in our data center and client businesses and modest increases in our gaming and embedded businesses," according to Su.