Advanced Micro Devices (AMD) reported first-quarter results that surpassed expectations after the U.S. market closed on Tuesday, accompanied by strong guidance. As a primary challenger to AI chip leader Nvidia, AMD saw its shares surge more than 14% in after-hours trading. Prior to the earnings release, the stock had already gained approximately 66% year-to-date. If the after-hours gains hold into Wednesday's regular trading session, the stock is poised to reach a new all-time high.
Financial results revealed that AMD's first-quarter revenue increased 38% year-over-year to $10.3 billion, exceeding the average analyst estimate of $9.89 billion. Under non-GAAP accounting standards, operating profit rose 43% to $2.54 billion, while net income grew 45% to $2.265 billion. Adjusted earnings per share came in at $1.37, beating the average analyst forecast of $1.28.
By business segment, Data Center revenue grew 57% to $5.8 billion, outperforming expectations of $5.61 billion, driven by strong demand for AMD EPYC processors and increased shipments of AMD Instinct GPUs. Client and Gaming revenue increased 23% to $3.6 billion. Within this segment, Client revenue reached $2.9 billion, up 26%, primarily due to robust demand for AMD Ryzen processors and continued market share gains. Gaming revenue was $720 million, an 11% increase, supported by strong demand for AMD Radeon GPUs, though partially offset by a decline in semi-custom revenue. Embedded segment revenue grew 6% to $873 million, reflecting stronger demand across multiple end markets.
AMD Chair and CEO Dr. Lisa Su stated, "Our outstanding first-quarter performance was driven by accelerating demand for AI infrastructure, with the Data Center segment now serving as the primary driver of our revenue and profit growth. We see strong momentum as the demand for high-performance CPUs and accelerators increases with the growth of inference and AI agents. Looking ahead, we expect server revenue growth to accelerate significantly as we expand supply to meet demand. Customer engagement for our MI450 series and Helios is increasing, forecasts from major customers exceed our initial expectations, and growing large-scale deployment projects give us greater visibility into our future growth trajectory."
AMD projects second-quarter revenue of approximately $11.2 billion, above the average analyst estimate of $10.5 billion. This optimistic outlook suggests the company is securing orders from major spenders in AI computing. Although Nvidia remains the dominant supplier in the AI chip market, data center customers are increasingly seeking alternatives—a trend that benefits AMD. The scale of investment in this sector is immense. Four major tech companies that reported earnings last week—Microsoft, Google, Amazon, and Meta—indicated they could spend up to $725 billion on AI by 2026.
Furthermore, similar to Intel, the demand for data center chips driven by large-scale AI infrastructure build-out is boosting sales of AMD's central processing units (CPUs). With the explosive growth of AI agent and reinforcement learning workloads, the strategic importance of CPUs in data centers is undergoing a structural reassessment. Some analysts have previously noted that the paradigm for AI workloads is evolving from simple text generation to complex agents and reinforcement learning, leading to "extremely severe capacity shortages" for CPUs.
AMD stated that the data center CPU market is expected to expand at a compound annual growth rate of over 35%, reaching a size of more than $120 billion by 2030. This is a significant upward revision from the 18% growth rate projected during the company's analyst day last November. The company also indicated that its server CPU revenue is expected to grow more than 70% in the second quarter, with such "strong growth" continuing into the second half of 2026 and through 2027.
Dr. Su commented on an analyst call, "To address this demand, we are working closely with our supply chain partners to significantly increase wafer and backend capacity to support this growth." She also expressed increasing confidence in the company's ability to achieve annual data center revenue in the tens of billions of dollars next year, expecting growth in the coming years to exceed the long-term target of over 80%.
However, the industry faces challenges. Like other tech companies, AMD is contending with a side effect of the AI data center build-out: a shortage of memory chips. Computers in data centers require large quantities of high-performance memory chips. This has prompted memory chip manufacturers to shift their focus toward this segment, reducing production of conventional memory chips used in laptops and other devices. As a result, PC industry shipments are expected to decline.
Dr. Su noted on Tuesday, "Due to rising memory chip and other component costs, we anticipate a decline in PC shipments in the second half of the year. Against this backdrop, we still expect Client segment revenue to grow year-over-year and outperform the market."
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