Superior Micro Units (NASDAQ: AMD) shares have been on hearth this yr, and the surge continued after the semiconductor firm reported sturdy first-quarter outcomes and issued upbeat steering. The inventory is up greater than 90% yr up to now, but it surely seems prefer it might have much more upside.
Let’s dig into the corporate’s earnings outcomes and prospects to see why it seems just like the inventory’s momentum can proceed.
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The age of knowledge heart CPUs is right here
With the rise of agentic AI, now’s the time for knowledge central processing models (CPUs) to shine, and AMD is without doubt one of the firms greatest positioned for the subsequent part of the AI infrastructure build-out.
Given the demand indicators it’s seeing as we speak and the quantity of CPUs required for agentic AI, the corporate mentioned it now tasks the server CPU whole addressable market (TAM) to achieve $120 billion by 2020, representing greater than 35% compounded annual progress. That may be a big step up from the 18% annual progress and $60 billion TAM it predicted at its Analyst Day final November. It believes it may well seize greater than a 50% share of this market.
AMD has already began to see demand for server CPUs start to choose up, with knowledge heart CPU income climbing greater than 50% within the quarter. It expects that progress to speed up to 70% in Q2 and to proceed to be sturdy the remainder of the yr and into 2027, because it ramps up its subsequent technology of CPUs. In the meantime, it sees common promoting costs for its next-generation CPUs additionally rising as core counts enhance. Core counts are vital for agentic AI as a result of every core serves as an unbiased processing zone, letting CPUs energy a number of AI duties on the identical time.
Total, AMD’s Q1 income climbed by 38% yr over yr to $10.25 billion. Adjusted gross margin got here in at 55%, up 170 foundation factors from a yr in the past, helped by extra income coming from its knowledge heart merchandise. Adjusted earnings per share surged 43% to $1.37. The outcomes had been effectively forward of the $1.29 in adjusted EPS on $9.89 billion in income that analysts had been anticipating.
Knowledge heart income surged 57% yr over yr within the quarter to $5.8 billion. Along with its sturdy CPU progress, it additionally noticed sturdy year-over-year progress in its graphics processing models (GPUs).
Consumer and gaming phase income, in the meantime, elevated by 23% to $3.6 billion. Throughout the phase, shopper income rose by 26% to $2.9 billion because it continues to take share within the PC market, whereas gaming income rose 11% to $720 million. AMD’s smaller embedded phase, in the meantime, noticed income enhance by 6% to $873 million.
