On May 6, AMD reported stronger-than-expected financial results for the first quarter of fiscal year 2025 and issued a second-quarter outlook that also exceeded Wall Street estimates. However, the company warned that recent U.S. export restrictions will cost it approximately $800 million in Q2 and a total of $1.5 billion in revenue over the course of 2025.

Q1 Revenue Surges on Strong Data Center Growth

AMD posted Q1 revenue of $7.44 billion, up 36% year-over-year and beating analysts' average estimate of $7.12 billion. Non-GAAP operating income rose 57% to $1.78 billion, and adjusted earnings per share came in at $0.96, surpassing the $0.94 consensus forecast. Gross margin remained flat sequentially at 54%, up two percentage points from a year ago.

R&D spending grew 13% to $1.73 billion, while capital expenditures jumped 49% to $212 million.

By segment, the Data Center business saw a 57% year-over-year revenue increase to $3.67 billion, driven by strong demand for EPYC CPUs and Instinct GPUs. Operating income for the segment rose 72% to $932 million.

The Client and Gaming segment generated $2.94 billion in revenue, up 28% year-over-year. Operating income more than doubled to $496 million. Notably, notebook and desktop chip sales surged 68% thanks to strong demand for AMD's Zen 5 processors launched last summer, while gaming revenue declined 30% due to weaker game console chip sales.

Revenue from the Embedded segment declined 2.7% year-over-year to $823 million, with operating income down 4.1% to $328 million.

“We delivered a strong start to 2025 with accelerated year-over-year growth for the fourth consecutive quarter,” said AMD Chair and CEO Lisa Su. “Robust performance in our core businesses, combined with momentum in data center and AI, drove the results.”

CFO Jean Hu added, “Revenue grew 36% year-over-year, and we saw strong operating leverage. Continued investments in R&D and go-to-market initiatives are positioning us for long-term growth and value creation.”

Export Controls to Impact Q2 and 2025 Earnings

The U.S. government implemented additional export restrictions in April targeting advanced AI chips, including AMD's MI308 GPU. On April 16, AMD disclosed in an SEC filing that it had completed a preliminary assessment of the new export rules, which now require a license to ship affected products to China (including Hong Kong and Macau) and other designated regions.

“While we plan to apply for export licenses, there is no assurance of approval,” the company stated. As a result of canceled or at-risk orders and inventory provisions, AMD expects a revenue loss of approximately $800 million in Q2 alone.

The company guided Q2 revenue to be around $7.4 billion, plus or minus $300 million. Non-GAAP gross margin is expected to be 43%, including about $800 million in charges related to inventory and reserves stemming from the new restrictions. Excluding these charges, gross margin would be approximately 54%.

During the earnings call, CFO Jean Hu further revealed that the full-year impact of the export controls is projected at $1.5 billion in lost revenue.

CEO Lisa Su said the restrictions will mainly impact Q2 and Q3, but emphasized the company's resilience: “Despite a dynamic macroeconomic and regulatory environment, our Q1 performance and Q2 outlook highlight the strength of our product portfolio and execution, setting us up for strong growth in 2025.”

Su also noted that AI-related revenue within the data center segment is expected to grow by strong double digits this year. “We're excited about the momentum in our AI business. While uncertainties remain around trade and regulations, investment in AI infrastructure continues, and we expect meaningful growth in the second half of the year.”