AMD's stock price soared after its performance! AI demand has become a growth engine, with results in Q1 and guidance for Q2 exceeding expectations.

As a major challenger to NVIDIA Corporation (NVDA.US), the "dominant" AI chip maker, AMD (AMD.US) announced better-than-expected first quarter performance in after-hours trading on Tuesday in the US stock market and provided strong guidance. Boosted by this news, as of the time of writing, AMD's stock surged over 14% in after-hours trading on Tuesday. Prior to the earnings announcement, the stock has already accumulated an increase of about 66% so far this year. If the after-hours surge on Tuesday continues into regular trading hours on Wednesday, the stock price is expected to reach a new all-time high. The financial report shows that AMD's first quarter revenue increased by 38% year-on-year to $10.3 billion, surpassing analysts' average expectation of $9.89 billion. Under Non-GAAP accounting standards, operating profit was $2.54 billion, up 43% year-on-year; net profit was $2.265 billion, up 45% year-on-year. Adjusted earnings per share were $1.37, exceeding analysts' average expectation of $1.28. In terms of business segments, data center revenue increased by 57% year-on-year to $5.8 billion, surpassing analysts' average expectation of $5.61 billion, mainly due to strong demand for AMD EPYC processors and continuous growth in AMD Instinct GPU shipments. Client and gaming business revenue increased by 23% year-on-year to $3.6 billion. Client business revenue was $2.9 billion, up 26% year-on-year, mainly driven by strong demand for AMD Ryzen processors and continuous market share growth; gaming business revenue was $0.72 billion, up 11% year-on-year, mainly driven by strong demand for AMD Radeon GPUs, partially offset by a decrease in custom business revenue. Embedded business revenue increased by 6% year-on-year to $0.873 billion, driven by increased demand in multiple end markets. AMD Chairman and CEO Dr. Lisa Su stated, "Our first quarter performance was strong, primarily driven by accelerated growth in demand for AI infrastructure, with data center business now becoming a primary driver of our revenue and profit growth. With the development of inference and intelligent agents in AI, the demand for high-performance CPUs and accelerators is continuously growing, and we see strong momentum for growth. Looking ahead, with our expanded supply to meet demand, we expect significant acceleration in server business growth. Customer engagement for the MI450 series and Helios is continuously rising, with major customers exceeding our initial expectations, and the growing number of large-scale deployment projects is giving us a clearer understanding of our future growth trajectory." AMD expects second quarter revenue to be $11.2 billion, surpassing analysts' average expectation of $10.5 billion. This optimistic outlook indicates that the company is winning orders from the largest spenders in the AI computing field. While NVIDIA Corporation remains the dominant supplier in the AI chip sector, data center customers are increasingly looking for alternative solutions, which is favorable for AMD. The scale of funds involved in this field is extremely large. The four major tech giants that announced their financial reports last weekMicrosoft Corporation, Alphabet Inc. Class C, Amazon.com, Inc., Metastated that spending in the AI field could reach $725 billion by 2026. Furthermore, similar to Intel Corporation, the demand for data center chips in large-scale AI infrastructure construction is boosting sales of AMD's central processing units (CPUs). With the explosive growth of intelligent agents and reinforcement learning workloads, CPUs in data centers are undergoing a structural reassessment of their strategic positioning. Analysts have pointed out before that the paradigm of AI workloads is evolving from simple text generation to complex intelligent agents and reinforcement learning, with CPUs facing "extremely serious capacity shortages." AMD stated that the data center CPU market will expand at a "more than 35% annual growth rate, reaching a size of over $120 billion by 2030." At last year's analyst day in November, the company predicted a growth rate of only 18%. AMD said that server CPU revenue is expected to grow by more than 70% in the second quarter, and such "strong growth" will continue until the second half of 2026 and into 2027. Dr. Su mentioned in a conference call with analysts, "To meet this demand, we are working closely with our supply chain partners to significantly increase wafer and back-end capacity to support this growth." Dr. Su also stated that the company is increasingly confident in its ability to achieve annual data center revenue of hundreds of billions of dollars next year. She expects the company's growth in the coming years to exceed the long-term goal set at over 80%. However, the industry also faces some challenges. Like other tech companies, AMD is dealing with one of the side effects of AI data center constructionstorage chip shortages. Computers in data centers require a large number of high-performance storage chips. This has prompted storage chip manufacturers to shift their focus to this area, reducing production of conventional storage chips for laptops and other devices. Therefore, shipments in the personal computer industry are expected to decline. Dr. Su stated on Tuesday, "Due to rising costs of storage chips and other components, we expect PC shipments to decline in the second half of the year. In this context, we still expect client business revenue to achieve year-on-year growth and outperform the market."