Advanced Micro Devices (AMD) is set to report its fiscal first-quarter 2025 financial results on May 6. However, investors’ sentiment surrounding the stock is far from upbeat. This is due to AMD stock’s underperformance compared to the broader market. Notably, AMD stock is down about 33% over the past year. Year-to-date, AMD stock has dropped about 17%, while the S&P 500 Index ($SPX) has experienced a more modest decrease of 4.1% during the same period.

The underperformance reflects multiple headwinds. A key factor is AMD’s relatively small market share in the rapidly expanding artificial intelligence (AI) market, where rival Nvidia (NVDA) has taken a commanding lead. As AI continues to drive investor enthusiasm in the semiconductor space, AMD’s limited footprint has left it trailing.

But AI market share isn’t the only concern. Broader macroeconomic softness, ongoing tariff tensions, and increasing regulatory hurdles have all pressured AMD stock.

Most recently, U.S. export restrictions have added to the challenges. AMD disclosed in a SEC filing that the U.S. government has imposed new licensing requirements on shipments of its MI308 chips to China. While it is not a complete ban, the policy creates uncertainty, especially if licenses are delayed or denied.

AMD has not specified how much of its revenue is at risk, but it warned that the export controls could lead to charges of up to $800 million tied to inventory, purchase obligations, and reserves. This is particularly concerning given China’s significance to AMD’s business. In 2024, AMD generated $6.23 billion in revenue from China (including Hong Kong), reflecting 24.2% of its total sales. Thus, any disruption could impact its top-line growth in the region. Further trade friction or potential retaliatory tariffs from China could add more pressure, potentially dampening AMD’s growth prospects.

While AMD faces significant challenges, there could still be some bright spots in its upcoming earnings report. The company’s data center segment will likely remain strong, helping lift its overall top line in the first quarter.

However, persistent macroeconomic uncertainty and trade disputes will weigh on its guidance and stock price. Let’s look at the Street’s Q1 earnings forecast.

AMD: Q1 Expectations

AMD’s management projects Q1 revenue to be around $7.1 billion, representing a 30% increase compared to the same period last year. This solid growth will likely be driven by AMD’s surging data center and client businesses, more than making up for ongoing declines in its gaming segment and weakness in the embedded division.

AMD’s key growth driver is its data center business, which continues to gain momentum. Both its server and data center GPU product lines are expected to post strong double-digit growth in the quarter. This strength builds on the company's stellar performance in 2024. AMD accelerated its AI hardware roadmap, rolled out new instinct accelerators, enhanced its ROCm software suite, and generated over $5 billion in AI-related revenue in 2024.

AMD's data center business will not slow down in 2025, especially as the company focuses on acquisitions to strengthen its AI capabilities and has a solid product pipeline.

During the Q4 earnings call, AMD’s management said that the company has begun ramping up production of its MI325X GPUs and is already laying the groundwork for the next-generation MI350 series. Looking even further ahead, the MI400 series is on the horizon. Its solid product roadmap will support its financials.

This top-line strength is set to trickle down to the bottom line. Analysts expect AMD to post Q1 earnings of $0.75 per share, a solid 74.4% increase from last year, mainly driven by the AI-related tailwinds.

The Bottom Line for AMD Stock

AMD’s Q1 revenue and earnings will benefit from growth in its data center and the client business. However, broader macroeconomic uncertainties, including trade tensions and heightened regulatory scrutiny, could weigh on the company’s forward guidance and restrict AMD stock's recovery.

Wall Street is leaning toward cautious optimism. Analysts have given AMD stock a “Moderate Buy” consensus rating.