Shares of AMD (NASDAQ:AMD) plunged following the company’s Q1 results, which included a weaker-than-expected revenue forecast and declining margins. Despite flat revenue in the key data-center business, AMD and several Wall Street analysts remain optimistic about the segment and the overall outlook for the year. Although Q1 earnings per share of $0.60 surpassed the predicted $0.56, and quarterly revenue of $5.4 billion exceeded the $5.3 billion expectation, AMD’s revenue forecast for Q2—ranging from $5 billion to $5.6 billion—fell short of Wall Street’s $5.5 billion projection.
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AMD expects double-digit annual growth for data centers in 2023, and analysts from KeyBanc Capital Markets and Piper Sandler remain positive about the company’s growth segments, including data centers and the client business. However, Citi’s Christopher Danely perceives the weak macro environment as a threat to the data-center business, calling the company’s growth projections aggressive.
Furthermore, Bank of America’s Vivek Arya downgraded AMD to neutral, citing Intel’s aggressive pricing and promotional strategies and the restrained cloud computing spending environment as potential headwinds. AMD anticipates Q2 revenue of about $5.3 billion, with adjusted gross margins of around 50%, while analysts expected $5.51 billion in revenue and gross margins of 50.4%. The company plans to keep operating expenses flat until demand improves.
Overall, Wall Street analysts have a consensus price target of $105.58 on AMD stock, implying over 26% upside potential, as indicated by the graphic above.
