AMD Q1 Earnings Preview: Options Traders Brace for Tariff Impact

The upcoming first-quarter earnings report from Advanced Micro Devices (AMD), set for release after the close next Tuesday, May 6, will be a closely watched catalyst for the semiconductor stock. Analysts are projecting adjusted earnings per share of $0.93 to $0.94, representing a 50% year-over-year increase, alongside expected revenue of $7.12 billion, which would mark 30% growth. 

The upcoming earnings call will be crucial for AMD investors, with particular focus on AI chip demand, production capacity, customer adoption rates, and any potential impacts from ongoing trade tensions. Here’s a closer look ahead of Tuesday night’s report.

Can Data Center Strength Continue?

AMD’s data center segment continues to be a primary growth catalyst. The segment delivered impressive 69% year-over-year revenue growth in Q4 2024, despite facing intensifying competition in the artificial intelligence (AI) chip market from industry rivals. Recent benchmark tests have strengthened investor confidence, as they show AMD's latest GPUs performing competitively against Nvidia's (NVDA) Blackwell chips.

The company's strategic initiatives, including its alliance with Rapt.ai for AI workload optimization and plans for domestic production at Taiwan Semiconductor’s (TSM) Arizona facility, further strengthen its competitive position. 

The successful deployment of MI300X AI accelerators among major cloud partners demonstrates AMD's growing presence in the AI infrastructure space, although potential headwinds from trade tensions and a possible $800 million inventory writedown related to China restrictions could impact forward guidance.

The client segment at Advanced Micro Devices has also shown remarkable progress, with desktop processor market share expanding by 8.4 percentage points to 23.8% in Q4 2024. 

What’s the Tariff Impact on AMD Earnings?

Management's previous guidance indicated gross profit margins of 54%, though recent concerns about tariffs and China exposure have led to a 2.7% downward revision in consensus earnings estimates for AMD over the past month. 

Despite near-term challenges, AMD's strategic manufacturing shifts to India and Vietnam may help mitigate tariff-related pressures, while the company's track record of beating earnings estimates in recent quarters continues to support the positive consensus outlook (an average “Buy” rating, with about 40% upside expected to the mean price target).

Is AMD Stock a Good Buy Ahead of Earnings?

AMD's current trading price of approximately $96 represents an attractive entry point at 21 times forward adjusted earnings, particularly considering the company's consistent market share gains and promising outlook in both client and data center segments. 

However, traders should beware of likely volatility around next week’s earnings report, with AMD options pricing in a post-event move of more than 7% in either direction.