Why AMD Stock Sank Today

Advanced Micro Devices (AMD -8.91%) stock sank Wednesday following the company's first-quarter earnings release. The semiconductor company's share price ended the daily trading session down 9%, according to data from S&P Global Market Intelligence.

AMD published its Q1 report Tuesday after the market closed, delivering sales and earnings for the period that came in slightly above the average analyst target. On the other hand, performance came in below the levels that some analysts were anticipating, and questions remain about how much of a boost from artificial intelligence (AI) the business is poised to see in the near term.

AMD recorded non-GAAP (adjusted) earnings per share of $0.62 on sales of $5.47 billion in the first quarter. Meanwhile, the average analyst estimate had called for the business to post per-share earnings of $0.61 on revenue of $5.45 billion.

AMD's revenue was up 2.2% year over year in the first quarter, with growth for the company's data center segment helping to offset declines for its gaming and embedded segments. Sales for the data center segment were up 80% year over year to roughly $2.3 billion -- a new record for the unit. Sales for AMD's MI300 AI processor and its Ryzen and EPYC processors helped drive growth for the segment.

But while AMD's data center business posted some encouraging year-over-year growth, big declines in other segments mean the processing specialist recorded relatively muted growth in Q1. AMD remains significantly behind Nvidia in the market for data center graphics-processing units, and its relatively slow growth momentum is causing some investors to sell out of the stock today.

For the second quarter, AMD is guiding for sales to come in between $5.4 billion and $6 billion. At the midpoint of the guidance range, that would suggest year-over-year sales growth of roughly 6%. Management is also targeting an adjusted gross margin of 53% for the period -- up from the 52% margin it posted in this year's first quarter.