AMD Merges Client and Gaming Segments After Revenue Decline

Advanced Micro Devices Inc. (AMD) has announced its decision to merge its client and gaming segments into one unified reportable segment. This restructuring is in response to a significant drop in gaming revenue, which fell by 59% year-over-year, totaling $563 million in the fourth quarter of 2024.

Developments: The semiconductor company plans to put this new structure into effect starting with its financial reports for the first quarter of 2025. Chief Financial Officer Jean Hu explained during the earnings call that the new reporting will consist of three segments: data center, client with gaming, and embedded. This change aims to better reflect how the company manages its operations.

The steep decline in the gaming segment's revenue is mainly due to a decrease in sales of semi-custom chips. Major clients such as Microsoft and Sony have been focused on reducing their channel inventories, which has affected AMD's sales in this sector. Nonetheless, AMD celebrated a notable achievement during the fourth quarter, with cumulative gaming console shipments exceeding 100 million units.

Future Outlook: Looking ahead, Lisa Su, AMD’s Chair and CEO, expressed optimism that channel inventories have stabilized and that sales of semi-custom chips are expected to return to more typical levels in 2025.

The reason behind this organizational shift is crucial, as AMD’s client segment is currently performing well, reporting record revenue of $2.3 billion in the fourth quarter, a 58% increase year-over-year.

For the first quarter of 2025, AMD anticipates total revenue of around $7.1 billion, indicating a 30% year-over-year growth. This growth is largely attributed to strong performance in its data center and client businesses, which are expected to counterbalance the ongoing weakness in gaming and embedded segments.

As for the market's perspective on AMD’s stock, analysts have set a consensus price target of $175.31 based on evaluations from 31 analysts, ranging from a high of $250 to a low of $110. Recent analyses from firms like Morgan Stanley and Rosenblatt suggest an average target of $187.33, indicating a potential upside of 71.96%.

Stock Movements: On the stock market, AMD shares closed at $119.50, marking an increase of 4.58%. However, in after-hours trading, the stock dropped by 8.84%, bringing it down to $108.94. Over the past year, AMD's shares have declined by approximately 31.41% according to recent market data.

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Disclaimer: The information provided here is not intended as investment advice.

AMD, Gaming, Revenue