$AMD: Data Center revenue +57%, Q2 guide well above estimates, and FCF hit $2.6B

AMD delivered a very strong Q1. Revenue grew 37.8% YoY to $10.25B, ahead of the $9.89B estimate.

Gross profit grew faster than revenue, up 42.4% YoY, while gross margin expanded 180 bps to 55%.

Operating income grew 83.1% YoY to $1.48B. Operating margin expanded 360 bps to 14%. Net income grew 95.1% YoY to $1.38B. Free cash flow reached $2.57B, with FCF margin up 1,530 bps YoY to 25%.

Data Center revenue grew 57.2% YoY to $5.78B. Data Center EBIT grew 71.6% to $1.60B. Data Center EBIT margin reached 27.7%, up 230 bps YoY.

Client also stayed healthy, with revenue up 25.8% YoY to $2.89B. Gaming grew 11.3%, and Embedded returned to growth at 6.1%.

AI infrastructure is carrying the financial profile higher.

The Q2 guide reinforces that view. Revenue is expected around $11.2B, well above the $10.52B estimate, implying 46% YoY growth at the midpoint. Adjusted gross margin is guided to roughly 56%, also above consensus.

But, how much of the current optimism already sits in the valuation?

AMD trades around 17.7x EV/Sales and 56x forward earnings. Strong growth can justify a premium, but execution has to remain clean.

Client and Gaming EBIT margin declined 90 bps YoY. Embedded EBIT margin declined 110 bps. Second-half gaming revenue is expected to decline more than 20% versus the first half due to memory and component cost headwinds. Shares outstanding increased 1.5% YoY.

Overall, $AMD showed accelerating revenue growth, expanding gross margin, major FCF improvement, and a Data Center business gaining scale fast.