Advanced Micro Devices (AMD) braces for its Q1 report as Bank of America's (BAC, Financial) Vivek Arya warns that while a modest beat is likely, guidance could disappoint.
Arya pegs Q1 revenue at $7.15 billion–$7.20 billion, about $50 million–$100 million above consensus, driven by continued strength in client PC chips and initial traction in data-center CPUs. However, an $800 million write-off tied to MI308 export restrictions in China will shave roughly $300 million from Q2 results and cost AMD about $1.4 billion through year-end.
That headwind, combined with pressure on gross margins, has Arya forecasting Q2 pro-forma margins of 42%–43%—well below the Street's 52%–54% estimates—though he expects margins to rebound to roughly 54%–55% in the back half as China-related impacts ease.
On the product front, Arya notes that AMD's current MI300 series still trails Nvidia's Blackwell architecture in both hardware and software capabilities, pushing true competitiveness into 2026 when the MI400 series and synergies from the ZT acquisition materialize.
He predicts AI GPU sales will hit $6 billion in 2026—below the Street's $7.4 billion forecast—reflecting “China headwinds and continued NVDA and custom-chip competition.”
On the CPU side, Arya sees client revenue topping the $2.1 billion consensus thanks to desktop share gains and potential tariff-related pull-ins, but he views this strength as “unsustainable” over the long term. Server CPU demand, by contrast, remains solid as enterprises and cloud providers ramp deployments.
Despite applauding AMD's “consistent execution, reasonable valuation (27x/19x CY25/26E) and attractive compute-market exposure,” Arya maintains a Neutral rating with a $105 price target, implying about 7% upside from current levels.
He cautions investors not to “jump the gun” ahead of the call, stressing that the near-term drag from export constraints and margin pressure could temper the company's otherwise bullish narrative.
Why it matters: AMD's upcoming earnings will test whether it can offset regulatory headwinds and competitive pressures while sustaining solid top-line growth.
Investors will be watching for Q1 beats, Q2 guidance clarity and any color on the MI400 roadmap when AMD reports after the close today.
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