• AMD's earnings growth has accelerated.

• Two of AMD's four segments continue to experience shrinking revenue.

• The decision to buy may come down to valuation.

Could AMD be on the road to recovery?

The chipmaker reported its earnings for the first quarter of 2025, and its revenue growth is accelerating, with all but one segment registering improvements. This is welcome news for a stock that trades more than 55% below its high in March 2024.

The semiconductor stock is definitely discounted, but is it worth the bargain price? Let's take a closer look.

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AMD's fiscal 2025 Q1 earnings

When it comes to revenue, the company reported an overall improvement. In the first quarter of 2025, revenue of $7.4 billion grew 36% from year-ago levels. That is up from the 24% growth from the fourth quarter and the 14% growth for 2024 overall.

That increase also occurred as revenue shrank on an annual basis in two of its four segments. Still, the two growth segments accounted for 80% of AMD's sales, and thanks to strong demand for AI accelerators and central processing units (CPUs), the company overcame a lagging performance in other parts of its business.

With that revenue growth, it is likely unsurprising that AMD reported $709 million in net income in the first quarter, well above the $123 million earned in the year-ago quarter.

The stock has risen since the announcement, though it trades down more than 30% from its price a year ago.

Amid that decline, investors can buy this stock at a considerable discount. Even though it trades at 76 times trailing earnings, the forward price-to-earnings ratio (P/E) is 26, a low cost for a company whose earnings have accelerated in recent quarters.

Mixed news on the revenue front

Still, the numbers also showed that AMD's financials are a mixed picture, which could potentially continue to hamper its stock.

The company forecasts revenue between $7.1 billion and $7.7 billion in the second quarter. Although that would mean around 28% revenue growth at the midpoint, it may also lead to a deceleration in its growth rate from the first quarter.

Moreover, even the better-performing segments offered some mixed news. The data center segment, which includes AI accelerators and accounts for about half of AMD's revenue, saw its growth slowing slightly to 57% annually versus 69% yearly in the prior quarter.

To be sure, 57% growth over 12 months is still impressive. Nonetheless, that segment generated $3.7 billion in revenue, 49% of AMD's total, meaning it has a considerable impact on the overall company.

Furthermore, management did not release specific AI accelerator numbers, which may make investors uneasy, given that it still lags Nvidia in that market.

The same goes for its lower-performing segments, which, as stated before, still have shrinking revenue. The embedded segment dropped by only 3% annually, up from a 13% yearly decline in the fourth quarter. Also, its gaming revenue shrank by 30% over the last 12 months. Still, that improved from the 58% yearly pullback in the fourth quarter.

Overall, embedded and gaming revenue accounted for a combined 20% of AMD's revenue in the latest quarter. That is down from 32% one year ago, showing how much a downturn in these segments has affected the company.

The best news on the revenue front came from its client business, which includes PC chips. It made up 31% of overall revenue in the first quarter, and its annual growth of 68% in the quarter improved from 58% in the prior quarter.

Amid such results, both bulls and bears can find something to like in AMD's first-quarter 2025 earnings report. The question is whether investors will latch on to the good or bad news?

Is it time to turn bullish on AMD stock?

When looking at AMD's attributes and challenges on balance, the stock is likely a buy.

Indeed, the down cycles in the embedded and gaming segments remain a concern and have had a tremendous negative effect on AMD. Also, even though the data center segment continues to post massive revenue growth, the slowdown could sour investors on the stock.

However, the acceleration in overall revenue growth leaves investors with more good news than bad news. Also, the lower declines with the embedded and gaming segments may indicate the worst is over for those parts of the business.

And AMD has arguably become a value stock with its 26 forward P/E ratio. That earnings multiple, along with the overall improvements in the business, gives investors a tremendous incentive to buy the stock.