Advanced Micro Devices (NASDAQ:AMD) was expected to be a key player in the AI boom, but so far, it’s barely made a dent. Simply put, the company has yet to pose a real threat to Nvidia’s dominant position in the AI chip game.
That said, AMD does have a solid track record of topping Street expectations, and with Q1 earnings on deck after today’s close, Bank of America analyst Vivek Arya expects another modest beat – though he warns that guidance could underwhelm.
Arya projects revenue will land between $7.15 billion and $7.2 billion, roughly $50–$100 million ahead of consensus. But the real drag may come from a recent $800 million write-off tied to MI308 export restrictions to China, a move Arya says will deliver a $300 million blow in Q2 and cost AMD $1.4 billion through the end of the year.
On top of that, margins are under pressure. Arya expects Q2 pro-forma gross margin guidance to dip to 42–43%, far below the Street’s 52–54% forecast.
“We do expect overall pro-forma GM to trend back towards 54-55% pre-China restriction trendline in 2H,” Arya went on to add.
Looking further ahead, for 2026, the Street currently forecasts AI GPU sales of $7.4 billion, but Arya expects revised estimates will more closely match his $6 billion forecast, reflecting “China headwinds and continued NVDA and custom-chip competition.”
Nvidia makes its presence felt again as Arya points out that AMD’s 3xx series products currently lag behind Nvidia’s Blackwell in both hardware and software capabilities. The analyst believes AMD is unlikely to become competitive until next year, when its MI 4xx series launches and the strategic benefits of the ZT acquisition begin to materialize.
Arya expects client (mostly PC) sales to exceed the $2.1 billion forecast by BofA and the Street, driven by continued desktop share gains and potential tariff-related pull-ins, similar to what was seen with Intel. Still, he doubts investors will give AMD much credit, viewing the strength as “unsustainable.”
Arya also sees a strong spot in server CPUs, thanks to solid specs compared to Intel and ongoing strength in cloud and enterprise AI deployments. Intel also had a strong Q1 in its data center segment, though it pushed back on the idea that results were boosted by China or tariff-related pull-ins.
While Arya highlights the company’s “consistent execution, reasonable valuation (27x/19x CY25/26E) and attractive compute market exposure,” that is tempered by “strong competitive headwinds.”
As such, ahead of the print, Arya urges investors to hold their horses. The analyst rates AMD shares a Neutral, alongside a $105 price target, suggesting a ~7% upside from current levels. (To watch Arya’s track record, click here)
As for the rest of Wall Street, sentiment is a bit more bullish. With 15 Buys and 7 Holds, the stock carries a Moderate Buy consensus rating. The average price target sits at $126.40, suggesting shares could surge 28% over the next 12 months. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.