Erste Group lowers AMD rating to "Hold" as profit margin falls below industry average
Erste Group downgraded AMD's stock rating from "Buy" to "Hold" due to its operating profit margin falling below the industry average. Analysts pointed out that AMD's EBITDA margin is expected to be 22% in fiscal year 2025, lower than the peers' 34.7%. Despite significant revenue growth for AMD, especially in the data center business, the current price-to-earnings ratio is considered high
According to the Zhitong Finance APP, investment bank Erste Group has downgraded the stock rating of AMD (AMD.US) from "Buy" to "Hold," partly due to the fact that the chip manufacturer's operating profit margin has fallen below the industry average.
Analyst Stephen Lingnau stated in an investor report: "The operating profit margin has been below the industry average for several quarters, with last quarter's EBITDA margin even slightly negative. Given that the operating profit margin has not improved and the group's return on equity is below average, we believe the current price-to-earnings ratio is too high."
During the fiscal year 2025, AMD's average EBITDA margin is 22%, while its semiconductor industry peers average 34.7%. AMD's net profit margin averages 19.3%, below the industry average of 29.3%.
However, AMD's year-on-year sales revenue growth far exceeds that of most competitors. According to data from Ouhua International Bank, AMD's sales surged by 28% in fiscal year 2025, while its peers' average growth was only 11%.
The rise of artificial intelligence has proven beneficial for AMD's revenue—its data center business revenue grew by 94% last year, reaching $12.6 billion, accounting for 29% of total revenue.
Lingnau noted: "The Instinct product line has accelerated the development of deep learning, artificial neural networks, and high-performance applications. AMD has generated over $5 billion in revenue through the Instinct product line."
