Advanced Micro Devices (AMD  ) beat analysts' expectations on the top and bottom-line which caused shares to open higher by 4.5%. However, investors sold into this strength, and the stock finished 2% lower. The company has benefitted from strength in chip demand which is leading to shortages and pricing power for manufacturers.

Inside the Numbers

In Q1, AMD reported $0.52 per share in adjusted earnings which easily topped consensus expectations of $0.44 per share. This marked a 185% increase from last year's Q1 results. Revenue also came in higher at $3.4 billion against expectations of $3.2 billion for growth of 93%. The company met expectations for gross margins at 46%. This is a slight increase from last quarter's 45% but flat compared to last year.

The strongest segments for the company were its Enterprise, Embedded, and Semi-Custom units. These contain its server, embedded processor, semi-custom System-on-Chip, and game console businesses. All of these units have been extraordinarily strong due to a new console cycle, increased spending for cloud computing and data centers, people using stimulus money to buy phones, tablets, and PCs, and new technologies like automotive driving, AI, and machine learning which require a large number of chips.

AMD also increased its forecast for the next quarter and full-year. It expects revenue of roughly $3.6 billion for the next quarter, an increase of 86%. For the full year, AMD expects revenue growth of 50% compared to last year, driven by growth across all units. This is an upgrade from its previous quarter when it forecast 37% growth.

The company was even more positive on its conference call as CEO Dr. Lisa Su said that she expects revenue growth to continue at similar rates in future quarters. She attributed the strength to "another quarter of record server-processor revenue thanks in part to Epyc processor sales which more than doubled." It also reported new contracts that should lead to another boost for data center revenue from a "strong pipeline of new cloud, enterprise and high-performance computing wins."

It also addressed concerns that its production could be disrupted by the semiconductor shortage. The company believes it should be able to manage these issues and thus remains confident in its forecast.

Stock Price Outlook

AMD has been a strong performer over multiple timeframes. Over the past year, its stock is up 50.1%, slightly outpacing the S&P 500 (SPY  ). Interestingly, the stock has remained in an uptrend over the past few months, while many tech stocks have faltered. Further, it looks ready to continue its trajectory of replacing Intel (INTC  ) as the premier chipmaker.

In terms of its stock price, AMD is following the recent pattern of companies that have posted strong earnings and raised guidance but then sold off. This might indicate some sort of consolidation in the near term but overall, AMD continues to gain ground on its competitors, benefit from the trends fueling the tech sector and provides exposure to new growth industries.