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ADVANCED MICRO DEVICES INC (AMD)·Q2 2025 Earnings Summary

Executive Summary

  • Record revenue of $7.685B (+32% y/y, +3% q/q) with non-GAAP EPS $0.48; revenue beat Street ($7.43B*) while EPS was essentially in line ($0.483*), as $800M export-control inventory charges cut gross margin to 40% GAAP and 43% non-GAAP; excluding charges, non-GAAP GM ~54% .
  • Data Center revenue rose 14% y/y to $3.24B, but segment posted a $(155)M operating loss due to export-control charges; Client & Gaming revenue surged 69% y/y to $3.62B with operating income $767M; Embedded revenue fell 4% y/y to $824M .
  • Guidance: Q3’25 revenue ~$8.7B ±$300M, non-GAAP GM ~54%, OpEx ~$2.55B, OI&E net ~$10M, tax ~13%, diluted shares ~1.63B; outlook excludes any MI308 China revenue pending license review—key upside catalyst if approvals arrive .
  • Stock narrative catalysts: rapid MI350 accelerator ramp with broad hyperscaler adoption, continued EPYC CPU share gains, plus potential China license approvals; near-term margin puts/takes from MI gross margin mix versus high-margin Client/Gaming strength .

What Went Well and What Went Wrong

What Went Well

  • Record server and PC processor sales drove 32% y/y revenue growth and record free cash flow ($1.18B), despite export-control headwinds; “We delivered strong revenue growth… robust demand across our computing and AI product portfolio” — Dr. Lisa Su .
  • Client & Gaming strength: Client revenue hit a record $2.5B (+67% y/y) on “Zen 5” Ryzen and richer mix; Gaming revenue rose 73% y/y to $1.1B on semi-custom and Radeon demand .
  • MI350 ramp and AI roadmap: launched MI350 with leadership memory bandwidth/capacity; ROCm 7 delivers >3x perf vs prior gen; Oracle building 27k+ node cluster combining MI355X, 5th Gen EPYC and Polara 400 .

What Went Wrong

  • Export-control impact: ~$800M inventory and related charges tied to MI308 restrictions reduced non-GAAP EPS by ~$0.43 and drove GAAP gross margin down to 40% and Data Center operating loss .
  • Non-GAAP profitability compression: non-GAAP GM fell to 43% (–10ppts y/y), non-GAAP operating income fell to $897M (–29% y/y), reflecting charges and higher investment spend .
  • Embedded softness: revenue down 4% y/y with operating margin down to 33% (from 40%) on mixed end-market demand and product mix .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$7.658 $7.438 $7.685
GAAP Gross Margin (%)51% 50% 40%
Non-GAAP Gross Margin (%)54% 54% 43%
GAAP Diluted EPS ($)$0.29 $0.44 $0.54
Non-GAAP Diluted EPS ($)$1.09 $0.96 $0.48
GAAP Operating Income ($USD Billions)$0.871 $0.806 $(0.134)
Non-GAAP Operating Income ($USD Billions)$2.026 $1.779 $0.897

Segment breakdown

SegmentQ2 2024Q1 2025Q2 2025
Data Center Revenue ($USD Billions)$2.834 $3.674 $3.240
Data Center Operating Income ($USD Billions)$0.743 $0.932 $(0.155)
Client & Gaming Revenue ($USD Billions)$2.140 $2.941 $3.621
Client & Gaming Operating Income ($USD Billions)$0.166 $0.496 $0.767
Embedded Revenue ($USD Billions)$0.861 $0.823 $0.824
Embedded Operating Income ($USD Billions)$0.345 $0.328 $0.275

Key KPIs

KPIQ1 2025Q2 2025
Cash, Cash Equivalents & Short-term Investments ($USD Billions)$7.310 $5.867
Total Debt ($USD Billions)$4.164 $3.218
Inventories ($USD Billions)$6.416 $6.677
Accounts Receivable, Net ($USD Billions)$5.443 $5.115
Cash from Operating Activities of Continuing Ops ($USD Billions)—$1.462
Free Cash Flow ($USD Billions)—$1.180

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3 2025—~$8.7B ± $0.3B New
Non-GAAP Gross MarginQ3 2025—~54% New
Non-GAAP Operating ExpensesQ3 2025—~$2.55B New
Interest Expense/Other Income (Expense), netQ3 2025—~$10M New
Effective Tax RateQ3 2025—~13% New
Diluted Share CountQ3 2025—~1.63B New
China MI308 revenue inclusionQ3 2025—Excluded from outlook pending license review New policy note
Non-GAAP GM (incl./excl. charge)Q2 2025 (for context)~43% incl. $800M; ~54% excl. charge Actual 43%; Adjusted 54% Achieved vs guide

Segment directional guidance (management commentary)

  • Data Center: “strong double-digit” q/q growth in Q3 with MI350 ramp .
  • Client: expected q/q increase (single digits) in Q3; below seasonality .
  • Gaming: “flattish” in Q3; down strongly in Q4 on console seasonality .
  • Embedded: return to sequential growth in Q3 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI accelerators (MI300/MI350)Record Data Center growth; strong MI300 ramp ; Q1: MI350 on track mid-2025 MI350 launched; ahead-of-schedule production; broad hyperscaler/OEM adoption; up y/y in Q3 expected Accelerating
ROCm softwareROCm 6.3 perf gains; ecosystem expansion ROCm 7: >3x perf vs prior gen; nightly builds; developer cloud; ROCm Enterprise AI Strengthening
EPYC CPU shareQ4: EPYC cloud/enterprise momentum, 1,000+ instances ; Q1: Data Center +57% y/y Record cloud/enterprise CPU sales; continued share gains; Turin ramp Expanding
Export controls/ChinaQ1: guided $800M inventory/reserves impact ~$800M charges recorded; MI308 licenses under review; no China revenue in Q3 guide Headwind easing if approvals
Client PCsQ4: AI PC portfolio expansion ; Q1: strong “Zen 5” mix Record Client revenue; richer mix; commercial momentum with Lenovo/HP/Dell Positive
GamingQ4: console units >100M cumulative; Radeon 9070 series Gaming +73% y/y; multi-year Xbox custom chips collaboration; Radeon 9600 XT launch Improving near term; Q4 seasonal down
EmbeddedQ4: mixed demand; Versal Gen2 –4% y/y; Spartan UltraScale+ shipments; Bosch robotaxi pilot Mixed, sequential improvement expected
MI400/HeliosQ4: N/AMI400 dev progressing; Helios rack-scale platform targeting 2026 with 10x gen performance Future catalyst

Management Commentary

  • “We delivered strong revenue growth in the second quarter led by record server and PC processor sales… well positioned to deliver significant growth in the second half… driven by the ramp of our AMD Instinct MI350 series accelerators and ongoing EPYC and Ryzen processor share gains.” — Dr. Lisa Su .
  • “We achieved 32% year-over-year revenue growth and generated record free cash flow this quarter… positioning us well to support robust future growth and drive long-term shareholder value.” — Jean Hu .
  • “Our current outlook does not include any revenue from AMD Instinct MI308 shipments to China as our license applications are currently under review by the U.S. Government.” — AMD Q3’25 Outlook .
  • “We launched our Instinct MI-350 series… began volume production ahead of schedule in June and expect a steep production ramp in the second half.” — Dr. Lisa Su .
  • “Client and gaming segment operating income was $767 million… driven by richer client product mix and operating leverage on higher revenue.” — Jean Hu .

Q&A Highlights

  • China licenses and inventory: Management expects MI308 shipments to resume upon license approval; most inventory is WIP, requiring a couple quarters to run through; no Q3 inclusion .
  • MI350 ramp magnitude: Stronger-than-expected adoption; large-scale deployments competitive vs B200/GB200 with TCO advantages; MI revenue set to grow y/y in Q3 .
  • Gross margin drivers: Despite MI ramp below corporate average, margin supported by high-margin server CPUs and expanding commercial PC mix; Q3 non-GAAP GM guided ~54% .
  • Segment seasonality: Client up single digits in Q3; Gaming flattish in Q3 and down strong double digits in Q4 due to console build timing .
  • Capital allocation: Expect continued share repurchases; proceeds from ZT Systems sale (upon close) support investment and buybacks .

Estimates Context

MetricQ4 2024 Consensus*Q4 2024 ActualQ1 2025 Consensus*Q1 2025 ActualQ2 2025 Consensus*Q2 2025 Actual
Revenue ($USD Billions)$7.526*$7.658 $7.120*$7.438 $7.429*$7.685
Primary EPS ($)$1.086*$1.09 (non-GAAP) $0.934*$0.96 (non-GAAP) $0.483*$0.48 (non-GAAP)

Values retrieved from S&P Global.*

  • Q2’25: revenue beat; EPS essentially in line given non-GAAP framing and ~$0.43/share impact from export-control charges .
  • Q3’25 guide: ~$8.7B ±$0.3B vs consensus $8.75B*; Street likely to adjust segment mix assumptions toward stronger Data Center GPU and modest Client growth, with Gaming flattish and Embedded returning to growth .

Key Takeaways for Investors

  • MI350 ramp and ROCm 7 traction are core second-half drivers; expect Data Center revenue to re-accelerate in Q3 despite China exclusion, with MI margins improving over time from operational efficiencies .
  • EPYC CPU momentum remains durable with record cloud/enterprise sales, supporting gross margin and offsetting MI margin dilution; narrative supported by hyperscaler and enterprise wins .
  • Client & Gaming strength (richer mix, semi-custom normalization) provided near-term EPS support; plan for Q4 console-driven downtick in Gaming .
  • Export-control charges are largely non-recurring; adjusted non-GAAP GM excluding charges at ~54% underscores underlying earnings power .
  • Upside optionality: MI308 China licenses—any approvals could add incremental revenue beginning late-Q4 or beyond, given WIP inventory run-through timing .
  • Capital returns: $478M buybacks in Q2; authorization remains sizable; post-ZT sale (close near end-2025) adds flexibility for investment and repurchases .
  • Risk watch: MI gross margin mix, regulatory outcomes, embedded end-market recovery pace; monitor Q3 segment execution vs guidance .

Appendix: Non-GAAP Adjustments

  • ~$800M inventory and related charges tied to U.S. export restrictions reduced EPS by ~$0.43; GAAP GM 40%, non-GAAP GM 43%; excluding charges, adjusted non-GAAP GM ~54% .
  • Reconciliations provided in Exhibits 99.1 and 99.2 for gross profit/margin, op-ex, operating income, net income/EPS .