AMD Q2 2025: MI350 Ramp Fuels Data Center Growth, Margins 54%
- Accelerated MI350 Series uptake: Executives emphasized that customer interest in the MI350 family is exceeding expectations with a strong ramp, which is driving sequential revenue growth in data center GPUs and reinforcing AMD’s competitive position in the AI space.
- Robust client and gaming performance: Q&A responses highlighted that the client business is performing exceptionally well—with higher ASPs, record desktop CPU sales, and expanding commercial PC momentum—fostering overall revenue strength across key segments.
- Promising long‑term prospects with MI400 and Helios: Management discussed significant future upside driven by their upcoming MI400 Series and Helios platform, with growing customer validation among sovereign, hyperscaler, and Neo Cloud players, setting the stage for a multi‑billion dollar opportunity.
- Regulatory and Supply Chain Risks: The uncertainty around U.S. export licenses for MI308 in China, combined with an $800M inventory write-down (mainly work in process) that cannot be quickly reversed, could delay revenue recognition and negatively impact future results.
- Sustainability of Client Business Growth: Concerns were raised about potential pull‑forwards in the client business, suggesting that the strong first‑half performance might not be sustainable into the second half, potentially impacting revenue momentum.
- Margin Pressure from Product Mix: Persistently lower gross margins on the MI product line—including the need to overcome margin-dilutive impacts from the MI350 ramp—pose a risk to overall profitability if operational improvements do not materialize as planned.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q2 2025 | $7.4B ± $300M, 27% YoY | no current guidance | no current guidance |
Non‐GAAP Gross Margin | Q2 2025 | 43% (inclusive of $800M charges) | no current guidance | no current guidance |
Non‐GAAP Operating Expenses | Q2 2025 | $2.3B | no current guidance | no current guidance |
Net Interest and Other Expenses | Q2 2025 | $5M | no current guidance | no current guidance |
Non‐GAAP Effective Tax Rate | Q2 2025 | 13% | no current guidance | no current guidance |
Diluted Share Count | Q2 2025 | 1.64B shares | no current guidance | no current guidance |
Client & Gaming Segment Revenue | Q2 2025 | Double-digit sequential increase | no current guidance | no current guidance |
Embedded Segment Revenue | Q2 2025 | Flattish sequentially | no current guidance | no current guidance |
Data Center Segment Revenue | Q2 2025 | Expected to decrease (excludes MI308 revenue) | no current guidance | no current guidance |
Full-Year 2025: Revenue Impact (Export License) | Q2 2025 | $1.5B | no current guidance | no current guidance |
Revenue | Q3 2025 | no prior guidance | $8.7B ± $300M, 28% YoY | no prior guidance |
Sequential Revenue Growth | Q3 2025 | no prior guidance | 13% | no prior guidance |
Non‐GAAP Gross Margin | Q3 2025 | no prior guidance | 54% | no prior guidance |
Non‐GAAP Operating Expenses | Q3 2025 | no prior guidance | $2.55B | no prior guidance |
Net Interest and Other Expenses | Q3 2025 | no prior guidance | Gain of $10M | no prior guidance |
Non‐GAAP Effective Tax Rate | Q3 2025 | no prior guidance | 13% | no prior guidance |
Diluted Share Count | Q3 2025 | no prior guidance | 1.63B shares | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Data Center GPU Growth and Performance | Previously, Q1 2025, Q4 2024, and Q3 2024 calls described strong double-digit revenue growth, record quarterly revenues, and significant customer deployments driven by products like the MI300/MI325 series. | In Q2 2025, AMD noted that Data Center GPU revenue declined year‐over‐year due to U.S. export controls on MI308, but emphasized a strong ramp of the MI350 series with production ahead of schedule and growth expected in H2. | Mixed sentiment: Regulatory headwinds are weighing on revenue even as new-generation GPU ramp creates optimism. |
Client Segment Demand and ASP Dynamics | Earlier periods (Q1, Q4, Q3 2024) highlighted robust year‐over‐year growth, record sell-through across desktop and mobile channels, and a richer mix driving higher ASPs. | Q2 2025 continued the theme with strong client segment performance driven by record desktop channel CPU sales, robust Ryzen AI adoption, and an uplift in ASPs from a richer product mix. | Consistent strength and improved product mix remain, sustaining optimism despite market uncertainties. |
MI350 Series Adoption and Ramp Effects | Q1 2025 reported very strong customer interest, early sampling, and partnerships (e.g. with Oracle) positioning the MI350 series for a fast ramp. Q4 2024 and Q3 2024 also referenced progress toward ramp and competitive positioning. | Q2 2025 emphasized accelerated volume production of MI350 starting ahead of schedule, broad Tier 1 customer adoption, and a steep production ramp expected in the second half, reinforcing its role as a stepping stone to future products. | Accelerated ramp and stronger-than-expected adoption reflect growing customer enthusiasm and a more optimistic near-term outlook. |
Gross Margin Outlook and Margin Pressure | Q1 2025 and Q4 2024 calls reported healthy gross margins (around 54%) driven by a favorable revenue mix and product portfolio, with Q3 2024 also noting mix improvements from the Data Center and Client segments. | Q2 2025 reported a reported gross margin of 43%—primarily due to an $800 million inventory write‐down from U.S. export controls on MI308—though excluding the charge, margins remain near 54%. | A short-term margin pressure due to regulatory-related write‐downs contrasts with a generally stable medium-term outlook. |
Regulatory and Export Control Risks (China/MI308) | Q1 2025 highlighted new export license requirements impacting MI308 shipments to China with an estimated multi‐billion revenue impact, while earlier calls had acknowledged potential regulatory challenges. | In Q2 2025, AMD detailed an $800 million inventory write‐down tied to export controls eliminating MI308 sales, while noting efforts with U.S. regulators to secure licenses for future shipments. | Continued regulatory challenges remain a significant short-term headwind, emphasizing the ongoing risk and its financial impact. |
AI Accelerator Competitiveness and Development Delays | Across Q1, Q3, and Q4 2024, AMD expressed strong competitiveness for its AI accelerators (e.g. MI300X, MI325X) with significant performance and TCO advantages, and no development delays were noted. | Q2 2025 reaffirmed the competitive positioning of the MI350 series and previewed rapid progress on the next-generation MI400 series, with no specific delays mentioned. | Stable competitive positioning and continued focus on next-generation performance, with no new delay issues reported. |
Future Product Pipeline: MI400 Series and Helios Platform | Q1 2025 and Q4 2024 discussed the MI400 series as a 2026 launch vehicle delivering leadership performance, while previous calls (Q1, Q4, Q3) did not mention Helios; only the MI400 series was emphasized. | Q2 2025 introduced detailed discussion of both the MI400 series—with its promised 40 petaflops performance—and the Helios platform, a full‑stack rack‑scale AI solution, highlighting increased strategic focus on scalable AI systems. | New emphasis on the Helios platform along with continued robust messaging around the MI400 series signals an expanded future product roadmap. |
Supply Chain Disruptions and Inventory Write‐Down Risks | Earlier periods (Q1, Q3, Q4 2024) provided limited discussion on inventory risks, aside from general comments on building inventory for ramp-up. | In Q2 2025, AMD reported a significant $800 million inventory write‐down due to export control issues, and noted that most inventory was work in process requiring several quarters to clear. | Heightened focus on inventory write‐downs tied to regulatory controls marks an emerging risk compared to prior periods. |
Rack‑Scale AI Deployment Challenges | Prior Q1 and Q3 2024 calls discussed rack‑scale complexities—including power, cooling, and networking challenges—and detailed strategic moves (e.g. the ZT Systems acquisition) to better address these needs. | Q2 2025 reiterated the importance of customer co‑development for rack‑scale solutions, highlighted collaboration on the Helios rack, and emphasized long lead times inherent to such deployments. | Consistent recognition of rack‑scale challenges with ongoing proactive investments and collaboration; the focus remains steady with enhanced co‑development efforts. |
Server CPU Market Competition | Q1, Q3, and Q4 2024 calls emphasized strong market share gains, competitive performance of EPYC processors, and broad adoption across cloud and enterprise sectors. | Q2 2025 reaffirmed AMD's competitive advantage in the server CPU market with continued strong adoption in cloud and enterprise segments, driven by robust EPYC performance and growing demand for AI‐driven compute. | Steady competitive positioning; AMD continues to leverage its strong product portfolio to win market share in a competitive landscape. |
Underrepresentation in Chinese Server Market (no longer highlighted) | In Q3 2024, AMD acknowledged underrepresentation in the Chinese server market as part of the broader enterprise segment, citing it as an opportunity for future share gains. | There is no mention of underrepresentation in the Chinese server market in the Q2 2025 call. | The topic has been dropped from the current discussion, possibly because focus has shifted toward managing regulatory challenges and ramping new products. |
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China Licenses
Q: When do MI308 shipments resume?
A: Management stated that MI308 shipments will resume once U.S. export licenses are approved, though current inventory consists mostly of work in process and will take a couple of quarters to run through. -
Gross Margins
Q: What margin impact from MI products?
A: They explained that despite MI product margins being a bit lower, operational efficiencies and a richer mix in server and client segments allow gross margins to hold near 54%. -
Sovereign Opportunity
Q: How big is the sovereign AI business?
A: Management expects sovereign contracts to be additive with opportunities growing from MI355 and the upcoming MI400 series, although ramp timing remains dependent on regulatory approvals. -
GPU Ramp
Q: How is the MI355 adoption progressing?
A: The MI355 series launched ahead of schedule with adoption growing faster than expected, driving significant sequential revenue growth as it rapidly ramps into Q3. -
Client Business
Q: Was there any pull forward in client sales?
A: Management noted that while client business performed strongly with record CPU sales and improved ASPs, the first-half strength wasn’t overly pulled forward, supporting sustained momentum. -
Lead Times
Q: What lead time for MI400 deployments?
A: They indicated lead times of about 8–9 months are needed for MI400 series due to extensive co-development and rack-scale integration with customers. -
Capital Allocation
Q: How will ZT sale proceeds be used?
A: With robust free cash flow generation, management plans to reinvest in AI opportunities and maintain shareholder returns through share repurchases and potential bolt-on acquisitions.
Research analysts covering ADVANCED MICRO DEVICES.