Shares of Advanced Micro Devices (AMD -8.47%) declined 6.3% in Tuesday's after-hours trading, following the chipmaker's release of its second-quarter 2025 report.
The stock's drop can probably be largely attributed to AMD's earnings per share (EPS) "only" meeting Wall Street's consensus estimate. Higher profit expectations were likely built into the stock price, as it had surged 44% in 2025 through Tuesday's regular trading session.
On the plus side, the quarter's revenue comfortably beat Wall Street's expectation, as did revenue guidance for the third quarter. A noteworthy metric was free cash flow, which was a strong $1.2 billion -- a record quarterly high.
As expected, AMD's results were hurt by the U.S. government's export controls on advanced artificial intelligence (AI) chips to China. These controls prevented the company from selling its Instinct MI308 data center graphics processing units (GPUs) to China. Moreover, the company's gross profit and, therefore, its bottom line were negatively impacted as these restrictions resulted in AMD taking about $800 million in inventory and related charges in the second quarter.
Image source: Getty Images.
Advanced Micro Devices' key numbers
| Metric | Q2 2024 | Q2 2025 | Change YOY |
|---|---|---|---|
| Revenue | $5.84 billion | $7.69 billion | 32% |
| GAAP operating income | $269 million | ($134 million) | Flipped to negative from positive |
| Adjusted operating income | $1.26 billion | $897 million | (29%) |
| GAAP net income | $265 million | $872 million | 229% |
| Adjusted net income | $1.13 billion | $781 million | (31%) |
| GAAP earnings per share (EPS) | $0.16 | $0.54 | 238% |
| Adjusted EPS | $0.69 | $0.48 | (30%) |
Data source: Advanced Micro Devices. GAAP = generally accepted accounting principles. YOY = year over year.
Investors should focus on the adjusted numbers, which exclude one-time items.
Adjusted gross margin was 43%. Excluding the charges stemming from the export restrictions, the adjusted gross margin would have been about 54%. This metric was 53% in the year-ago period.
Wall Street was looking for adjusted EPS of $0.48 on revenue of $7.43 billion, so AMD met the profit expectation and exceeded the revenue one. It also surpassed its own revenue guidance of 27% year-over-year growth. (It doesn't issue a profit outlook.)
In the quarter, AMD generated cash of $2.01 billion running its operations, up from $593 million in the year-ago period. It ended the quarter with cash, cash equivalents, and short-term investments of $5.9 billion, and long-term debt of $3.2 billion.
AMD's segment performance
| Segment | Q2 2025 Revenue | Change YOY | Change QOQ** |
|---|---|---|---|
| Data center | $3.24 billion | 14% | (12%) |
| Client* | $2.50 billion | 67% | 9% |
| Gaming* | $1.12 billion | 73% | 73% |
| Embedded | $824 million | (4%) | Flat |
| Total | $7.69 billion | 32% | 3% |
Data source: Advanced Micro Devices. *Client and gaming is a single reportable segment; I broke the two parts out for better clarity. **Calculations by author. YOY = year over year. QOQ = quarter over quarter.
Data center growth was primarily driven by strong demand for the company's EPYC central processing units (CPUs) more than offsetting the negative impact of the China export controls on MI308 GPU sales.
Client revenue -- which was a quarterly record -- was mainly driven by robust demand for the Zen 5, the latest Ryzen desktop CPUs, and a beneficial product mix. Gaming revenue was driven by an increase in semi-custom revenue and strong Radeon GPU demand.
Embedded segment revenue edged down 4% year over year because demand in end markets remained mixed. This change was about the same as in the first quarter, when it was down 3% year over year.
What the CEO had to say
CEO Lisa Su's statement in the earnings release:
We delivered strong revenue growth in the second quarter led by record server and PC processor sales. We are seeing robust demand across our computing and AI product portfolio and are well positioned to deliver significant growth in the second half of the year, driven by the ramp of our AMD Instinct MI350 series accelerators and ongoing EPYC and Ryzen processor share gains.
Q3 guidance
For the third quarter, management guided for:
- Revenue of about $8.7 billion +/- $300 million, which at the midpoint equates to growth of 28% year over year.
- Adjusted gross margin of 54%. For context, this metric was 43% in the just-reported second quarter, but would have been 54% excluding the charges associated with the export controls.
This outlook does not include any revenue from Instinct MI308 GPU shipments to China as the company's "license applications are currently under review by the U.S. Government," it said in the release. On the earnings call, CEO Su said that despite this, "we expect Instinct revenue to grow year over year in the third quarter, driven by the ramp of MI350 at multiple customers."
Going into the release, Wall Street had been modeling for Q3 revenue of $8.32 billion, or 27% growth, so AMD's guidance surpassed this expectation.
In short, AMD turned in as good a quarter as could be expected given the brisk headwind stemming from the AI chip export controls.
The stock's decline was probably in part due to some investors feeling unsettled about the uncertainty still surrounding the export restrictions. We don't know how long it will take for the government to review the company's applications for licenses to sell its Instinct MI308 chips to China.
