AMD delivered record quarterly revenue of US$7.7 billion in Q2 2025, but investors weren't buying the celebrations - shares slumped over 4% after hours as the chip giant revealed the costs of doing business with China in today's trade climate.
The Santa Clara company's 32% year-over-year growth came with a hefty caveat: roughly US$800 million in inventory and related writedowns linked to U.S. Government export controls on its AMD Instinct MI308 data centre GPU products bound for China.
Strip away those charges, and non-GAAP gross margin would have been about 54% instead of the reported 43%.
Jefferies maintains a cautious "Hold" rating with a reduced US$100 price target, citing MI308 export delays to China, while other analysts question whether AMD can carve out meaningful market share against Nvidia's dominance.
Data centre growth amid headwinds
Data Centre segment revenue reached US$3.2 billion, up 14% year-over-year, driven primarily by strong EPYC processor demand that more than offset the Chinese GPU shipment obstacles.
Meanwhile, the Client and Gaming segments surged 69% to $3.6 billion, powered by a record $2.5 billion in client revenue from the latest Zen 5 Ryzen desktop processors.
Nvidia commands an estimated 70% market share for AI chips, and AMD's market share in data centre AI GPUs dipped in Q1 as Nvidia's rival Blackwell ramp-up commenced.
AMD CEO Lisa Su remained bullish for the future, telling analysts the company is "on a steep long-term growth trajectory, led by the rapid scaling of our data centre AI franchise from more than US$5 billion of revenue in 2024 to tens of billions of dollars of annual revenue over the coming years".
"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.”
MI350 hopes and reality checks
For Q3 2025, AMD expects revenue of ~US$8.7 billion (±US$300 million), a significant 28% year-over-year growth.
The outlook notably excludes any revenue from MI308 shipments to China, as licence applications remain under U.S. Government review.
The company's strategic pivot includes selling ZT Systems' data centre infrastructure manufacturing business to Sanmina for US$3 billion, expected to close by year-end.
At the time of writing, Advanced Micro Devices (AMD) stock was trading at US$163.25, down 6.3% from Tuesday's close of $174.31. AMD's market cap stands at US$282.63 billion.
