Why are investors disappointed with AMD’s Q2 2025 results?

AMD's data center business delivered weaker-than-expected growth, with a 15% revenue reduction linked to supply restrictions in China is adding pressure on margins and curbing investor appetite in the company’s stock.

Advanced Micro Devices, Inc. (NASDAQ: AMD) reported record Q2 2025 revenue of approximately 7.69 billion USD, but its GAAP gross margin fell to 40% due to inventory write-downs and related costs of around 800 million USD linked to export restrictions on the Instinct MI308 chip. Non-GAAP EPS came in at 0.48 USD, down 37% year-over-year. Despite sales in the data center segment rising year-on-year thanks to strong demand for EPYC processors, the segment fell short of investor expectations amid ongoing AI hype and the negative impact of China export restrictions. AMD management guided Q3 2025 revenue at 8.7 billion USD ± 300 million USD, with a non-GAAP gross margin of approximately 54% – a forecast excluding MI308 sales to China.

Investors reacted to AMD's report with cautious disappointment.

The main reason was weak growth in the data center business, which the market had heavily relied on due to AI’s rising popularity. Another negative factor was export restrictions on chips to China, which temporarily reduced the company’s demand. Subsequently, the US government allowed sales to China, on the condition that 15% of revenue from China be returned to the US Treasury.

Although the Q3 forecast exceeded expectations, the situation around China creates uncertainty and pressure on profits. Investors are waiting for concrete signs of improvement, but for now, AMD’s stock is poised for a correction towards 145 USD.

This article covers AMD’s business, its revenue streams, and the products it offers in the AI market. It provides a fundamental analysis of AMD and a technical analysis of Advanced Micro Devices stock, forming the basis for the AMD stock forecast.

About Advanced Micro Devices, Inc.

Advanced Micro Devices, Inc. (AMD) is a US-based company founded in 1969 by Jerry Sanders and a group of fellow engineers. It designs and manufactures semiconductor devices, including processors, graphics chips, and server solutions. The company went public with an IPO on the NYSE in 1972 under the ticker AMD.

AMD is present in the rapidly expanding AI market with the following products:

• Graphics Processing Units (GPUs) for data centres: AMD produces Radeon Instinct microprocessors and has recently introduced new models in the MI series designed for high-performance computing and AI workloads. For example, the MI300 is a high-powered processor optimised for deep data analysis and large AI models
• Radeon Open Compute (ROCm) software: AMD has developed an open-source software platform, ROCm, providing tools for AI development and high-performance computing on the company’s GPUs
• Field-Programmable Gate Arrays (FPGAs): following the acquisition of Xilinx, AMD expanded into FPGAs, which are widely used for AI applications, including signal processing and adaptive computing
• Central Processing Units (CPUs): AMD also optimises its EPYC series processors to support AI computing in server solutions
• Products for end devices: in addition to server solutions, AMD develops specialised GPUs and FPGAs for AI-powered end devices, such as autonomous vehicles, smart cameras, and medical equipment

Advanced Micro Devices, Inc.’s main revenue streams

AMD’s revenue is generated from four key segments:

1. Data Center: includes EPYC server processors, AMD Instinct graphics accelerators for AI and scientific computing, and Xilinx FPGA solutions for specialised workloads in data centres.

2. Client segment: includes Ryzen and Athlon processors for desktop PCs and laptops, delivering high performance for general users and enthusiasts, and integrated graphics solutions for hybrid devices.

3. Gaming segment: includes Radeon GPUs for gaming PCs, integrated solutions for gaming laptops, and custom processors for gaming consoles such as PlayStation and Xbox.

4. Embedded segment: covers high-performance processors and graphics solutions for embedded systems in automotive electronics, industrial automation, medical devices, and telecommunications.

Advantages of Advanced Micro Devices, Inc. in the semiconductor market

AMD has several strengths that enable it to compete effectively with key industry players such as Intel Corp. (NASDAQ: INTC) and NVIDIA Corp. (NASDAQ: NVDA). The company’s main advantages are outlined below:

• Processor architecture: AMD introduced the Zen architecture, which significantly enhanced performance and energy efficiency. The Ryzen (consumer) and EPYC (server) series have gained popularity thanks to their excellent performance-to-price ratio. In recent years, AMD has surpassed Intel in terms of core and thread counts in processors
• Multi-core and multi-threaded solutions: AMD typically offers more cores and threads at the same price point, making its processors attractive to users requiring multitasking and high-performance computing (for example, for graphics, video editing, data streaming, etc.)
• Innovations in graphics technology: although AMD lags behind NVIDIA in some high-performance GPU functionalities, it maintains a strong position due to processors with high data processing throughput, offering a competitive price-to-performance advantage. With the RDNA and RDNA 2 series, AMD has significantly improved the energy efficiency and performance of its graphics cards
• EPYC server solutions: AMD’s EPYC line delivers an impressive performance-to-price ratio in the server segment, gaining traction among large corporations and data centres. These processors support more core counts per socket, reducing scaling costs for server infrastructure
• CPU and GPU integration: AMD manufactures both processors and graphics chips, allowing it to develop integrated solutions for laptops and gaming consoles. For example, AMD supplies processors for PlayStation and Xbox consoles, which ensures a stable revenue stream and reinforces its market presence
• Competitive pricing: AMD frequently offers lower-priced alternatives to Intel and NVIDIA, making its products attractive to a broader customer base, from enthusiasts to corporate clients
• the rapid adoption of new technological processes: AMD collaborates with TSMC to swiftly implement advanced process nodes (such as 7 and 5 nm), enhancing energy efficiency and performance across its processors and graphics chips

Advanced Micro Devices, Inc. Q3 2024 report

AMD released its Q3 2024 earnings report on 29 October, confirming continued revenue and net income growth. Below are the report’s key figures:

• Revenue: 6.82 billion USD (+18%)
• Net income: 0.77 billion USD (+158%)
• Earnings per share: 0.47 USD (+161%)
• Operating profit: 0.72 billion USD (+223%)

Revenue by segment:

• Data Center: 3.55 billion USD (+122%)
• Client segment: 1.88 billion USD (+29%)
• Gaming segment: 462 million USD (-69%)
• Embedded segment: 927 million USD (-25%)

AMD benefitted substantially from AI advancements, reflected in its Data Center segment, where revenue surged by 122%, contributing 52% of total revenue. The Gaming segment suffered the steepest decline (-69%), making it its weakest performer.

For Q4 2024, AMD projected revenue in the range of 7.20-7.80 billion USD, with an average estimate of 7.50 billion. This implied a 22% year-on-year increase and a 10% rise compared to Q3 2024. However, the forecast fell slightly short of analysts’ expectations, sparking investor concerns, particularly amid intensifying AI market competition and a broader slowdown in segment growth.

Advanced Micro Devices, Inc. Q4 2024 report

AMD released its Q4 2024 earnings report on 4 February, showing a 37% decline in net income. The report highlights are outlined below:

• Revenue: 7.65 billion USD (+24%)
• Net income: 0.48 billion USD (-37%)
• Earnings per share: 0.29 USD (+29%)
• Operating profit: 0.87 billion USD (+155%)

Revenue by segment:

• Data Center: 3.86 billion USD (+69%)
• Client segment: 2.31 billion USD (+58%)
• Gaming segment: 563 million USD (-59%)
• Embedded segment: 923 million USD (-13%)

2024 financial performance:

• Revenue: 25.78 billion USD (+14%)
• Net income: 1.64 billion USD (+92%)
• Earnings per share: 1.00 USD (+88%)
• Operating profit: 1.90 billion USD (+375%)

In Q4 2024, AMD CEO Lisa Su highlighted the company’s impressive performance, reporting a record annual revenue of 25.80 billion USD, up 14% from the previous year. This growth was mainly driven by a 94% surge in its Data Center revenue and a 52% increase in the Client segment. Su also emphasised that AMD prioritises total revenue rather than the number of processors shipped, particularly amid concerns about potential CPU oversupply in the PC market.

The company attributed the decline in Q4 net income to a 17% rise in operating costs, primarily due to higher research and development investments, especially in AI. Additionally, despite strong Data Center growth, AI GPU sales fell short of expectations, further impacting profitability.

For Q1 2025, AMD expects revenue of 7.10 billion USD, slightly exceeding analysts’ projections. However, Su warned about a potential AMD Data Center sales slowdown, citing heightened competition, particularly from NVIDIA (NASDAQ: NVDA) in the AI processor market.

AMD management remains optimistic about 2025. Su projects strong double-digit growth in both revenue and EPS for the year. She also highlighted the long-term potential of AMD’s Data Center AI business, which generated over 5.00 billion USD in 2024 and is expected to eventually drive annual segment revenue into the tens of billions of dollars.

AMD management’s sentiment was cautiously optimistic, focusing on leveraging the company’s strengths in AI and computing to drive future growth while remaining agile in response to market shifts in weaker segments.

Advanced Micro Devices, Inc. Q1 2025 report

AMD released its Q1 2025 report on 6 May. Below are its highlights compared to the corresponding period in 2024:

• Revenue: 7.44 billion USD (+36%)
• Net income: 0.71 billion USD (+476%)
• Earnings per share: 0.44 USD (+529%)
• Operating profit: 0.81 billion USD (+2,139%)

Revenue by segment:

• Data Center: 3.67 billion USD (+57%)
• Client segment: 2.29 billion USD (+68%)
• Gaming segment: 647 million USD (-30%)
• Embedded segment: 823 million USD (-3%)

AMD’s Q1 2025 financial performance strengthened confidence in the company as one of the leaders in the AI and data centre segment. AMD exceeded Wall Street expectations, reporting a 36% revenue increase and a 476% rise in net income. Meanwhile, the key segments showed even stronger growth. The data centre segment increased sales by 57%, while PC processor revenue rose by 68%, driven by sustained demand for EPYC server processors, Instinct accelerators, and Ryzen chips for consumer PCs.

For Q2 2025, AMD management projected revenue to range between 7.1 and 7.7 billion USD but cautioned about potential losses of about 800 million USD as the company might postpone or entirely abandon the sales of a significant amount of its AI chips in China. The reason is the new export restrictions imposed by the US government, which banned advanced technology exports to the Chinese market. As a result, these chips cannot be sold, and their cost will likely be written off as losses. However, AMD management warned about this as early as 16 April, so this information was most likely already factored into the current stock price. For 2025, CFO Jean Hu estimated revenue losses of 1.5 billion USD due to export restrictions.

Nevertheless, AMD management remained optimistic about 2025. The company anticipated double-digit growth in both revenue and EPS for the year, driven by its expanding AI portfolio and strategic partnerships. This signalled that AMD’s long-term potential remained promising despite external risks and short-term stock volatility.

Advanced Micro Devices, Inc. Q2 2025 report

AMD released its Q2 2025 earnings report on 5 August. Below are its highlights compared to the corresponding period in 2024:

• Revenue: 7.69 billion USD (+32%)
• Net income: 0.78 billion USD (-31%)
• Earnings per share: 0.48 USD (-30%)
• Operating profit: 0.90 billion USD (-29%)

Revenue by segment:

• Data Center: 3.24 billion USD (+14%)
• Client segment: 2.49 billion USD (+67%)
• Gaming segment: 1.12 billion USD (+73%)
• Embedded segment: 824 million USD (-4%)

AMD ended Q2 2025 with record revenue of 7.7 billion USD, up 32% year-over-year. However, profitability was under pressure due to a one-time write-down of approximately 800 million USD, related to inventory and obligations tied to MI308 shipments to China, impacted by US export restrictions. This led to a decline in GAAP gross margin to 40% and non-GAAP margin to 43%. According to the company, the margin would have been around 54% without the write-down. The result was supported by record sales of EPYC server processors and Ryzen desktop processors, as well as a revival in the Gaming segment. However, the hit to margins and GAAP operating loss reminded the market of regulatory risks surrounding AI accelerators.

Segments delivered the following results. The Data Center segment generated approximately 3.2 billion USD in revenue, up 14% y/y, driven by EPYC sales, which partially offset the impact of restrictions on the MI308. The Client and Gaming segments together contributed around 3.6 billion USD, with the Client segment reaching 2.5 billion USD, fueled by strong demand for Zen 5-based desktop processors and a more favourable product mix. The Gaming segment rose to 1.1 billion USD, boosted by higher shipments of semi-custom chips for consoles and steady demand for Radeon GPUs. The Embedded segment brought in 824 million USD, down 4% year-on-year, reflecting mixed demand across end markets. The company also reported a record free cash flow for the quarter, providing additional financial cushion for investments in AI.

The outlook for Q3 FY25 looks strong. The company expects revenue of 8.7 billion USD ± 300 million USD, which implies about 28% year-over-year growth and a sequential increase of around 13%, with a projected non-GAAP gross margin of about 54%. Notably, MI308 shipments to China were excluded from the Q3 guidance, as this matter was still under review by the US government at the time. Later, it was reported that a deal was reached, under which AMD would receive export licences for the MI308 in exchange for remitting 15% of revenue from China sales to the US Treasury.

Analysis of key growth drivers and risks for Advanced Micro Devices, Inc.

The analysis of Advanced Micro Devices Q2 2025 earnings report revealed several issues that negatively impacted its key financial metrics. The main challenges are listed below:

• US export restrictions on the Instinct MI308 GPU led to inventory write-downs and associated charges of approximately 800 million USD, reducing GAAP gross margin to 40% and resulting in an operating loss of 134 million USD. Excluding this effect, the adjusted gross margin would have been around 54%
• Non-GAAP metrics also deteriorated, with gross margin declining to 43% from 53% a year earlier, and operating margin down to 12% from 22%, reflecting both the impact of export controls and rising operational costs
• Non-GAAP operating expenses increased to 2.43 billion USD, up 32% year-on-year, further pressuring quarterly profitability
• The Embedded segment declined by 4% year-on-year due to mixed demand across end markets, weakening the overall revenue profile

The analysis of the report also highlighted key future growth drivers for AMD’s revenue and earnings, with the main ones listed below:

• The launch of the Instinct MI350 series in H2 2025 and the expansion of the AI infrastructure portfolio, including ROCm 7, Developer Cloud, and the Helios rack-scale solution based on upcoming MI400, lay the groundwork for accelerated development of the AI accelerator segment
• The Data Center segment posted 3.2 billion USD in revenue, up 14% year-on-year, driven by strong demand for EPYC server processors, which helped offset the MI308 restrictions and signals continued workload migration to AMD platforms
• The Client segment reached a record 2.5 billion USD, up 67% year-on-year, on robust demand for Zen 5-based Ryzen processors and a favourable product mix, while the Gaming segment grew to 1.1 billion USD, up 73% year-on-year, due to higher shipments of semi-custom console chips and discrete Radeon GPUs, boosting the average price and revenue momentum
• The partner ecosystem is expanding, with new collaborations announced with HUMAIN, Red Hat, KDDI, Nokia, and Dell, which broadens the addressable market and strengthens demand prospects for AMD’s CPUs/GPUs in enterprise and cloud solutions
• Free cash flow hit a record 1.18 billion USD, with an FCF margin of 15%, giving AMD ample resources to invest in growth while enhancing financial resilience
• The sale of ZT Systems' manufacturing business to Sanmina for 3 billion USD, and AMD’s transition to a partner-led NPI model for AI racks, are expected to reduce capital intensity and accelerate supply scaling
• The Q3 2025 forecast expects revenue of approximately 8.7 billion USD and a non-GAAP gross margin of around 54%, indicating profitability recovery as the product mix normalises and AI demand rises

To summarise, the quarter revealed AMD’s vulnerability to regulatory risks, with export restrictions on the MI308 impacting margins and causing one-off losses. Although a new licensing model formally reopens sales to China, it includes a 15% revenue remittance requirement and ongoing local demand uncertainty.

However, the core growth drivers remain intact: EPYC maintains steady momentum, the Client segment set a new revenue record amid Ryzen demand, and the Gaming segment also surged. Further medium-term upside comes from the MI350 launch, the expansion of AMD’s software ecosystem (ROCm 7, Developer Cloud), and the NPI partnership model via Sanmina, which should scale deliveries faster while lowering capital costs.

In summary, margin volatility from regulatory and one-off factors remains a weak spot, while diversified product lines and rapid advancement in next-gen accelerators are key strengths.

Near-term catalysts for AMD stock include the fulfilment of the Q3 2025 guidance, a successful large-scale launch of MI350, and the first confirmed orders from China after obtaining export licences. If these factors materialise positively, they may offset regulatory risks and help AMD restore its margins to target levels.

Fundamental analysis of Advanced Micro Devices, Inc.

Below is the fundamental analysis of AMD's financial performance for Q2 2025:

• Balance sheet and liquidity: AMD entered the second half of the year with a net cash position and significant liquidity reserves. At the end of the quarter, the company had 5.867 billion USD in cash and short-term investments against total debt of 3.218 billion USD, resulting in a net position of about +2.65 billion USD. Inventories increased to 6.677 billion USD following the expansion of client and data center product manufacturing. In addition, the balance sheet includes assets held for sale of 4.326 billion USD, associated with the divestiture of the ZT Manufacturing business. From a liquidity perspective, the company appears resilient: cash, short-term investments, and accounts receivable exceed current liabilities
• Cash flows and capital allocation: cash flow was one of the key positives of the report. Operating cash flow for the quarter reached approximately 1.5 billion USD, and free cash flow hit a record 1.2 billion USD, equating to an FCF margin of about 15% of revenue. The company spent 478 million USD on share repurchases and reduced total debt to 3.2 billion USD by repaying 950 million USD in commercial paper previously issued to finance the ZT Systems deal. During the first half of 2025, AMD was also active in investments: net M&A outflows totalled 1.716 billion USD, and share repurchases reached 1.227 billion USD. The balance between investing in growth and returning capital to shareholders is supported by strong operating cash flow generation
• Debt load and capital structure: total debt at the reporting date stood at 3.218 billion USD. The company has already passed its peak borrowing related to the ZT Systems integration and has transitioned to a gradual reduction of gross debt. With 5.867 billion USD in cash and short-term investments, the debt burden appears moderate, and refinancing risk remains low. Share repurchase programs are primarily funded by free cash flow rather than by increasing leverage

Overall conclusion from AMD's fundamental analysis.

The company maintains strong financial stability thanks to its net cash position, record free cash flow, and moderate debt levels, which are already on the decline. A short-term risk remains the volatility in margins due to one-off regulatory factors and rising OPEX linked to the scaling of the AI business. In the long term, the company’s resilience is supported by its broad product lineup beyond AI GPUs, solid operational cash generation, and improved supply chains following the ZT Systems integration and the planned manufacturing transition to Sanmina. In the coming quarters, the key indicators will be the actual rollout pace of Instinct MI350, the recovery of gross margin to 54%, and inventory trends. If the strategy is successfully implemented, AMD’s financial profile should return to a more predictable trajectory with high profit-to-cash flow conversion.

Expert forecasts for Advanced Micro Devices, Inc.’s stock

• Barchart: 28 of 44 analysts rated the stock as Strong Buy, one as Moderate Buy, and 15 as Hold, with a high price target of 230 USD and a low price target of 121 USD
• MarketBeat: 26 of 39 specialists assigned a Buy rating to the shares, 12 gave a Hold recommendation, and one advised Sell, with a high price target of 210 USD and a low price target of 140 USD
• TipRanks: 25 of 36 professionals recommended the stock as a Buy, and 11 as a Hold, with a high price target of 230 USD and a low price target of 120 USD
• Stock Analysis: 15 of 37 experts rated the stock as Strong Buy, 12 as Buy, and 10 as Hold, with a high price target of 210 USD and a low price target of 110 USD

Advanced Micro Devices, Inc. stock price forecast for 2025

On the weekly timeframe, Advanced Micro Devices shares are trading within an ascending channel, and in April 2025, the stock bounced off the trendline near the 80 USD level, which acted as support. As a result, from April to August, AMD’s share price surged by 140% without significant corrections, reaching the 185 USD resistance level. Based on AMD’s stock performance, the potential price trajectories for 2025 are as follows:

The main forecast for Advanced Micro Devices stock suggests a corrective decline to the nearest support level at 161 USD. A rebound from this level would signal the end of the correction and the resumption of the uptrend within the ascending channel. The upside target is the channel’s upper boundary at 205 USD.

The alternative forecast for Advanced Micro Devices stock anticipates a deeper correction down to the 145 USD support level. A rebound from this level would act as a catalyst for AMD’s stock price to resume upward momentum within the ascending channel, with a target at the upper boundary around the 205 USD level.

Risks of investing in Advanced Micro Devices, Inc. stock

When investing in AMD shares, it is essential to consider the following risks:

• Intense competition: AMD faces tough competition from Intel Corp. (NASDAQ: INTC) and NVIDIA, which may lower prices or accelerate the introduction of new technologies, potentially impacting AMD’s market share negatively
• Reliance on TSMC: AMD relies on TSMC to manufacture its chips. Any supply disruptions or delays in the introduction of new technology processes at TSMC (NYSE: TSM) could affect AMD’s market position
• Demand fluctuations: the PC and server market is cyclical and depends on macroeconomic conditions. A decrease in demand for devices may reduce AMD’s revenue
• Development of proprietary AI chips by consumers: large tech companies like Amazon, Google, and Microsoft are investing in the development of their semiconductors for data centres and specialised tasks. This reduces their reliance on external suppliers, including AMD. If these corporations continue to increase spending on developing their proprietary chips, it could limit AMD’s overall market, reduce its share in the data centre segment, and slow its revenue growth over the long term

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