AMD beats revenue but stock drops 3% on $800M China export impact

AMD reported weaker-than-expected second-quarter earnings despite beating revenue estimates, with adjusted earnings per share of 48 cents versus the expected 49 cents, while revenue reached $7.69 billion against expectations of $7.42 billion. The chipmaker’s stock dropped about 3% in extended trading as the company continues battling U.S. export controls that cost it $800 million in the quarter. Major AI customers like Meta and OpenAI are increasingly turning to AMD as an alternative to Nvidia’s dominant graphics processing unit (GPU) offerings.

Key financial results: AMD’s mixed quarterly performance reflects both growth opportunities and regulatory headwinds in the AI chip market.

• Net income surged to $872 million, or 54 cents per share, compared to $265 million, or 16 cents per share, in the year-ago period.
• The company forecasts current quarter sales of $8.7 billion, plus or minus $300 million, versus analyst expectations of $8.3 billion.
• Adjusted gross margin hit 43% during the quarter, though AMD noted it would have reached 54% without export control costs.

Export control impact: U.S. government restrictions on AI chip exports significantly hampered AMD’s China business and overall profitability.

• The MI308 AI chip was barred for export to China in April, directly costing the company $800 million in the June quarter.
• AMD’s outlook excludes any revenue from its China-focused MI308 chip, with license applications currently under Department of Commerce review.
• The company expects shipments to resume after the Trump administration signaled approval for waivers in July.

AI chip competition: AMD is positioning itself as a viable alternative to Nvidia’s expensive GPUs, particularly for AI inference applications.

• The company announced new MI400 AI chips expected to hit the market next year.
• OpenAI CEO Sam Altman committed to using AMD’s newest GPUs, signaling growing enterprise interest in alternatives to Nvidia.
• Big AI customers including Meta and OpenAI are increasingly looking to AMD for inference workloads, where AI models are deployed to the public.

In plain English: AI inference is like the difference between teaching someone to cook versus actually preparing dinner. Training AI models (like what Nvidia’s chips primarily do) is the teaching phase, while inference is when the AI uses what it learned to actually perform tasks for users—like answering questions or generating images.

Business segment performance: AMD’s traditional CPU and gaming divisions showed strong growth, offsetting some AI chip challenges.

• Data center segment revenue reached $3.2 billion, up 14% annually, combining both GPU and CPU sales for servers.
• Client and Gaming segment surged 69% to $3.6 billion, driven by strong demand across consumer products.
• Gaming revenue alone jumped 73% year-over-year to $1.1 billion, exceeding StreetAccount estimates of $784 million due to increased demand for custom console chips and gaming GPUs.

What’s driving growth: AMD’s latest desktop processors and gaming products are gaining significant market traction.

• Client revenue rose 57% to $2.5 billion, meeting StreetAccount expectations of $2.56 billion, partially driven by strong demand for AMD Ryzen Zen 5 desktop CPUs.
• Gaming growth stemmed from increased demand for both custom chips for game consoles and gaming GPUs.