AMD outlines 28% revenue growth guidance for Q3 2025 amid MI350 ramp and strong data center demand

Earnings Call Insights: Advanced Micro Devices, Inc. (AMD) (AMD) Q2 2025

Management View

• Lisa T. Su, CEO, highlighted record performance: “We delivered very strong second quarter results, with revenue exceeding the midpoint of guidance as higher EPYC and Ryzen processor sales more than offset headwinds from export controls that impacted Instinct sales.” She noted records in both EPYC and Ryzen CPU sales and a 32% year-over-year revenue increase to $7.7 billion, with over $1 billion in free cash flow. Excluding an $800 million inventory write-down, gross margin was 54%.

• Su emphasized data center achievements: Data Center segment revenue increased 14% year-over-year to $3.2 billion, driven by robust EPYC portfolio demand and significant adoption in cloud and enterprise, with more than 100 new AMD-powered cloud instances launched in the quarter.

• The CEO pointed to an accelerating AI opportunity, stating, “With the MI350 series, we’re also expanding our system-level capabilities to support deployments powered by AMD CPUs, GPUs and NICs,” and described a multibillion-dollar collaboration with HUMAIN to build AI infrastructure.

• Su highlighted the launch of ROCm 7 with 3x higher inferencing and training performance, and projected that the MI400 series development is “progressing rapidly,” aiming for a 2026 launch, and significant customer interest for large-scale deployments.

• Jean X. Hu, CFO, stated, “We are pleased with our strong second quarter financial results. We delivered record revenue of $7.7 billion, exceeding the middle point of our guidance, up 32% year-over-year, reflecting strong momentum across our business.” She also noted, “Gross margin was 43%, down 10 points from 53% a year ago. The decrease was due to the $800 million inventory and related charges associated with the export restrictions.”

Outlook

• Management provided Q3 2025 revenue guidance of approximately $8.7 billion, plus or minus $300 million. Hu explained, “The midpoint of our guidance represents approximately 28% year-over-year revenue growth, driven by strong double-digit growth in our Client and Gaming, and Data Center segments.”

• Sequentially, revenue is expected to grow by approximately 13%, with strong double-digit growth in Data Center driven by the ramp of AMD Instinct MI350 series GPU products and modest growth in Client and Gaming.

• Non-GAAP gross margin for Q3 is expected to be approximately 54%, with non-GAAP operating expenses of about $2.55 billion. The outlook does not include any revenue from Instinct MI308 shipments to China.

Financial Results

• Record Q2 revenue of $7.7 billion was reported, up 32% year-over-year and 3% sequentially. Ryzen and EPYC processor sales, along with higher semi-custom shipments, outpaced the impact of U.S. export controls on MI308 sales.

• Operating income was $897 million, representing a 12% margin compared to $1.3 billion or 22% a year ago, due to inventory-related charges. Diluted earnings per share were $0.48, with the $800 million charge reducing EPS by approximately $0.43.

• Data Center segment revenue reached $3.2 billion, up 14% year-over-year but down 12% sequentially due to export controls. The segment posted an operating loss of $155 million, compared to operating income of $743 million a year ago.

• Client and Gaming segment revenue grew 69% year-over-year to $3.6 billion, with operating income of $767 million. Embedded segment revenue was $824 million, down 4% year-over-year.

• The company closed the acquisition of ZT Systems and entered an agreement to sell ZT’s manufacturing business for $3 billion, expected to close by year-end.

Q&A

• Thomas James O’Malley, Barclays: Asked about potential pull-forwards in Client and Gaming. Lisa T. Su responded, “We don’t think a whole lot of that is. We actually… end user consumption is actually quite strong for Client in terms of going into the second half of the year.”

• O’Malley also inquired about MI308 sales to China. Su explained, “The exact timing of revenue and contribution will depend a bit on when those are… licenses are actually granted. But overall, I think this is a better position than we were 90 days ago.”

• Vivek Arya, BofA Securities: Asked about sovereign AI opportunities and gross margins. Su said sovereign is “additive” to current growth. Jean X. Hu noted MI product gross margin is “a little bit below corporate average” but expects improvements long-term.

• Timothy Michael Arcuri, UBS: Queried about the Data Center GPU ramp. Su highlighted, “MI355… really is ramping as we go through this quarter and the third quarter… there’s a strong desire to really use us at scale.”

• Ross Clark Seymore, Deutsche Bank: Asked about MI350 family adoption. Su responded, “I think the adoption is a bit faster than we might have expected.” On Client and Gaming seasonality, Su said Gaming would be “flattish to Q2” and expects the segment “would probably be down in the fourth quarter.”

• Joshua Louis Buchalter, TD Cowen: Focused on lead times for MI350 and MI400. Su stated, “Think about it as somewhere between 8, 9 months…” and cited strong supply chain preparation.

• Benjamin Alexander Reitzes, Melius Research: Asked about sequential sales growth drivers. Hu confirmed, “the majority of the increase is really driven by MI355’s strong ramp.”

Sentiment Analysis

• Analysts maintained a constructive but probing tone, repeatedly focusing on the sustainability of growth, the timing and impact of export controls, and the scaling of AI and data center products. Questions probed for clarity on gross margins and the pace of new product adoption.

• Management’s tone was confident and forward-looking during prepared remarks, emphasizing strong demand and share gains. In Q&A, management maintained composure, offered detailed explanations, and occasionally acknowledged uncertainties, particularly around regulatory timelines.

• Compared to the previous quarter, management’s tone remained steady but with increased emphasis on the rapid scaling of MI350 and the strategic importance of sovereign AI and regulatory developments. Analyst tone remained consistently focused on underlying growth drivers and operational risks.

Quarter-over-Quarter Comparison

• Guidance language shifted from projecting “strong double-digit-percentage revenue growth” in the previous quarter to an explicit Q3 revenue target of approximately $8.7 billion, or 28% year-over-year growth.

• Strategic focus increasingly centers on scaling the MI350 series and preparing for MI400, with more detailed commentary on sovereign AI opportunities and regulatory impacts.

• Key metrics improved: Client and Gaming segment revenue grew from $2.9 billion in Q1 to $3.6 billion in Q2, while Data Center segment revenue decreased sequentially due to export controls.

• Management confidence in product roadmap and customer adoption remains high, with a greater sense of urgency around executing large-scale AI deployments and mitigating regulatory risks.

• Analyst questions maintained focus on Client segment momentum, Instinct product ramps, export control impacts, and gross margin sustainability, consistent with prior quarter themes.

Risks and Concerns

• Management identified U.S. export controls as a significant headwind, resulting in an $800 million inventory write-down and excluding MI308 China revenue from near-term guidance. Su noted, “Given the timing of licenses, we have a number of licenses that are under review now.”

• Gross margin dilution from MI products remains a concern, though management expects improvement as operational efficiencies scale.

• Analysts raised questions about the timing and magnitude of China-related revenue, the ramp of new AI products, and overall visibility into large-scale deployments.

Final Takeaway

AMD management emphasized robust demand and record results across key businesses, driven by strong adoption of EPYC and Ryzen processors and the rapid ramp of Instinct MI350 accelerators. With a clear pathway to 28% revenue growth in Q3 and a focus on scaling AI and data center solutions, AMD continues to invest aggressively in R&D and go-to-market initiatives while navigating regulatory headwinds and preparing for the next wave of product launches and large-scale deployments.

Read the full Earnings Call Transcript