AMD Reports Surprising Revenue Growth, but Profit Falls Short of Expectations, Stock Price Drops 4% After Hours

Advanced Micro Devices (AMD) released its quarterly earnings on Tuesday, reporting revenue that exceeded expectations, but profit fell short of predictions. The company's stock price dropped approximately 4% in after-hours trading.

Here is a comparison of the chipmaker's performance with that predicted by Loup (LSEG) for the quarter ended June:

Adjusted earnings per share: 48 cents, expected 49 cents; revenue: $76.9 billion, expected $74.2 billion.

For the current quarter, AMD expects revenue of $87 billion (a range of plus or minus 3 billion), exceeding expectations of $83 billion.

AMD's second-quarter net profit was $8.72 billion (54 cents per share), up from last year's same period of $2.65 billion (16 cents per share). During the same period, NVIDIA's total revenue grew 32%, rising from $58.4 billion to a higher level.

AMD is the second-largest manufacturer of artificial intelligence graphics processing units (GPUs), after NVIDIA, which dominates the market. However, Meta and OpenAI, among other large AI clients, are increasingly seeking AMD as an alternative to high-priced NVIDIA chips, especially in the inference stage (i.e., when AI models are deployed publicly).

This quarter, AMD released its new MI400 AI chip, which is expected to be launched next year. OpenAI CEO Sam Altman has already committed to using AMD's latest GPUs.

AMD is also addressing the issue of chip export controls – some AI chips are restricted due to concerns by the US government that high-performance GPUs could be used to surpass American technological capabilities or military uses.

In April, the MI308 chip was banned from export, which led to a loss of $8 billion in revenue for the quarter ended June. However, AMD stated that it expects shipments to resume due to hints from the Trump administration that they will approve exemptions.

AMD's adjusted gross margin for this quarter was 43%. The company said that if export control costs were not considered, the gross margin could have reached 54%.

In addition to GPUs, AMD's core business is manufacturing central processing units (CPUs), competing with Intel in providing computing power support for traditional servers.

Both of these businesses are part of the company's data center department, which reported revenue of $32 billion for this quarter, a 14% year-over-year increase.

AMD's other main department is the "Client and Gaming" department, covering CPUs used in laptops and desktops as well as GPUs used in 3D gaming. Revenue in this department grew 69%, reaching $36 billion. Within this department, client business revenue growth was 57% to $25 billion, which was in line with StreetAccount's expectations of $25.6 billion, partly due to strong demand for the company's latest desktop CPUs (AMD Ryzen Zen 5).

AMD stated that gaming business revenue grew 73% to $11 billion, exceeding StreetAccount's expectations of $7.84 billion, driven by increased demand for customized chips and GPUs used in games.