In spite of a significant inventory charge amounting to $800 million for the MI308 product, AMD still managed to report a record-breaking $7.685 billion in revenue, marking its biggest ever quarter without being entirely derailed.
AMD has announced its Q2 2025 financial results, showing a 27% year-over-year (YoY) increase in revenue to approximately $7.43 billion. However, the earnings per share (EPS) declined by 30% YoY to around $0.48.
The strong revenue growth was primarily driven by a surge in demand for AMD's data center products, particularly the AMD EPYC CPUs, and a record $3.621 billion in revenue from the Client and Gaming division, marking a 69% YoY increase.
However, the company faced a significant challenge in Q2 FY2025 due to export restrictions on AMD’s Instinct MI308 GPU shipments to China. These restrictions led to a decline in AI-related revenue year-over-year because MI308 shipments to China were effectively halted, costing the company about $800 million in sales during that quarter.
The export controls forced AMD to take an approximately $800 million regulatory inventory charge, which negatively affected gross margin and profit for Q2. AMD’s gross margin dropped from 54% in Q1 to around 51-52% in Q2 as a result of these issues.
Notably, the company’s Q2 revenue outlook and guidance excluded any revenues from MI308 shipments to China, as export license applications were still under review by the U.S. Department of Commerce at the time of reporting.
Despite these headwinds, AMD expressed confidence that the negative impact from MI308 export restrictions would be more than offset by growth from its leadership products, including the MI300 series and EPYC CPUs. The recent announcement that the U.S. government would begin reviewing MI308 export licenses to China, with shipments expected to resume upon approval, could unlock up to $1.5 billion in annual revenue that had been at risk.
The Data Center division posted revenue of $3.24 billion, growing 14% YoY, but the division had an operating loss of $155 million, compared to $743 million in income a year ago. The decline in profitability was attributed to $800 million in inventory and related charges due to U.S. export restrictions on the Instinct MI308 AI accelerator.
The Embedded division, on the other hand, saw a 4% year-over-year (YoY) and flat sequential decline in revenue, posting $824 million. The decline was attributed to mixed demand across end markets, macroeconomic softness, and variability in customer ordering patterns.
The Gaming segment saw a 73% revenue increase, reaching $1.12 billion, due to higher shipments of semi-custom SoCs used in game consoles and strong demand for Radeon RX 9000-series GPUs.
Looking ahead, AMD expects its Instinct MI350-series to ramp in Q3, along with EPYC server processors and client products due to the start of the back-to-school season and stockpiling for the upcoming Christmas season.
For Q3 2025, AMD expects revenue of approximately $8.7 billion, representing around 28% YoY and 13% sequential growth. The company's gross margin dropped to 40% due to the $800 million writeoff.
Dr. Lisa Su, AMD Chair and CEO, stated that the company is well positioned to deliver significant growth in the second half of the year, driven by the ramp of AMD Instinct MI350 series accelerators and ongoing EPYC and Ryzen processor share gains.
In summary, AMD's Q2 2025 results were marked by strong demand for its data center and client products, but the company faced significant challenges due to export restrictions on its Instinct MI308 GPU shipments to China. Despite these challenges, AMD remains optimistic about its future growth prospects, particularly with the expected resumption of MI308 shipments to China and the ramp of its new products.
The strong revenue growth from AMD's data center products, particularly the AMD EPYC CPUs, and a record performance from the Client and Gaming division were primarily driven by technology advancements and increased demand, but were challenged by export restrictions on AMD’s Instinct MI308 GPU shipments to China, impacting AMD’s finance due to a drop in AI-related revenue and an approximately $800 million regulatory inventory charge.
Notably, AMD's optimism for future growth hinges on technology developments, such as the expected resumption of MI308 shipments to China and the ramp of its new products like the Instinct MI350 series, which they believe will offset the negative impact from previous export restrictions.
