AMD Stock Drops 6.42% on Q2 Earnings Miss, Export Restrictions

On August 6, AMD, a leading semiconductor company, experienced a significant decline in its stock price, dropping over 9% at one point and closing down 6.42%. This downturn was primarily due to the company's disappointing financial performance for the second quarter of 2025, which was announced on August 5. The quarterly gross margin fell slightly below expectations, and the company's outlook for the third quarter did not include any revenue from the MI308 product.

AMD's second-quarter revenue was reported at 77 billion dollars, with a gross margin of 40% and net income of 8.72 billion dollars. However, due to export restrictions on the AMD Instinct MI308 data center GPU, the company incurred approximately 8 billion dollars in inventory and related expenses. Excluding these costs, the non-GAAP gross margin was around 54%. Despite exceeding revenue expectations, the impact of export restrictions led to a lower-than-anticipated gross margin for the quarter. AMD had previously projected a revenue of approximately 74 billion dollars and a non-GAAP gross margin of 43% for the second quarter.

Analysts noted that AMD's second-quarter gross margin did not meet previous guidance, and the company's third-quarter outlook did not include any revenue from the MI308. This, combined with the stock's significant year-to-date gains, led to a decline in the stock price despite optimistic revenue projections. The company's stock price fell over 9% at the market open on August 6, narrowing to a 6.64% decline by the time of reporting.

AMD's performance for the quarter was driven by strong sales in both computing and AI products. The company's CEO, Lisa Su, highlighted that the strong revenue performance was primarily due to record sales of server and PC processors. The data center division generated 32 billion dollars in revenue, a 14% year-over-year increase, driven by strong demand for AMD EPYC processors. The client and gaming division reported 36 billion dollars in revenue, a 69% year-over-year increase, with client revenue reaching a record high of 25 billion dollars, up 67% year-over-year, and gaming revenue at 11 billion dollars, up 73% year-over-year.

Looking ahead to the third quarter of 2025, AMD expects to achieve revenue of approximately 87 billion dollars, a 28% year-over-year increase and a 13% sequential increase. The non-GAAP gross margin is projected to be around 54%. AMD's executive vice president, Mark Papermaster, emphasized that the company's strategic investments in hardware, software, and systems will support future growth and drive long-term shareholder value.

AMD's CEO, Lisa Su, expressed excitement about the company's future prospects, particularly in the AI sector. She noted that the company has a clear path to scaling its AI business to generate hundreds of billions of dollars in annual revenue. The upcoming MI400 series is expected to be a significant advancement in AMD's product lineup, offering leading performance in chips, servers, and racks. Su also highlighted the growing interest from customers in the MI400 series, which is expected to drive large-scale deployments in 2026. She emphasized that the industry is in the early stages of an AI transformation, which will drive significant growth in computing demand across all markets, benefiting AMD's revenue and earnings growth in the coming years.

In addition to the AI market, AMD sees opportunities in sovereign AI, where countries seek to develop their own computing capabilities. Su cited the collaboration between Saudi Arabia and Humane as an example of this trend. AMD's open ecosystem is seen as a significant advantage in this market. However, she also noted that regulatory differences could impact the competitive landscape and innovation in the AI sector. Despite these challenges, AMD remains optimistic about the growth opportunities in the AI market and its ability to capitalize on them.