AI Export Restrictions Weigh on Chipmaker’s Performance
Advanced Micro Devices reported mixed second-quarter results, missing earnings estimates while exceeding revenue expectations. Adjusted earnings per share came in at 48 cents, just below the expected 49 cents, while revenue reached $7.69 billion, surpassing forecasts of $7.42 billion. The stock dropped around 5% in extended trading following the announcement.
Net income rose sharply to $872 million, or 54 cents per share, compared to $265 million, or 16 cents per share, a year ago. Despite the revenue beat, challenges tied to U.S. export controls on AI chips negatively impacted AMD’s performance, particularly in its data center segment.
AI Business Faces Headwinds and Opportunities
CEO Lisa Su acknowledged that AMD’s AI revenue declined year-over-year, primarily due to U.S. restrictions that blocked exports of the MI308 chip to China. This alone resulted in an $800 million revenue hit during the quarter. Although the company expects shipments to resume pending license approvals, the current quarter’s forecast excludes any revenue from China-bound AI chips.
AMD is betting heavily on its new Instinct MI400 and MI350 AI chips. Su highlighted growing partnerships with leading AI developers and claimed performance competitiveness with Nvidia’s GB200. She stated that seven of the top 10 model builders are currently using AMD’s Instinct chips, with discussions underway to expand cluster deployments based on AMD hardware.
Strong Data Center and Gaming Growth
Data center revenue rose 14% year-over-year to $3.2 billion. The segment includes both GPUs and CPUs, the latter seeing increasing demand due to their vital role in AI server infrastructure. Su noted that growing cloud capital expenditures reflect not only GPU investments but also significant spending on CPUs.
Meanwhile, AMD’s Client and Gaming segment surged 69% annually to $3.6 billion. Client revenue reached $2.5 billion, bolstered by robust demand for AMD Ryzen Zen 5 desktop CPUs. Gaming revenue rose 73% to $1.1 billion, beating expectations thanks to higher sales of gaming GPUs and custom chips for game consoles.
Guidance and Margins Affected by Geopolitical Pressures
For the current quarter, AMD expects revenue of $8.7 billion, plus or minus $300 million, outpacing analyst expectations of $8.3 billion. Adjusted gross margin was reported at 43%, though it would have reached 54% without the export control costs. Despite regulatory headwinds, the company remains optimistic about AI-driven growth moving forward.
As AI demand surges globally, AMD’s ability to execute amid shifting trade policies and fierce competition from Nvidia will be key to its trajectory in the second half of the year.
