What just happened? AMD just found itself in the strange position of posting its highest quarterly revenue ever but still partly missed expectations and reported underwhelming data center figures. As a result, the company's share price is down 5% in premarket trading.
For the second quarter of its fiscal 2025, AMD reported a record $7.69 billion in revenue, beating analysts' expectations of $7.42 billion. But the earnings per share of 48 cents was less than the expected 49 cents.
AMD's data center division reported revenue of $3.2 billion for the quarter. This was in line with expectations and marked a 14% year-over-year increase. However, US export restrictions on the Instinct MI308 accelerator led to $800 million in inventory and other charges. This resulted in an operating loss of $155 million, compared to the $743 million profit a year ago. Without the charges, non-GAAP gross margin would have been approximately 54% instead of 43%.
Most companies would be happy with a 14% revenue increase, which was driven by strong demand for AMD Epyc processors as AI adoption becomes more widespread, but it pales in comparison to rival Nvidia's 73% surge in data center revenue to $39.11 billion.
Elsewhere, AMD's Client and Gaming division revenue was up 69% to $3.6 billion, driven by demand for client CPUs, GPUs, and console gaming products. Operating income was up 362% to $767 million compared to $166 million a year earlier.
AMD's CPUs are now a firm favorite among gamers, as illustrated by Team Red's processors reaching a record-high user share on the recent Steam survey. CEO Dr. Lisa Su said demand for its Radeon RX 9000 GPUs has outweighed supply, all of which contributed to gaming revenue rising 73% to $1.1 billion during the quarter.
The Embedded division was one of the more disappointing areas. Its revenue was down 4% to $824 million while operating income fell 20% to $275 million. AMD blamed the results on mixed demand across end markets, macroeconomic softness, and variability in customer ordering patterns.
Looking forward, AMD posted revenue guidance for the third quarter at $8.3 billion, plus or minus $300 million, which would be a 13% YoY jump and yet another record breaker for the company – one that's higher than analysts' expectations. AMD believes the increase will be spurred by extra demand for its AI accelerators, Epyc processors, and client products as the back-to-school period begins and companies stockpile for the holidays.