AMD reports weaker-than-expected earnings even as revenue tops estimates

Advanced Micro Devices reported quarter earnings on Tuesday that missed estimates. The stock slid about 3% in extended trading.

Here's how the chipmaker did versus LSEG expectations for the quarter ended June:

• Earnings per share: 48 cents adjusted versus 49 cents expected
• Revenue: $7.69 billion versus $7.42 billion expected

For the current quarter, AMD expects sales of $8.7 billion, plus or minus $300 million, versus expectations of earnings of $8.3 billion.

AMD reported net income during its fiscal second quarter of $872 million, or 54 cents per share, increasing from $265 million, or 16 cents per share in the year-ago period. Nvidia's overall sales rose 32% in the period from $5.84 billion a year earlier.

AMD is the second-biggest maker of graphics processing units (GPUs) for artificial intelligence behind Nvidia, which has the vast majority of the market. But big AI customers such as Meta and OpenAI are increasingly looking to AMD to provide an alternative to Nvidia's pricey chips, especially for inference, or when AI models are deployed to the public.

During the quarter, AMD announced new AI chips called the Instinct MI400 that are expected to hit the market next year. OpenAI CEO Sam Altman committed to using AMD's newest GPUs.

AMD is also grappling with chip export controls which have been placed on some of its AI chips because the U.S. government worries that powerful GPUs could be used by adversaries to surpass American capabilities or be used for military purposes.

"AI business revenue declined year over year as US export restrictions effectively eliminated MI308 sales to China, and we began transitioning to our next generation," AMD CEO Lisa Su said on a call with analysts.

The MI308 was previously barred for export to China in April, which the company said cost it $800 million in the June quarter. However, the company said in July that it expected shipments to resume after the Trump administration signaled that it would approve waivers. AMD said its outlook doesn't include any revenue from its China-focused AI chip called the MI308 and its license applications are currently being reviewed by the Department of Commerce.

Su told analysts on the call that the company's newest AI chip, called Instinct MI350, was competitive with Nvidia's GB200 chips for training and inference.

"Seven of the top ten model builders and AI companies use Instinct," Su said.

AMD's adjusted gross margin during the quarter was 43%. The company said it would have been 54% if not for export control costs.

AMD's main business, aside from GPUs, is making central processors, called CPUs, which compete with Intel to power more traditional servers.

Both are reported in the company's data center segment, which had $3.2 billion in revenue, up 14% on an annual basis.

The other major segment for AMD is called Client and Gaming, which includes the company's CPUs for laptops and desktops, and its GPUs for 3D gaming. That was up 69% on an annual basis to $3.6 billion. Client revenue by itself rose 57% to $2.5 billion, in line with the StreetAccount expectations of $2.56 billion, partially driven by strong demand for the company's latest desktop CPUs, which it calls AMD Ryzen Zen 5.

Gaming revenue by itself was up 73% year-over-year to $1.1 billion, versus StreetAccount estimate of $784 million, with its growth due to increased demand for custom chips for game consoles and gaming GPUs, AMD said.