Shares of Advanced Micro Devices (NASDAQ: AMD) slid nearly 7% post-earnings on Tuesday, despite the company posting record revenue for Q2 2025. While AMD outperformed analyst estimates on top-line growth, investors seemed disappointed with the AI story that has so far fueled the chipmaker’s recent stock surge.
📊 Here’s what you need to know about AMD’s results, why the stock fell, and what lies ahead.
🔹 Solid Quarter, but Mixed Signals
AMD reported revenue of $7.7 billion, beating Wall Street’s expectation of $7.4 billion. This marks a 32% YoY growth, driven mainly by strong performance in its Client CPU and Gaming GPU segments.
However, the company’s Data Center segment, which represents its AI ambitions, posted only 14% YoY growth, bringing in $3.2 billion. This number met expectations but lagged significantly behind Nvidia’s 73% surge in a similar vertical — a comparison that likely triggered investor concern.
🔹 Gross Margins Under Pressure
AMD’s gross margins declined to 43%, compared to the projected 54% — a drop attributed to U.S. export restrictions on its MI308 AI chips destined for China. This margin squeeze raised red flags, especially considering high expectations surrounding AMD’s AI-driven growth potential.
🔹 AI Hype vs. Revenue Reality
Dr. Lisa Su, AMD’s CEO, remained optimistic about upcoming product cycles, especially the Instinct MI350 GPU, built to rival Nvidia’s new Blackwell platform.
But analysts and investors are starting to question whether the AI narrative around AMD has run too far ahead of fundamentals.
“The stock is pricing in an Nvidia-like AI growth story,” says top-ranked TipRanks analyst Tech Stock Pros. “But when you dig into the numbers, the real growth this quarter came from CPUs, not AI acceleration.”
According to the analyst, AMD’s recent 100% rally since April created a valuation buffer that left little room for error — and the company’s AI delivery was not strong enough to sustain that momentum.
🔹 Outlook Still Promising — But With Caveats
On the bright side, AMD raised its Q3 revenue guidance to $8.7 billion, beating consensus estimates of $8.32 billion. However, this excludes any MI308 shipments to China, which remain blocked due to ongoing export restrictions.
Despite near-term caution, Wall Street remains moderately bullish on the stock:
- 25 Buy Ratings
- 10 Hold Ratings
- 1 Sell Rating
- Average Price Target: $161.16
This suggests that while the AI momentum may be temporarily cooling, analysts still believe in AMD’s long-term potential — provided execution remains solid.
🔹 Final Word: Time to Reassess?
With the stock correcting 7%, investors may want to reassess their risk-reward profile on AMD. The company remains a strong player in the semiconductor space, but expectations need to align with actual AI monetization rather than just potential.
This could be a healthy reset — or the beginning of a deeper re-rating. Either way, Q3 performance will be the real litmus test.
💡 Looking Ahead
Investors should watch closely for:
- MI350 adoption news
- Data center segment acceleration
- Clarity on export restrictions
- Gross margin recovery trends
📌 Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a financial advisor before making investment decisions.
