Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Global Head of Investment Strategy
Investors in semiconductor stocks have become accustomed to dramatic cycles: impressive climbs often followed by sharp dips. AMD’s latest quarterly earnings provided exactly this dynamic, pairing strong AI-driven revenue growth with geopolitical disruptions that tempered near-term enthusiasm. While AMD’s longer-term trajectory remains compelling, investors face a nuanced balance of risk and reward.
AMD delivered record second-quarter revenues of USD 7.69 billion, comfortably surpassing Wall Street’s estimate of USD 7.41 billion, driven by robust demand in its Data Center GPUs and Gaming segments.
However, adjusted earnings per share of USD 0.48 slightly missed analyst expectations (USD 0.49), reflecting an USD 800 million charge related to US export controls restricting AI chip sales to China.
Despite near-term margin concerns, AMD raised its revenue guidance for the third quarter to approximately USD 8.7 billion, significantly above analyst expectations of USD 8.3 billion, signaling robust confidence in continued demand and AI-driven growth.
In after-hours trading immediately following the earnings release, AMD shares slipped around 6%, reflecting investor caution over near-term margin pressures and China-related uncertainties. This pullback comes after the stock had already risen more than 40% year-to-date, highlighting elevated market expectations leading into earnings.
“AMD’s growth remains robust, but geopolitical pressures and margin volatility require investors to stay alert and closely track developments.”
At the core of AMD’s growth story is its fast-growing Data Center business, up 14% year-over-year to USD 3.24 billion, powered by server chips (EPYC) and especially the AI-focused Instinct GPUs.
The new MI355 GPU is increasingly viewed as a credible challenger to Nvidia, offering up to 40% better performance-per-dollar metrics in key workloads. CEO Lisa Su highlighted strong customer momentum, noting: “We’re bullish on MI355. Customer engagement is ahead of expectations, reflecting significant adoption for large-scale AI deployments.”
Additionally, the upcoming MI400 series, scheduled for 2026, promises even greater performance, drawing strong interest for gigawatt-scale customer engagements.
Geopolitical tensions around China continue to cloud AMD’s immediate future. The US export restrictions blocking MI308 GPU sales to Chinese customers have already cost AMD around USD 800 million in revenue.
While recent signals from the Trump administration suggest possible easing of these restrictions, AMD’s current third-quarter guidance excludes any revenue upside from resumed sales, highlighting ongoing uncertainty.
“China remains a significant near-term uncertainty but also represents meaningful revenue potential if export licenses are promptly restored.”
Despite the spotlight on AI, AMD’s Gaming and Client segments posted impressive growth, with revenue up 69% year-over-year to USD 3.6 billion. Ryzen CPUs and Radeon gaming GPUs continued to gain market share and drive margins.
Gaming revenue alone jumped 73%, driven by strong semi-custom console sales and solid GPU performance in PC gaming. AMD’s Gaming and Client segments continue to provide essential stability and growth, cushioning the stock against potential volatility elsewhere.
To evaluate AMD’s prospects, investors need to pay close attention to a number of factors:
“AMD offers significant long-term growth potential, especially in AI, but requires investors to remain vigilant around geopolitical and operational execution risks.”
AMD’s second-quarter earnings reaffirm its significant growth potential, notably in AI-driven technologies. However, the stock’s near-term path could remain volatile, influenced by ongoing geopolitical uncertainties. Investors with a long-term view and tolerance for short-term volatility may find AMD attractive, but caution remains essential.
CEO Lisa Su captured the long-term sentiment succinctly: “We’re in the early stages of an industry-wide AI transformation. Our roadmap positions AMD for sustained growth, but execution and geopolitical navigation will be key.”
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