AMD Suffers After China GPU Ban

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Chip designer Advanced Micro Devices, Inc. (AMD) released a mixed earnings report today. Despite beating analyst revenue estimates of $7.4 billion with actual sales reaching $7.6 billion, AMD’s earnings per share ($0.48) fell short of the expected $0.49. The firm’s guidance for revenues of between $8.4 billion and $9 billion surpassed analysts’ predictions but was insufficient to prevent a 4.2% drop in its stock price post-earnings report.

AMD Reports Operating Loss Due to High Costs

The crux of AMD’s earnings lies in the cost of goods sold, which surged by 59% year-over-year, while revenue grew by 32%. This disparity led to a nine percentage point dip in gross margins. These increased costs resulted in an operating loss of $134 million for Q2, compared to $259 million and $806 million in the previous two quarters.

However, when adjusted to non-GAAP figures, AMD recorded an operating profit of $897 million but saw a 29% drop from the prior year. Sequentially, this dropped by 50%, halving its Q1 operating income. In a note accompanying the release, AMD explained that non-GAAP measures exclude items not indicative of core performance and provide consistent comparisons across periods.

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October 8, 2025

Impact of US Export Controls

AMD’s non-GAAP gross margin fell to 43% due to $800 million in inventory charges related to export control restrictions on Instinct MI308 products. Excluding this charge, the firm would have had a gross margin of approximately 54%. The company attributed its operating income decline partly to these charges.

While AMD reported a GAAP operating loss, it set new revenue records with $7.7 billion, marking a 32% increase year-over-year. For Q3, the firm anticipates revenues of $8.7 billion with a 50% gross margin. Shares fell by 4.8% in after-hours trading before recovering slightly to end down 3.8% at 4:45 p.m. Eastern Time.

Despite this setback, AMD benefited from earlier approval from the Trump administration to sell its MI308 AI chips to China.

📚 Reading Comprehension Quiz

10 Points

What was the impact of the cost of goods sold (COGS) on Advanced Micro Devices, Inc. (AMD)'s earnings report?

A. COGS increased by 32% year-over-year, leading to a revenue growth of 59%. This resulted in an operating profit. B. COGS increased by 59% year-over-year, leading to a nine percentage point dip in gross margins. This resulted in an operating loss of $134 million for Q2. C. COGS remained stable, and there was no significant impact on the earnings report. D. COGS decreased by 59% year-over-year, leading to a nine percentage point increase in gross margins. This resulted in an operating profit of $897 million.

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