U.S. veto on their Instinct MI308 chips forces AMD to take an $800 million charge and dents their margins
Advanced Micro Devices (AMD) closed the second quarter of fiscal year 2025 with mixed results: record revenues of $7.6 billion, a 32% year-over-year increase, but operating losses under GAAP due to a sharp rise in costs and the direct effects of U.S. export restrictions imposed on artificial intelligence chips sold to China.
Although revenues exceeded consensus forecasts — which expected $7.4 billion — earnings per share (EPS) were below expectations, coming in at $0.48 compared to the $0.49 anticipated by analysts. The market reacted skeptically: AMD’s shares fell 4.2% in after-hours trading following the results, although losses later moderated.
Key financial data for Q2 FY2025:
| Indicator | Q2 2025 (GAAP) | Q2 2024 | Change |
|---|---|---|---|
| Total revenue | $7.6 billion | $5.74B | +32% |
| Cost of goods sold (COGS) | $4.332 billion | $2.72B | +59% |
| Gross margin | $3.268 billion | $3.02B | +8% |
| Gross margin (%) | 43% | 52% | -9 points |
| Operating income | -$134 million | $259M | — |
| EPS (GAAP) | $0.48 | $0.58 | -17% |
⚠️ The gross margin fell by 9 percentage points mainly due to an $800 million inventory charge related to export restrictions on the MI308 line.
Non-GAAP results also paint a picture of sustained operating profit, though down 29%
AMD also reported non-GAAP figures to provide a “more accurate” view of operating performance excluding extraordinary factors. In these terms:
| Indicator | Q2 2025 (non-GAAP) | YoY Change |
|---|---|---|
| Adjusted gross margin | 43% | -10 points |
| Adjusted operating income | $897 million | -29% |
| Sequential decline in operating income | -50% | — |
The company emphasized that, had the inventory charge due to restrictions not occurred, the gross margin would have been around 54%, well above the reported figure. However, it did not provide an adjusted net operating income estimate excluding that charge, leaving the question open whether AMD would have maintained GAAP operating profits.
Context: sanctions, competition, and geopolitical tensions
The margin pressure and operational losses occur amid a tense semiconductor market environment, marked by the geopolitical dispute between the U.S. and China. U.S. authorities have restricted sales of advanced chips to Chinese companies, directly impacting key products like the Instinct MI308, designed for AI workloads and large-scale language model training.
While AMD recently obtained partial authorization to continue selling to China — similar to NVIDIA’s license for its H20 — the effects of the initial ban are clearly reflected in the quarterly results.
Outlook: slight improvement but still uncertain
For the third fiscal quarter, AMD provided a revenue guidance between $8.4 billion and $9 billion, with a mid-point of $8.7 billion, above analysts’ expectations of $8.3 billion. It also projects a recovery in gross margin up to 50%, indicating expectations of less inventory impact or better cost management.
Market reaction
AMD’s shares dropped as much as 4.8% after hours but later pared losses to around -3.8%. Analysts interpret that, despite revenue growth and improved forecasts, the market still seeks clearer assurances on operational profitability and a more definitive resolution to the sanctions’ impact.
Summary for investors:
AMD maintains a solid revenue growth trajectory but faces significant margin pressures due to regulatory and geopolitical challenges. The key in upcoming quarters will be their ability to adapt supply chains and markets in response to restrictions, and to diversify their AI portfolio beyond China. Meanwhile, volatility appears inevitable.
References: wccftech and Portal Financiero