AMD Rides on Gaming Business Rebound: Will the Momentum Continue?

Advanced Micro Devices AMD is benefiting from the strong rebound in its Gaming segment, which delivered an impressive growth in the second quarter of 2025. The Gaming segment’s revenues increased 73.1% year over year to $1.122 billion, accounting for 14.6% of total revenues. Sequentially, revenues increased 73.4% quarter over quarter.

Growth was primarily driven by strong demand for Radeon GPUs and higher semi-custom revenues. In the second quarter of 2025, semi-custom revenues increased by a large double-digit percentage year over year as console inventories normalized and AMD’s customers began preparing for the holiday season.

AMD also announced collaborations with Microsoft and Sony for next-generation gaming technologies. In the second quarter of 2025, the company announced a multiyear collaboration with Microsoft for custom chips powering next-generation Xbox devices. It deepened its partnership with Sony through Project Amethyst, which leverages machine learning to enhance immersive gaming experiences. 

AMD’s Radeon 9000 series graphics cards have been a major growth driver. The launch of the Radeon 9600 XT extended RDNA 4 performance advantages to mainstream gamers, delivering significant gaming performance improvements, including more than double the ray tracing capabilities of the prior generation. 

For the third quarter of 2025, AMD expects the Gaming segment to remain flattish, following the strong second-quarter performance. However, the company anticipates a significant drop in console-related revenues in the fourth quarter of 2025 due to the seasonal nature of the business.

AMD Suffers From Stiff Competition

AMD faces stiff competition in the gaming market from the likes of NVIDIA NVDA, which dominates in the discrete GPU market, and Intel Corporation INTC, which is a strong player in the gaming-focused discrete GPU market and integrated graphics.

NVIDIA is benefiting from strong demand in the gaming segment, driven by the sales of its Blackwell architecture GPUs. In the first quarter of fiscal 2026, gaming revenues increased 30.7% year over year and 48% sequentially to $3.76 billion, accounting for 8.5% of the total revenues. The year-over-year increase reflects strong demand from gamers, creators, and AI enthusiasts.

In the first quarter of fiscal 2026, NVDA announced the GeForce RTX  5070 and RTX 5060, introducing Blackwell graphics to gamers with desktop prices from $299 and laptops from $1,099.

Intel is expanding its footprint in the gaming market through its Intel Arc graphics family, which offers modern GPU features to power immersive games, creator applications, and AI workloads. Intel’s launch of Intel Arc B-Series, based on the latest Xe2 GPU architecture, has been noteworthy. This architecture delivers 70% more performance per core and is 50% more power efficient than the previous generation Intel Arc A750.

AMD’s Share Price Performance, Valuation, and Estimates

Advanced Micro Device shares have gained 37% year to date, outperforming the broader Zacks Computer & Technology sector’s return of 11.8% and the Zacks Computer-Integrated Systems industry’s increase of 25.7%.

AMD Stock Performance

AMD stock is trading at a premium, with a forward 12-month Price/Sales of 7.33X compared with the industry’s 3.65X. AMD has a Value Score of F.

Price/Sales (F12M)

The Zacks Consensus Estimate for third-quarter 2025 earnings is currently pegged at $1.17 per share, representing a 5.4% increase over the past 30 days. This indicates a 27.17% decrease year over year.

The consensus mark for 2025 earnings is pegged at $3.94 per share, which has increased 2.3% over the past 30 days, suggesting 19.03% year-over-year growth.

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote

AMD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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