AMD Q3 Earnings Beat Estimates, Revenues Up Y/Y, Shares Fall

Advanced Micro Devices AMD reported third-quarter 2025 non-GAAP earnings of $1.20 per share, which beat the Zacks Consensus Estimate by 2.56%. The figure jumped 30.4% year over year and 150% sequentially. 

Revenues of $9.25 billion beat the Zacks Consensus Estimate by 6.02%. The top-line figure increased 35.6% year over year and 20.3% sequentially. 

AMD shares were down roughly 2% at the time of writing this article. AMD shares have surged 103.9% year to date compared with the broader Zacks Computer and Technology sector’s return of 29.4%.

AMD’s Q3 Top Line Rides on Data Center Growth

Data Center revenues increased 22.3% year over year to $4.34 billion and accounted for 47% of total revenues. Sequentially, revenues climbed 34%. Strong demand for fifth-gen EPYC processors and Instinct MI350 series GPUs drove top-line growth. Hyperscalers launched more than 160 EPYC-powered instances in the reported quarter, including new Turin offerings from Google, Microsoft Azure, Alibaba and others. More than 1,350 public EPYC cloud instances are now available globally, up roughly 50% year over year.
 

Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise

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

A rich partner base that inclues the likes of OpenAI, HPE, Dell Technologies, Lenovo, Super Micro, Amazon Web Services (AWS), Oracle ORCL, Cisco Systems CSCO, International Business Machines IBM, Cohere, Vultr, DigitalOcean and others is driving AMD’s prospects. AMD introduced its Helios design supporting Meta Platforms’ new Open Rack Wide specification. AWS launched Amazon EC2 M8a instances using 5th Gen EPYC CPUs, boosting performance up to 30% compared with the previous generation. 

In the reported quarter, OpenAI selected AMD as a preferred partner to build 6 gigawatts (GW) of next-generation AI computing capacity. The rollout will begin with 1 GW of AMD Instinct MI450 GPUs in the second half of 2026. Oracle Cloud Infrastructure will launch the first publicly available AI supercluster using AMD’s Helios rack design, featuring Instinct MI450 GPUs, EPYC Venice CPUs and Pensando Vulcano networking. The initial deployment includes 50,000 GPUs starting third-quarter 2026. Oracle also announced Compute Cloud@Customer X11 and Private Cloud Appliance X11 platforms powered by 5th Gen EPYC CPUs. 

Cisco Systems, G42 and AMD has collaborated to deliver a secure AI cluster in the UAE powered by AMD Instinct MI355X GPUs. IBM and AMD inked a multi-year collaboration with Zyphra to support multimodal AI development using large clusters of Instinct MI350X GPUs. Moreover, AMD and IBM will integrate quantum computing with high-performance compute for scalable and open architectures. Cohere and AMD Expanded partnership to integrate AMD Instinct GPUs across the latter’s complete enterprise AI platform. Vultr and AMD announced global rollout of Instinct MI355X GPUs on Vultr’s cloud. DigitalOcean and AMD announced broader AMD GPU support for AI workloads with MI325X available currently and MI350X launching later this year.

AMD launched ROCm 7 software, which delivers an improved AI training and inference performance with richer enterprise deployment tools. ROCm 7 delivers up to 4.6 times higher inference and 3 times higher training performance compared to ROCm 6.

AMD Sees Soaring Growth in Client and Gaming Segment

The Client segment’s revenues soared 46.2% year over year to $2.75 billion and accounted for 29.7% of total revenues. Sequentially, revenues increased 10%. Strong demand for Ryzen processors and a richer product mix drove top-line growth.

The Gaming segment’s revenues surged 181% year over year to $1.3 billion and accounted for 14% of total revenues. Sequentially, revenues increased 15.7%. Higher semi-custom revenues and strong demand for Radeon gaming GPUs drove results.

On a consolidated basis, Client and Gaming revenues accounted for 43.8% of AMD’s total revenues in the third quarter of 2025. The segment top-line figure increased 72.8% year over year and 11.8% sequentially.

In the reported quarter, AMD Launched Ryzen Threadripper 9000WX and Threadripper PRO 9000X processors for unmatched multi-core performance. The company stated that AMD FSR 4, an machine learning-based upscaling technology that enhances frame rates and visuals, saw rapid adoption and now supports more than 85 games.

AMD’s Embedded Revenues Decline Y/Y

The Embedded segment revenues were $857 million, down 7.6% year over year but up 4% sequentially. The segment accounted for 9.3% of total revenues.

In the reported quarter, AMD introduced EPYC Embedded 4005 Series for secure networking and industrial edge. The company also launched Ryzen Embedded 9000 processors delivering high performance-per-watt and low-latency compute for automation and machine-vision systems. 

The company launched AMD Versal RF Series that delivers industry-leading compute performance for aerospace and defense applications. AMD bagain shipping Versal Premium Series Gen 2, the first adaptive compute devices supporting next-generation CXL and PCIe connectivity. AMD EPYC Embedded 4005 series processors was also launched in the third quarter of 2025.

AMD’s Gross Margins Expand Y/Y in Q3

Non-GAAP gross margin expanded 40 basis points (bps) on a year-over-year basis to 54%. The reported quarter gross margin figure was significantly better than 43.3% AMD reported in the previous quarter.

Adjusted EBITDA increased 28.8% year over year to $2.43 billion and jumped 123.4% sequentially. However, adjusted EBITDA margin contracted 140 bps year over year but improved significantly on a sequential basis.

Non-GAAP operating expenses jumped 41.8% year over year and sequentially to $2.75 billion.

However, non-GAAP operating margin contracted 90 bps year over year to 24.2%. The reported quarter operating margin figure was significantly better than 11.7% AMD reported in the previous quarter.

Segment Operating Income Rides on Strong Client and Gaming

Segment wise, Client and Gaming operating income surged 201% year over year and 13% sequentially to $867 million. Segment operating margin expanded 520 bps year over year but declined 60 bps sequentially.

Data Center operating income was $1.07 billion against year-ago quarter’s loss of $155 million. Sequentially, operating income climbed 3.2% but operating margin contracted 190 bps.

Embedded operating income declined 24% year over year but increased 3% sequentially. However, operating margin contracted 240 bps year over year and 50 bps sequentially.

AMD’s Balance Sheet & Cash Flow

As of Sept. 27, 2025, AMD had cash, cash equivalents and short-term investments of $7.24 billion compared with $5.87 billion as of June 28.

As of Sept. 27, 2025, total debt was $3.22 billion compared with $3.21 billion as of June 28.

Operating cash flow was $1.79 billion in the third quarter of 2025 compared with $1.46 billion in the second quarter of 2025.

Free cash flow was $1.53 billion in the third quarter of 2025 compared with $1.18 billion in the second quarter of 2025. In the third quarter, free cash flow margin was 17%, up 200 bps sequentially.

In the third quarter of 2025, AMD returned $89 million to shareholders through its share repurchase program. The company has $9.4 billion remaining under its current authorization.

AMD Offers Positive Q4 Guidance

AMD expects fourth-quarter 2025 revenues of $9.6 billion (+/-$300 million). At the mid-point of the revenue range, this represents year-over-year growth of approximately 25% and sequential growth of approximately 4%.

For the fourth quarter, this Zacks Rank #3 (Hold) company expects non-GAAP gross margin to be roughly 54.5%. AMD expects non-GAAP operating expenses to be roughly $2.8 billion. 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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