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SEC filingRevenue grew 32% YoY to $7.7B, but gross margin dropped to 40% due to $800M export-control charges on MI308 GPUs, while net income benefited from an $853M tax reserve release.
For the three months ended June 28, 2025, AMD reported revenue of $7.7 billion, a 32% increase from $5.8 billion in the prior year period. The growth was broad-based, led by the Client and Gaming segment which surged 69% to $3.6 billion, and Data Center which rose 14% to $3.2 billion. Gross margin fell sharply from 49% to 40%, primarily due to approximately $800 million in inventory and related charges associated with U.S. government export controls on AMD Instinct MI308 Data Center GPU products. As a result, operating income swung to a loss of $134 million from income of $269 million. However, net income increased to $872 million from $265 million, driven by a $853 million income tax benefit from the release of uncertain tax positions related to dual consolidated losses approved by the IRS. The effective tax rate from continuing operations was 1,263.6% for the quarter.
Data Center segment revenue increased 14% YoY to $3.2 billion, driven by growth in AMD EPYC CPU sales. However, operating income turned to a loss of $155 million versus income of $743 million a year ago, due to the export-control charges and higher R&D expenses. Client and Gaming segment revenue jumped 69% to $3.6 billion, with Client revenue up 67% (42% higher average selling price, 17% higher unit shipments of Ryzen processors) and Gaming revenue up 73% (semi-custom and gaming graphics). Segment operating income rose to $767 million from $166 million. Embedded segment revenue fell 4% to $824 million as end market demand remained mixed, and operating income decreased to $275 million from $345 million due to product mix. All Other operating loss increased to $1.0 billion from $985 million, including $568 million in amortization of acquisition intangibles and $369 million in stock-based compensation.
AMD completed the acquisition of ZT Systems on March 31, 2025 for $3.2 billion cash and stock, and entered into an agreement to sell ZT Manufacturing Business to Sanmina Corporation for $3.0 billion, expected to close near end of 2025. Management expressed confidence that cash, cash equivalents, short-term investments, and cash flows from operations, along with the revolving credit facility and commercial paper program, will be sufficient to fund operations and strategic activities for the next 12 months. International sales rose to 71% of net revenue, reflecting ongoing global demand. The company also noted the enactment of the One Big Beautiful Bill Act (OBBBA) in July 2025 and is assessing its impact. No specific numerical guidance was provided for future periods.
As of June 28, 2025, AMD held $4.4B in cash and cash equivalents and $1.4B in short-term investments, totaling $5.8B in liquid assets. Total debt (net) stood at $3.2B, up from $1.7B at year-end 2024, driven by the issuance of $1.5B in senior notes in March 2025. Shareholders' equity increased to $59.7B from $57.6B, supported by retained earnings growth and stock-based compensation. Inventory rose to $6.7B from $5.7B, largely due to work-in-process and finished goods buildup. The company reported $0.2B in remaining performance obligations, indicating limited future revenue visibility from long-term contracts.
AMD disclosed $9.4B in unconditional purchase commitments as of June 28, 2025, primarily for wafers, substrates, cloud services, software, and IP licenses. Of this, $5.5B is due within the next twelve months, highlighting significant near-term cash outflows. The commitments are concentrated in the remainder of 2025 ($5.5B) and gradually decrease over subsequent years.
During the first half of 2025, AMD repurchased 12 million shares for $1.2B under its repurchase program. In May 2025, the board authorized an additional $6B, bringing total authorization to $14B, with $9.5B remaining. The company did not pay dividends. Net debt increased by $1.5B from new senior notes issuance, while capital expenditures totaled $0.5B (3.3% of revenue), focused on property and equipment.
AMD reports three segments: Data Center, Client and Gaming, and Embedded. For Q2 2025, Data Center revenue grew 14% YoY to $3.2B but posted an operating loss of $155M vs. a $743M profit a year ago, driven by higher costs and inventory charges. Client and Gaming revenue surged 69% to $3.6B with operating income of $767M (21.2% margin). Embedded revenue declined 4% to $824M with operating income of $275M (33.4% margin). Sub-segment revenue for Client was $2.5B and Gaming $1.1B. All other costs (amortization, stock compensation) totaled $1.0B in the quarter.
Operating cash flow (CFO) of $2.95B was well above net income of $1.58B, indicating strong cash generation. The ratio of CFO to net income was 1.87x, reflecting significant non-cash add-backs (depreciation & amortization $1.5B, stock-based compensation $733M, release of tax reserves $853M) and favorable working capital—notably a $1.08B reduction in accounts receivable. Excluding the release of tax reserves, CFO would have been about $2.1B, still comfortably covering capex.
Capex intensity (capex/CFO) was 17%, moderate for a semiconductor company. Free cash flow (not explicitly stated) can be approximated as CFO minus capex = $2.46B, which easily covers share repurchases of $1.23B and debt repayments of $950M.
Anomalies: The $853M release of uncertain tax position reserves is a non-cash benefit that inflated CFO; absent that, CFO would have been $2.1B. Investing outflows were dominated by $1.72B in acquisitions (ZT Systems) and $796M in short-term investment purchases. Financing was boosted by $2.44B in new debt issuance, partially used for share repurchases and debt repayment.
Overall, cash flow quality is robust, with operating cash flow providing ample coverage for capital expenditures and shareholder returns, despite one-time tax benefits.