Shares in Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) dropped 5% in after-hours trading, as investors digested a mixed earnings report that, while strong on the surface, fell short of the market’s increasingly lofty expectations, particularly in artificial intelligence (AI) and data centre GPU performance.
The company reported revenue of $7.7 billion for the second quarter, 4% ahead of Deutsche Bank’s forecast, and issued guidance for the third quarter of $8.7 billion, also ahead of expectations.
On paper, that’s a solid beat and a confident outlook. But analysts and investors had set the bar especially high, with much of the focus on AMD’s Instinct AI accelerator business, a key driver of future growth.
Deutsche noted that while the revenue upside in Q2 came largely from gaming, which it described as a “lower quality” driver, the Q3 uplift is expected to be powered by Instinct data centre GPUs, a more strategic and margin-rich area.
AMD’s new MI355 product appears to be ramping faster than expected, and DB sees continued strength through the second half of 2025 and into 2026.
Deutsche maintained its 'hold' rating, pointing out that much of this AI-fuelled growth is already priced in.
Its unchanged earnings forecast for 2025 and modest 10% increase for 2026 leave them estimating EPS in the $6–$7 range, consistent with a valuation of 25–30x earnings, already reflected in the current share price.
Wedbush, meanwhile, was more upbeat. While it acknowledged that Q2 GPU revenue fell short of internal models, it praised growth in server and client compute, as well as AMD's bullish Q3 guide for AI accelerators, even excluding any China revenue.
It raised its price target to $190 and retained an 'outperform' rating, noting that resumption of Chinese GPU sales could provide upside not yet captured in forecasts.
But that’s part of the problem: expectations for AMD in the AI race are sky-high, and while results were good, they didn’t meaningfully exceed the hype. For now, investors seem to be demanding not just growth, but acceleration.