Advanced Micro Devices (AMD) has announced its highest-ever quarterly revenue of $9.25 billion in Q3 2025, surpassing Wall Street expectations by a large margin. Even with those booming earnings and positive guidance for the fourth quarter, AMD’s stock dropped by nearly 3.7 percent in after-hours trading, which may highlight a mismatch between the company’s financial results and investor expectations.
Strong Financial Performance
AMD’s Q3 sales of $9.25 billion were up 36% year-over-year and ahead of analyst estimates of $8.76 billion. Adjusted earnings per share (EPS) were $1.20, better than analysts’ expectations of $1.17, while the operating margin expanded to 13.7% from 10.6% in the prior year. The quarter also marked a record revenue for AMD, higher than its previous benchmark of $7.69 billion. The company’s expansion was fueled in large part by significant demand for its high-performance EPYC server processors, Ryzen CPUs across the client computing space, and Instinct AI accelerators. The data center that benefited from AI and cloud infrastructure build-out was the particularly strong performer.
Outlook and Guidance
AMD guided Q4 2025 in the vicinity of $9.3-9.9 billion revenue, mid-point $9.6 billion (well above analysts’ average estimate of $9.15 billion). Gross margins are expected to remain approximately flat at 54.5%, sustaining profitable operations. Dr. Lisa Su, CEO of AMD, emphasized that the company anticipates continued strong demand for AI chips and data center products, as well as rebounds in client and embedded segments. However, the gaming segment is expected to see double-digit declines in revenue, as demand for console chips ebbs following a holiday surge.
Stock Market Reaction
Shares of AMD, however, fell following the earnings report despite its strong showing and continued outlook. The market’s reaction was shaped by broader-market fears about high valuations, particularly in the fields of AI and semiconductors, with some investors already fretting over an AI bubble. Hedge fund manager Michael Burry has gone short on AI stocks, including Nvidia and Palantir, adding to a growing sense of wariness among investors. AMD’s stock has also recently hit a record high, and the pullback could be part of the natural process of markets pulling back after achieving all-time highs.
Strategic Position and Industry Context
AMD is gaining ground as another formidable opponent to companies like Nvidia, especially in the AI chip market. It has secured several significant AI-related deals, including those with OpenAI and the U.S. Department of Energy, which are projected to generate substantial revenue over the next few years. The business is also making investments in its new product portfolio within the embedded and client segments, setting the foundation for longer-term growth opportunities.
Summary
AMD’s Q3 2025 earnings highlight historic growth, driven by strong demand for AI and data centers. Its bullish Q4 guidance only adds to the confidence surrounding continued growth. Yet, AMD stock dropped post-earnings due to more general market volatility, as investors gauge high valuations in the tech sector. Solid fundamentals and AI partnerships bode well for strong future growth, regardless of short-term fluctuations in the stock price.