Advanced Micro Devices Inc.’s stock headed lower in extended trading today after it delivered mixed financial results, with earnings coming up short of Wall Street’s targets.

The chipmaker reported second-quarter earnings before certain costs such as stock compensation of 48 cents per share, falling just shy of the Street’s forecast of a profit of 49 cents per share. Revenue for the period was up 32% from a year earlier, to $7.69 billion, easily surpassing the $7.42 billion analyst consensus estimate.

All told, AMD delivered a net income of $872 million in the quarter, up from just $265 million in the year-ago period. For the current quarter, it said it’s looking at revenue of around $8.7 billion at the midpoint of its guidance range, ahead of the Street’s target of $8.3 billion.

AMD has emerged as the most important rival to Nvidia Corp. in the artificial intelligence industry, as the world’s second-biggest manufacturer of graphics processing units, though a distant second. But although its rival is seen as by far the most dominant player in the GPU market, AMD has been gaining ground, partnering with AI industry giants such as OpenAI and Meta Platforms Inc., offering them an alternative source of hardware for inference workloads.

During the quarter, the company announced a new flagship GPU called the Instinct MI400, which it says can outperform Nvidia’s most advanced Blackwell B200 chips in some AI tasks. The MI400 is expected to go on sale next year, and OpenAI Chief Executive Sam Altman has already confirmed his company will be buying them to power its latest models.

Despite making progress at home, AMD has been grappling with prohibitions on its chip exports to China, due to the U.S. government’s concerns that its powerful GPUs could end up in the hands of that country’s military, where they could be used with advanced weaponry.

In a conference call, AMD CEO Lisa Su (pictured) admitted that the export controls have been problematic for the company. “AI business revenue declined year-over-year as U.S. export restrictions effectively eliminated MI308 sales to China, and we began transitioning to our next generation,” she told analysts.

AMD developed the MI308 GPU specifically for the Chinese market in order to adhere to earlier restrictions on the export of chips to that country, but it was suddenly barred from selling that chip too in April, when the U.S. government introduced new prohibitions. According to Su, the latest export controls cost the company about $800 million in sales during the quarter.

Fortunately for AMD, and its rival Nvidia, the White House has since signaled that it’s willing to approve waivers that would allow the resumption of MI308 exports to China. However, AMD said its revenue outlook doesn’t include any sales to Chinese customers, because its applications for export licenses are still under review by the U.S. Department of Commerce. Su said she does expect AI revenue to grow in the current quarter from the year-ago period.

Su also spoke about the impact of the company’s current most powerful GPU, the Instinct MI350, which rivals Nvidia’s GB200 chips in AI training and inference.

“Seven of the top 10 model builders and AI companies use Instinct,” Su said. She added that AMD was currently in discussions with several “large customers” to build out entire clusters of its most powerful AI processors.

Analyst Kevin Cook of Zacks Investment Research told SiliconANGLE that some of these large customers are likely to be “sovereign AI” players such as Saudi Arabia’s Humain.

“In May, AMD announced a partnership with Saudi Arabia to invest up to $10 billion to deploy 500 megawatts of AI compute capacity over the next five years,” Cook said. “AMD will provide the full spectrum of the AMD AI compute portfolio and the AMD ROCm open software ecosystem, its operating system platform that offers an alternative to NVIDIA CUDA.”

Cook added that AMD likely has a number of “hyperscale” data center operators waiting in the wings for Instinct-based AI clusters. “A good number of hyperscalers are thinking ahead about the Helios rack-scale system for their data centers and AI ecosystems,” he said. “They essentially want to be in early for smooth adoption.”

Aside from AI, AMD also makes central processing units for data center servers and personal computers, where it competes with Intel Corp. These are a part of AMD’s data center segment, which delivered revenue of $3.2 billion in the quarter, up 14% from a year earlier. However, investors no doubt noticed that revenue from the segment was down sequentially by around $400 million compared to the prior quarter.

AMD’s other major business unit, Client and Gaming, accounts for CPUs in laptops and desktops, as well as GPUs for video games consoles and gaming PCs. Sales there rose 69%, to $3.6 billion, with client revenue up 57%, to $2.5 billion, just shy of the Street’s forecast of $2.56 billion, driven by strong demand for the AMD Ryzen Zen 5, which is AMD’s most powerful CPU.

Gaming revenue was up even more, rising 73% to $1.1 billion in the quarter, easily surpassing the Street’s forecast of $784 million.

Holger Mueller of Constellation Research Inc. criticized AMD, saying it has been unable to ignite data center revenue with its AI chips as much as investors had hoped for.

“While it may have been affected by tariffs, it still needs to do better,” the analyst said. “Client and gaming revenue were the main growth engines, saving the quarter for AMD, but that doesn’t help Su and her team play in the AI and data center boom. Moreover, the absence of PR activity with the hyperscalers this quarter has likely given investors further food for thought. Next quarter will be key.”

Despite AMD’s overall optimism, investors were in an unforgiving mood, and earnings miss appeared to weigh heavily on its stock, which was down more than 5% in late trading. But overall, AMD’s stock is still up more than 44% in the year to date.

AMD wasn’t the only chipmaker to suffer today. GlobalFoundries Inc., which operates global chip fabs that manufacture chips on behalf of other companies, saw its stock fall 2% in extended trading, despite posting better-than-expected second-quarter results today.

The company, spun off from AMD in 2012, reported earnings of 42 cents per share on revenue of $1.69 billion, surpassing Wall Street’s estimates of 36 cents and $1.66 billion, respectively. However, its guidance for the current quarter came up short. The company said it’s expecting third-quarter earnings of 38 cents per share, trailing the Street’s forecast of 42 cents.

Photo: Robert Hof/SiliconANGLE