This quarter AMD still did not provide 2025/2026 AI revenue guidance, instead offering a 2027 target of AI revenue exceeding tens of billions of dollars.
AMD Q3 Earnings:
Revenue $9.25B, up 36% year over year and 20% sequentially, modestly above prior guidance of $8.7B. Guiding Q4 revenue $9.6B, up 25% year over year and 4% sequentially.
GAAP gross margin 51.7%, Non-GAAP 54%, up 0.4 points year over year and 10.7 points sequentially. Guiding Q4 Non-GAAP gross margin 54.5%.
GAAP operating income $1.27B, up 75% year over year. Non-GAAP operating income $2.16B, up 26% year over year. Guiding Q4 Non-GAAP operating income $2.47B, up 22% year over year.
GAAP net income $1.24B, up 61% year over year. Non-GAAP net income $1.97B, up 31% year over year. Guiding Q4 Non-GAAP net income $2.15B, up 21% year over year.
Operating cash flow $2.16B, up 244% year over year. Free cash flow $1.53B, up 209% year over year.
Q3 share repurchases totaled $89M, with $9.4B remaining under the authorization.
In May, agreed to sell ZT Systems' manufacturing business to Sanmina for $3B in cash and stock. Transaction closed October 27.
Q4 guidance excludes MI308 shipments.
Q3 by Segment:
Data Center revenue $4.34B, up 22% year over year, 47% of revenue. Operating income $1.07B, operating margin improved to 25%, making it AMD's most profitable segment this quarter.
On the CPU side, the data center was driven this quarter primarily by server CPU and the MI350 series ramp, with server CPU growing more. EPYC revenue hit a new high again, with ASP continuing to rise. Zen 4 EPYC Genoa still sees significant demand, while Zen 5 EPYC Turin CPU continues to ramp, now accounting for nearly half of EPYC revenue. Market share grew in both cloud and on-prem. Hyperscalers launched over 160 EPYC-powered cloud instances this quarter; globally there are now over 1,350 EPYC cloud instances available, up nearly 50% from a year ago. On the enterprise side, EPYC end sales grew significantly both year over year and sequentially. The next-gen Zen 6 2nm Venice EPYC is planned for 2026. Many large hyperscale cloud customers are now forecasting substantial CPU builds in 2026.
On the GPU side, the data center GPU business achieved year-over-year growth this quarter primarily through the MI350 series ramp and MI300 series deployments. More large-scale MI350 series deployments are expected to roll out gradually over the next several quarters. Oracle is the first hyperscaler to use MI350X. Neocloud vendors Crusoe, DigitalOcean, TensorWave, and Vultr also began rolling out their MI350 series cloud offerings this quarter. The MI350 series is expected to continue ramping through the first half of 2026. Data center GPU gross margin remains slightly below the corporate average but will improve over the long term.
Embedded revenue was $860M, down 8% year over year, marking the ninth consecutive quarterly decline, and represented 9% of revenue. Operating income was $280M, down 24% year over year, but it remains AMD's highest operating margin business. Demand environments strengthened across multiple markets, led by test & simulation, aerospace & defense, and industrial vision & medical. Design wins continue to grow, exceeding $14B this year.
Client revenue was $2.75B, up 46% year over year, representing 30% of revenue. Gaming revenue was $1.3B, up 181% year over year, growing for the second consecutive quarter, representing 15% of revenue. Combined Client and Gaming operating income was $870M, up 201% year over year, with an operating margin of 21%, though still below Intel's 32%.
Client revenue growth was driven primarily by desktop CPUs. Desktop CPU revenue hit a record high. Commercial end sales grew over 30% year over year, with enterprise adoption rising significantly. The company expects PC growth to exceed the industry average over the next several quarters.
In Gaming, semi-custom revenue grew significantly year over year, mainly because Sony and Microsoft are building inventory for the holiday season. Gaming GPU revenue and channel end sales both grew. Combining the Client and Gaming segments allows for a better comparison with Intel's Client business.
Q4 2025 revenue is guided to $9.6B, up 25% year over year and 4% sequentially. Data center is expected to grow double digits both year over year and sequentially, with server CPU growth outpacing GPU. Client and Gaming are expected to grow double digits year over year, with Client growing sequentially and Gaming declining sharply by a high double-digit percentage sequentially. Embedded is expected to return to year-over-year growth and grow double digits sequentially.
Outlook for 2027 AI business revenue could reach an annualized run rate of tens of billions of dollars. No guidance is given for 2025/2026 AI revenue. The 6 GW order with OpenAI starts in the second half of 2026 with the MI450 series, with an initial 1 GW deployment. Oracle OCI will begin deploying tens of thousands of MI450 GPUs in 2026 and extend into 2027 and beyond. There is strong market interest in full rack-scale solutions, although MI450 will also be available in non-rack form factors.
Management believes the entire AI compute industry TAM will only continue to rise. The goal is to have ample supply to support multiple large-scale customer demands by the time we enter the 2027-2028 timeframe.
Revisiting the Previous Quarter's View:
Overall, AMD's primary growth drivers remain server CPU and PC; the market's most-watched AI business still hinges on the fulfillment of OpenAI orders next year.