On May 6, Advanced Micro Devices (AMD) reported robust first-quarter results for 2025 despite looming challenges from new US export controls on shipments to China and evolving AI diffusion regulations. CEO Lisa Su emphasized the company's resilience in navigating tariff uncertainties and regulatory constraints, particularly impacting its data center GPU business. With a focus on AI infrastructure growth and strategic partnerships, AMD remains optimistic about its market position and long-term opportunities in the US$500 billion AI accelerator market.
AI diffusion rules
In AMD's earnings call, CEO Lisa Su addressed concerns about export controls and AI diffusion regulations, particularly regarding China. She noted that AMD had anticipated restrictions on leading-edge GPU shipments, incorporating them into its US$500 billion AI accelerator market estimate. Su emphasized AMD's engagement with US government agencies to balance national interests with global AI adoption, aiming to ensure US AI platforms remain foundational worldwide. She stressed the importance of a unified US technology ecosystem to sustain long-term AI market growth, expressing confidence that these regulations would not significantly reduce market potential.
Export control to have US$1.5B impact on AMD
Su discussed the performance of the Instinct AI accelerator family, excluding shipments to China and the MI308 model. The data center GPU segment met or slightly exceeded expectations, with strong customer interest ahead of the MI350 series launch in mid-2025.
Despite tariff uncertainties, Su expressed confidence in sustained AI infrastructure investments, projecting robust growth in AMD's AI business in the second half of 2025.
New export license requirements are expected to reduce revenue by US$1.5 billion in 2025, with US$800 million impacting the third quarter and US$700 million in the second quarter. Su noted that the MI350 series, focused on non-China markets, will drive revenue later in the year, minimizing fourth-quarter impact. EVP and CFO Jean Hu added that, excluding these revenue hits, the data center segment is poised for strong growth in the second half, driven by the MI355 accelerator series, with robust double-digit year-over-year growth expected for the full year.
Gross margin
CFO Jean Hu addressed the gross margin outlook, noting a projected decline in the second quarter due to a US$800 million inventory charge related to the MI308 GPU. Excluding this charge, the gross margin would remain around 54%.
Hu explained that a less favorable product mix, driven by growth in lower-margin client and gaming segments, contributes to the decline. However, improving the client segment's product mix, increasing average selling prices, and expanding enterprise market share in the data center segment support margin expansion. The lower-margin MI308 GPU's reduced contribution in the second half should further improve margins. Hu projected a slight gross margin increase in the second half, driven by the data center business's higher-margin products, partially offsetting strength in client and gaming segments.
Sees no tariff-related pull-ins over client's business
The client business grew 67% year-over-year, driven by higher average selling prices and a favorable product mix, particularly in high-end gaming desktops. Su noted no significant tariff-related pull-in activity in customer ordering patterns and remained cautiously optimistic for the second quarter despite a US$700 million revenue headwind from export controls on MI308 GPU shipments to China. Hu clarified that while client segment revenue was nearly flat sequentially compared to the fourth quarter, unit sales declined by double digits, reflecting the impact of higher pricing strategies.
Significant inventory increase
CFO Jean Hu explained the significant inventory increase, driven by the need to support strong client and server product demand and prepare for a surge in data center GPU shipments in the second half. Long manufacturing lead times necessitated early production to meet third- and fourth-quarter demand. Su highlighted strong client business revenue share gains, particularly in high-end notebooks, commercial segments, and desktops, amid overall market growth. Despite macroeconomic and tariff uncertainties, Su reassured investors that AMD's inventory position remains healthy, with no unusual pre-purchasing activity, and the company will stay agile in responding to market dynamics.
GPU vs. ASIC
When asked about competing with custom silicon ASICs in the AI space, an AMD representative clarified that GPUs and ASICs are complementary, not substitutes, within the US$500 billion AI computing market. GPUs capture a larger share due to the evolving nature of AI models, with customers valuing competitive total cost of ownership and choices in inference and training. AMD is focused on expanding inferencing capabilities and delivering competitive solutions across both GPU and ASIC technologies rather than viewing them as mutually exclusive.
Article edited by Joseph Chen
