AMD Q2 2025 EPS Estimate: Low Consensus, But a Nuanced Underlying Story

This article does not constitute investment advice. The author does not hold any positions in the stocks mentioned.

Impact of US Licensing Requirements on AMD’s Margins

Advanced Micro Devices (AMD) is facing ongoing pressure on its profit margins due to new U. S.licensing regulations concerning the China-specific MI308 GPUs. According to the company’s guidance, this situation is likely to result in significant charges during the second quarter of 2025.

Financial Ramifications of the MI308 Inventory Charges

During the Q1 2025 earnings announcement, AMD disclosed an expectation of incurring approximately $800 million in charges. These write-offs are linked to MI308 inventory, existing purchase commitments, and relevant reserves that are expected to impact the current quarter.

Revision of Gross Margin Estimates

AMD has forecasted a decline in its Q2 gross margin to 43%, a notable decrease from the anticipated 54% that would have prevailed without the MI308-related charges. This downturn reflects the financial strain imposed by the unexpected inventory adjustments.

Inclusion of One-Time Charges in Analyst Estimates

While market analysts typically disregard one-time charges when evaluating a company’s financial health, recent comments from KeyBanc analyst John Vinh reflect a shift. In his latest note, he indicated that the majority of Wall Street analysts have begun factoring in these MI308-related charges into their consensus estimates for AMD’s second quarter:

“Our prior estimate excluded these charges given they are one-time in nature; however, we are now including these charges to be consistent with Street consensus, as the majority of estimates include these charges. As such, we lower our 2Q25 EPS estimate to $0.47 vs.$0.90 prior vs.consensus of $0.57.”

Market Reactions and Analysts’ Concerns

The current consensus EPS estimate for AMD’s Q2 2025 has been significantly affected, as many analysts have incorporated these extraordinary charges into their projections. This trend raises concerns about the potential for such charges to not remain one-off occurrences.

Trade Relations and Future Prospects

In related news, Kevin Hassett, Director of the National Economic Council (NEC), recently suggested that the administration may consider relaxing certain chip export controls to China as part of a broader trade negotiation. However, he promptly dismissed the idea of easing restrictions specifically on NVIDIA’s H20 GPU for the China market.

This stance implies that the challenges surrounding AMD’s MI308 GPUs are likely to persist until a clear trade agreement between the U. S.and China is established, bringing a level of uncertainty to AMD’s future performance.

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