AMD’s Q2 results surpassed revenue expectations but fell short in the data centre segment, which is linked to AI. The adjusted earnings per share were $0.48, slightly below the consensus of $0.49. The company reported revenue of $7.69 billion, exceeding the $7.40 billion estimate.
For Q3, AMD projects revenue of $8.7 billion, compared to the anticipated $8.31 billion, with a gross margin around 54%. The outlook does not include MI308 AI chip sales to China, as U.S. license approvals are still pending, resulting in an expected $1.5 billion revenue impact this year due to U.S. export restrictions.
The data centre revenue increased by only 14% to $3.2 billion, which did not meet expectations, especially when compared to Nvidia’s much stronger growth. CEO Lisa Su mentioned reduced AI chip sales to China and the shift to the new MI350 series as factors. Despite strong performances earlier in the year, AMD shares dropped over 5% in after-hours trading, with markets reevaluating the AI sector and data centre competitiveness ahead of Nvidia’s forthcoming earnings.
Based on the recent earnings report, the market is punishing AMD for any perceived weakness in its AI story, creating an opening for derivative traders. The 5% after-hours drop shows how sensitive the stock is to its data center performance relative to competitors. We see implied volatility on AMD options for the next few weeks already climbing above 55%, signaling that the market is pricing in a significant price swing.
The disappointment in data center growth is the main takeaway, especially as recent Q2 2025 industry reports show Nvidia still controls over 85% of the AI accelerator market. The $1.5 billion revenue hit from China restrictions seems more concrete, especially after the Commerce Department confirmed last month, in July 2025, that it would not be easing export rules. This makes buying put options or using bear put spreads a logical response to protect against further downside ahead of Nvidia’s report.
Nvidia’s upcoming earnings are now the most critical catalyst for AMD’s stock price. Looking back at 2024, we remember how semiconductor stocks regularly experienced moves of 8-10% following a major competitor’s earnings release. This history suggests that a straddle or strangle on AMD could be an effective way to play the volatility, profiting from a large move in either direction once Nvidia reveals its numbers.
The widening performance gap between the two companies also points toward a potential pairs trade. The options market reflects this sentiment, with a growing put-call skew in AMD’s contracts. This indicates traders are paying more for downside protection, confirming a broader market expectation of either stagnation or a further drop.
