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AMD Rides on Gaming Business Rebound: Will the Momentum Continue?
ZACKSยท 2025-08-21 18:50
Core Insights - Advanced Micro Devices (AMD) is experiencing significant growth in its Gaming segment, with revenues increasing 73.1% year over year to $1.122 billion in Q2 2025, representing 14.6% of total revenues [1][12] - The growth is primarily driven by strong demand for Radeon GPUs and increased semi-custom revenues, as console inventories normalize and customers prepare for the holiday season [2] - AMD has announced collaborations with Microsoft and Sony for next-generation gaming technologies, including a multiyear partnership with Microsoft for custom chips for Xbox devices and Project Amethyst with Sony [3] - The launch of the Radeon 9000 series graphics cards, particularly the Radeon 9600 XT, has significantly improved gaming performance, including enhanced ray tracing capabilities [4] - For Q3 2025, AMD expects Gaming segment revenues to remain flat, with a notable decline in console-related revenues anticipated in Q4 2025 due to seasonal trends [5] Competitive Landscape - AMD faces strong competition in the gaming market from NVIDIA, which leads in the discrete GPU market, and Intel, which is a strong player in both discrete and integrated graphics [6] - NVIDIA reported a 30.7% year-over-year increase in gaming revenues to $3.76 billion in Q1 2026, driven by strong demand for its Blackwell architecture GPUs [7] - Intel is expanding its presence in the gaming market with its Intel Arc graphics family, which offers modern GPU features and has launched the Intel Arc B-Series based on the latest Xe2 GPU architecture [9] Financial Performance - AMD shares have gained 37% year to date, outperforming the broader Zacks Computer & Technology sector's return of 11.8% and the Zacks Computer-Integrated Systems industry's increase of 25.7% [10] - AMD is trading at a forward 12-month Price/Sales ratio of 7.33X, significantly higher than the industry's 3.65X, indicating a premium valuation [13] - The Zacks Consensus Estimate for Q3 2025 earnings is $1.17 per share, reflecting a 5.4% increase over the past 30 days but a 27.17% decrease year over year [15]