AMD Earnings Report: Stock Crashes – What Happened and Why?

AMD's Earnings Triumph Masks a Deeper Problem

The Headline Numbers Look Great

AMD just dropped its Q3 2025 numbers, and on the surface, it’s a victory lap. Revenue clocked in at $9.25 billion, a 36% jump year-over-year. Earnings per share (EPS) beat expectations, hitting $1.20 versus the $1.17 analysts were projecting. And the forecast for Q4? Even rosier, with revenue expected to land between $9.3 billion and $9.9 billion, eclipsing Wall Street's $9.21 billion estimate. Data center revenue surged to $4.3 billion, up from $3.5 billion the previous year. Client segment sales and gaming revenue also exceeded expectations, raking in $2.9 billion and $1.3 billion respectively. So, what's not to like?

Well, let's dig a little deeper. The market cap is sitting at $406 billion, with a P/E ratio of 150.63. That's a hefty premium investors are paying for future growth. AMD's stock has had a wild ride, ranging from $76.48 to $267.08 over the past 52 weeks. And while the shares have jumped 108% year-to-date and 79% in the last 12 months, the immediate reaction to this "stellar" earnings report was a 3.7% drop in share price, closing at $250.05, followed by another 3.72% dip after hours to $240.76. AMD stock crashes despite strong Q3 results: why is AMD stock down today, and could AMD’s rack-scale AI br - The Economic Times

The OpenAI and Oracle Deals: Are They Enough?

The press releases are screaming about AMD supplying up to 6 gigawatts of GPUs to OpenAI for AI data centers. That sounds impressive, but let's put it in perspective. OpenAI will also purchase approximately 160 million AMD shares, representing about 10% ownership. Oracle is also getting in on the action, deploying 50,000 AMD GPUs across its global cloud data centers. These are significant wins, no doubt. But they also highlight a critical dependency: AMD's growth is increasingly tied to a handful of massive players. What happens if OpenAI decides to diversify its chip suppliers? Or if Oracle scales back its cloud infrastructure investments? (These are the kinds of questions that keep analysts up at night.)

AMD is also betting big on its next-generation MI450 GPUs and rack-scale systems, slated for launch in the second half of 2026. Analysts are already touting these systems as key to future growth. But that's a long way off in the fast-moving world of AI. Nvidia, with its $5 trillion-plus market cap, isn't exactly standing still. They're innovating at a breakneck pace, and AMD needs to not only catch up but also offer something fundamentally different to truly disrupt the market. The Department of Energy deal, representing a $1 billion investment in chips for two supercomputers, is a nice feather in AMD's cap, but it's a drop in the bucket compared to the potential revenue from the broader AI market. And this is the part of the report that I find genuinely puzzling.

Here’s a thought: What if the market is already pricing in most of the upside from these deals? The 108% year-to-date jump suggests investors were expecting big things. Now that the numbers are in, the market seems to be saying, "Okay, good, but what's next?" It's like a runner who sprints to the front of the pack early in the race, only to realize they've burned too much energy and can't maintain the lead. Profit-taking after massive gains this year seems to be the primary culprit behind the stock dip, but it also reveals a certain level of skepticism about AMD's long-term prospects.

The Market's Saying "Show Me More"

The market's reaction—a stock dip despite strong earnings—tells the real story. AMD is executing well, but the expectations baked into its valuation are astronomical. It's not enough to beat expectations; AMD needs to shatter them consistently. The dependency on a few key customers and the looming shadow of Nvidia create a precarious situation. The next few quarters will be crucial in determining whether AMD can justify its lofty valuation or if it's destined for a painful correction.