From Building Other People's Chips to Selling Its OwnWide moat
Advanced Micro Devices (AMD) — moat facet
Custom work builds someone else's franchise; the fall from 25% to 9% is AMD deciding to build its own.
Revenue recognised over time from custom products and development services was approximately 9% of AMD's revenue in 2025, 8% in 2024 and 25% in 20231. That collapse is one of the clearest measures of how much this company has changed.
Custom work — designing a processor to another company's specification, most visibly for games consoles — is a decent business with a structural ceiling. The customer owns the product, sets the volume, captures the upside if it sells well, and re-competes the next generation. AMD earns a fair margin for excellent engineering and very little for the franchise it is building.
Selling EPYC and Instinct is the opposite arrangement: AMD owns the roadmap, sets the price, sells the same design to many buyers and keeps the operating leverage. The shift from 25% to 9% is the company moving from the first model to the second, which is why margins have improved even as the business became more competitive.
Watch this percentage as the hyperscaler relationships deepen. A rise would mean AMD is being drawn back toward bespoke engineering for individual customers — profitable work, but the kind that builds someone else's product rather than AMD's franchise.
Custom products and development services fell from 25% of revenue in 2023 to 9% in 2025 — AMD moving from building to other companies' specifications toward selling its own designs to many buyers. Better margins, better operating leverage, and a franchise AMD owns rather than rents.
Custom work earns a fair margin for excellent engineering and builds the customer's franchise rather than AMD's. The fall to 9% is AMD moving toward selling its own designs to many buyers. Watch for a rise as hyperscaler relationships deepen — bespoke work is profitable and does not compound.
Source: AMD Form 10-K, FY2025 (revenue recognition) ↗- ReportedRevenue from custom products and development services was ~9%, 8% and 25% of revenue in 2025, 2024 and 2023.AMD Form 10-K, FY2025 — no customer accounted for at least 10% of consolidated net revenue in fiscal 2025 or 2024; one Client and Gaming segment customer accounted for 18% of consolidated net revenue in fiscal 2023; one customer accounted for approximately 11% of total consolidated accounts receivable at December 27, 2025 and another accounted for 24% at December 28, 2024; sales to external customers by geography were United States $11,363M, China including Hong Kong $7,751M, Taiwan $5,186M, Singapore $4,284M and other regions $6,055M of $34,639M total; revenue recognized over time associated with custom products and development services was approximately 9%, 8% and 25% of revenue in 2025, 2024 and 2023; approximately $440M of net inventory and related charges were recorded in 2025 associated with the U.S. government export control on AMD Instinct accelerators — FY2025 (ended December 27, 2025) · publ. February 4, 2026 · source ↗