AMD Tops Q2 Estimates; Shares Slide on Guidance

Beat on Profit, Beat on Sales

On Tuesday, AMD released results for its second quarter. The company surpassed consensus forecasts for both profit and sales and issued guidance for the current quarter in line with Wall Street's target. Revenue came to $11.54 billion for the three months ending June 27, up 50% from $7.69 billion a year earlier, underscoring AMD's key role in the AI chip market.

Adjusted profit was $1.66 per share, versus $1.62 expected, according to LSEG consensus estimates. Net income came in at $2.3 billion, or $1.38 per diluted share, compared with $872 million, or 54 cents a share, in the same period last year.

AMD's Data Center segment is the main growth engine. The company sells both server central processors and GPUs for AI work. Demand for both product families is fueling expansion, with segment revenue doubling year over year. Data Center sales reached $6.7 billion, a 107% year-over-year gain, with CPUs and GPUs both contributing.

The Stock Sells Off Anyway

AMD shares dropped more than 10% in extended trading, reversing a gain posted during the regular session. Over the past 12 months, the stock has roughly tripled on optimism that AMD's Instinct accelerators can take meaningful share from Nvidia in a fast-growing market and that its Epyc server CPUs, now seen by AI experts as a necessary component for running agents, will keep gaining ground.

For the current quarter, AMD projected revenue of roughly $13 billion, give or take $300 million, compared with the $12.52 billion that LSEG analysts had expected. A few analysts were holding out for a forecast closer to $14 billion.

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AMD is Nvidia's main challenger in AI chips. That context helps explain why the stock fell even after an earnings beat.

The Big Bet on Helios and a $2 Trillion Market

Back in July, AMD lifted its forecast for the semiconductor industry's annual size, saying the market could reach $2 trillion by 2028. The company believes AI accelerators (GPUs) will account for $1.4 trillion of that by 2028, up from its previous estimate of $500 billion. Helios, AMD's first rack-scale AI system, is set to ship this quarter to customers including Meta, OpenAI, Oracle.

Helios combines AMD CPUs, GPUs, and networking gear into one system, making it a direct rival to Nvidia's full-stack offerings rather than just individual chips. AMD said Tuesday it expects Helios volumes to pick up in the fourth quarter.

During the analyst call, Chief Executive Lisa Su said data center sales should double in 2027 and server revenue will grow more than 80% year over year in the second half of fiscal 2026. Su also noted that AMD's CPU division gained market share in the quarter. AMD's main CPU rival is Intel.

"We expect Data Center sales to accelerate in the second half of 2026, driving stronger overall revenue growth and continued earnings expansion," AMD CFO Jean Hu said in a statement.

Other Segments and Outlook

Revenue from consumer-market CPUs and GPUs for PCs, laptops, and game consoles - the client and gaming division - rose just 6% from a year earlier to $3.8 billion. The embedded segment, whose chips serve industrial uses, was up 19% year over year to $977 million.

Capital expenditures hit $808 million, compared with $282 million in the prior-year period and $389 million three months earlier.

Su said on the earnings call: "Demand for both accelerators and CPUs is growing well above our prior expectations." She also said: "Hyperscalers continued expanding Epyc across their internal infrastructure and public cloud offerings, including AWS, Microsoft, Google, Oracle, and others."

About the company's PC business, Su said: "Our first half performance has been very strong and although we are expecting that the market will decline in the second half, the market has actually held up better than most people would have thought."

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