AMD forecasts upbeat revenue on strong AI chip demand, but shares fall on lofty expectations

On Tuesday, AMD forecasted quarterly revenue surpassing Wall Street estimates, attributing strength to robust demand for its chips from expanding data-center capacity to fuel AI advancements. However, its shares experienced a nearly 9% decline in extended trading, signaling investors' desire for an even more favorable outlook after a more than double-year increase driven by AI enthusiasm.

Analyst Jacob Bourne from Emarketer noted AMD is now comparable to Nvidia and hyperscalers, where investors seek proof that AI infrastructure investments continue to generate accelerating returns.

The Santa Clara, California-based chip giant is considered Nvidia's closest rival in the graphics processing units market, as major tech companies and governments worldwide increase spending on AI infrastructure. AMD anticipates third-quarter revenue of around $13 billion, with a potential variation of $300 million, while analysts estimate $12.52 billion.

Adjusted gross margin is expected to hover around 56%, in line with expectations. The company also projects data-center sales to more than double in 2027, with total revenue growth exceeding its more than 35% target and annual earnings surpassing its $20-per-share goal set during its 2025 analyst day, according to CEO Lisa Su during a post-earnings conference call.

These projections suggest AMD's investments to challenge Nvidia's dominance in the AI chip market are starting to yield results, with data-center processor sales accelerating in the second quarter, with quarterly data-center revenue more than doubling to $6.72 billion, surpassing expectations of $6.48 billion.