AMD's revenue climbs 50% and data center sales doubled, but the stock is down

Advanced Micro Devices (AMD) posted strong second-quarter earnings on Tuesday, with revenue increasing by 50% compared to the same period last year. The company's Data Center unit is credited for driving this growth, with sales reaching $6.7 billion, a 107% increase year-over-year. This surge in Data Center sales is attributed to the demand for AMD's central processing unit (CPU) and graphics processing unit (GPU) chips, known as Instinct.

AMD's stock experienced a notable decline following the earnings release, despite hitting a nearly three-fold increase in value over the past year. This decrease occurred as optimism around AMD's AI chips' market share, particularly in competition with Nvidia, and the resurgence of AMD's Epyc CPU, which is crucial for AI agents, led to a rise in the company's stock price.

For the current quarter, AMD anticipates revenue around $13 billion, with a possible variation of $300 million, exceeding analysts' expectations of $12.52 billion. In July, AMD raised its expectations for the semiconductor industry's potential value to $2 trillion annually by 2028, with AI accelerators or GPUs accounting for $1.4 trillion, up from the previous estimate of $500 billion by the same year.

AMD is set to launch Helios, its inaugural rack AI system, this quarter, which directly competes with Nvidia's all-in-one systems. In their earnings call, AMD CEO Lisa Su emphasized the company's expectations for data center sales to double in 2027 and server revenue to grow by more than 80% annually in the second half of fiscal 2026.

Su also highlighted that AMD has managed to capture market share from its main rival, Intel, in the CPU business. While AMD's business related to consumer devices, such as laptops and consoles, grew by 6% year-over-year to $3.8 billion, its embedded segment, comprising chips for industrial use, expanded by 19% to $977 million. Despite a strong first half, Su anticipates a decline in the second half, though the market has proven resilient, exceeding many analysts' predictions.

AMD reported $2.3 billion in net income, or $1.38 per diluted share, up from $872 million in net income, or 54 cents per diluted share, in the corresponding period last year.