AMD stock rises after beating earnings expectations

AMD shares surge after Q2 results beat Wall Street estimates. Data-center revenue and PC sales slightly below expectations.

Advanced Micro Devices Inc. (AMD) exceeded Wall Street estimates with its second-quarter results, causing a surge in the company's shares during after-hours trading. Following a 2.9% gain in the regular session, AMD shares rallied more than 4%. The chip maker reported a net income of $27 million, or 2 cents per share, for the second quarter, compared to $447 million, or 27 cents per share, in the same period last year. Adjusted earnings per share came in at 58 cents, down from $1.05 the previous year, when accounting for stock-based compensation and other one-time items. Revenue for the second quarter dropped to $5.36 billion from $6.55 billion in the previous year, and gross margins decreased to 50% from 54%.

Analysts surveyed by FactSet had predicted adjusted earnings of 57 cents per share on revenue of $5.32 billion. AMD had forecasted revenue between $5 billion and $5.6 billion and second-quarter gross margins of about 50%. Data-center revenue declined by 11% to $1.3 billion, falling short of the expected $1.37 billion, while PC sales dropped by 54% to $998 million, missing analysts' estimate of $843.3 million. Gaming sales also declined by 4% to $1.6 billion, in line with the Street estimate, and embedded sales rose by 16% to $1.5 billion, surpassing the forecasted $1.49 billion.

AMD's chair and chief executive, Lisa Su, stated that the company experienced a significant increase in AI engagements during the quarter, with multiple customers initiating or expanding programs to support future deployments of Instinct accelerators at scale. Su also mentioned that AMD made progress in meeting hardware and software milestones to address the growing customer demand for its data center AI solutions. The company is on track to launch and increase production of MI300 accelerators in the fourth quarter.

Looking ahead to the third quarter, AMD expects double-digit percentage growth in revenue for both its Data Center and Client segments. This growth will be driven by increasing demand for EPYC and Ryzen processors, partially offset by declines in the Gaming and Embedded segments. Jean Hu, AMD's chief financial officer, stated that the company forecasts revenue between $5.4 billion and $6 billion for the third quarter, with adjusted gross margins of about 51%.

Analysts predict adjusted earnings of 73 cents per share for the third quarter, with revenue of $5.82 billion, representing a 4.6% increase in the top line. Data-center sales are expected to rise by 7.3% to $1.73 billion from the previous year, and PC sales are projected to increase by 2.6% to $1.05 billion.

Year to date, AMD shares have seen a significant gain of 81.6%, outperforming the PHLX Semiconductor Index, the S&P 500 index, and the Nasdaq Composite.