AMD Q2 Revenue Soars 50%, Profit Up 163% – Data Center Doubles, But Stock Drops Nearly 10% After Hours

AMD (AMD-US) announced its second-quarter financial results for the 2026 fiscal year on Tuesday (4th), benefiting from sustained strong demand for AI chips. Both revenue and profit exceeded market expectations, with data center business revenue more than doubling year-over-year, becoming the company's primary growth engine. However, AMD's after-hours stock price declined nearly 10% as market expectations for forward guidance were higher, and some analysts had more optimistic forecasts.

For the second quarter ended June 27, AMD's adjusted earnings per share (EPS) reached $1.66, surpassing the market expectation of $1.62. Revenue came in at $11.54 billion, also exceeding the LSEG analyst consensus estimate of $11.28 billion, representing a 50% increase from $7.69 billion in the same period last year.

Data Center business revenue reached $6.7 billion, a 107% year-over-year increase, driven by rising demand for EPYC server processors and Instinct AI GPUs.

AMD stated that the data center business has now become the core of its growth. The company's stock price has nearly tripled over the past year, as the market anticipates that Instinct AI accelerators will continue gaining market share and challenge NVIDIA's (NVDA-US) leadership in the AI chip market. Meanwhile, EPYC server CPUs are also benefiting from the rapid adoption of AI agents, driving sustained demand.

For the third quarter, AMD forecasts revenue of approximately $13 billion, plus or minus $300 million, exceeding LSEG's estimate of $12.52 billion. However, some analysts had expected guidance as high as $14 billion, leading to some profit-taking pressure in the market.

In July, AMD also raised its global semiconductor market size forecast, projecting the total market to reach $2 trillion by 2028. The AI accelerator (GPU) segment alone is expected to reach $1.4 trillion, a significant upward revision from the previous $500 billion estimate, reflecting the rapid expansion of AI investment demand.

In terms of product strategy, AMD announced it will begin shipping its first rack-scale AI system, Helios, this quarter to Meta Platforms (META-US), OpenAI, and Oracle (ORCL-US). This marks AMD's first integrated rack-scale AI system combining EPYC CPUs, Instinct GPUs, and networking chips, positioning it to directly compete with NVIDIA's comprehensive AI system solutions, rather than just AI chips.

The company expects Helios shipment volumes to significantly increase in the fourth quarter.

AMD CFO Jean Hu stated the company anticipates continued acceleration in data center growth in the second half of 2026, further driving overall revenue and profit expansion.

CEO Lisa Su, during the earnings call, projected that data center revenue in 2027 will double compared to this year, and server business revenue in the second half of 2026 will grow over 80% year-over-year.

She noted that current demand for AI accelerators and CPUs far exceeds the company's initial expectations.

Su highlighted that AMD continues to expand its CPU market share, with Intel (INTC-US) remaining its primary competitor.

She added that major cloud providers, including AWS under Amazon (AMZN-US), Microsoft (MSFT-US), Google Cloud under Alphabet (GOOGL-US), Oracle, and other hyperscalers, are continuously expanding deployments of the EPYC platform across their internal infrastructure and public cloud services.

In contrast, the Client and Gaming segment, covering laptop, desktop, and gaming console chips, showed more moderate performance, with second-quarter revenue of $3.8 billion, a 6% year-over-year increase. The Embedded business benefited from a rebound in industrial market demand, generating $977 million in revenue, up 19% year-over-year.

In capital expenditures, AMD invested $808 million in the second quarter, a nearly 187% increase from $282 million in the same period last year and higher than the $389 million in Q1 of this year, reflecting continued heavy investment in AI infrastructure and product development.

Regarding the PC market, Su stated that AMD's PC business performed very strongly in the first half of the year. Although a market slowdown was initially expected in the second half, current demand remains stronger than general market expectations.

In profitability, AMD reported a net profit of $2.3 billion for the second quarter, a 164% increase from $872 million in the same period last year. Diluted EPS reached $1.38, up from $0.54 the previous year, demonstrating that AI products continue to enhance the company's overall profitability.