Advanced Micro Devices (NASDAQ:AMD) saw its shares advance 4.3% to $505.40 in premarket trading on Tuesday, as investors positioned for the company's second-quarter earnings report due after the market close. The chipmaker's stock has surged 126% year-to-date, bringing its market capitalization to nearly $790 billion.
Wall Street consensus estimates call for revenue of $11.3 billion, adjusted earnings per share of $1.62, and data center sales of $6.5 billion. These figures represent a 47% year-over-year revenue increase and a 10% sequential gain. Adjusted earnings are projected to more than triple compared to the year-ago period, which was impacted by export restrictions.
The data center segment has become the primary growth engine for AMD, with analysts estimating it will account for approximately 91% of the company's anticipated $3.6 billion in annual revenue growth. This marks a significant shift, as data center is expected to contribute $3.3 billion of that growth, while all other business segments combined are projected to add just $300 million.
Within the data center division, server CPUs (EPYC) are expected to generate $4.0 billion in revenue, representing 61.5% of the segment and 35.4% of total AMD sales. AI accelerators and related components are projected to bring in $2.5 billion, or 38.5% of data center revenue. This means server CPU sales are forecast to exceed AI accelerator revenue by 60%, highlighting the continued importance of traditional server processors.
Susquehanna analyst Christopher Rolland noted strong demand for EPYC processors, stating, "The demand environment remains robust." AMD has raised its estimate for the data center market opportunity to $220 billion by 2030. The company's AI accelerator roadmap, including the MI450 and Helios systems, is also drawing attention, with Anthropic planning to deploy its first gigawatt of MI450-powered systems in the first half of 2027.
Options markets are pricing in an 8.7% move in AMD's stock following the earnings release. The company has a history of beating earnings estimates, having surpassed forecasts in 10 of the last 12 quarters. However, the stock only rose the next day after five of those beats. A 16% beat in February led to a 17.3% decline, while a modest beat in May resulted in an 18.6% surge, underscoring the importance of forward guidance.
Analysts are already looking ahead to the third quarter, with early estimates suggesting revenue of $12.5 billion and adjusted EPS of $1.89. Achieving those targets would require sequential growth of approximately 10.6% in revenue and 16.7% in adjusted earnings. The company's guidance for the current quarter will be closely scrutinized.
Key risks to AMD's outlook include export regulations, memory and packaging supply constraints, timing of customer orders, and competition from Nvidia (NASDAQ:NVDA). The company's projected non-GAAP gross margin of around 56% may not be sufficient to offset any softness in data center performance. Investors will be watching for data center revenue around $6.5 billion, the 56% margin target, and third-quarter guidance in line with the $12.5 billion consensus. AMD's earnings call is scheduled for 5:00 p.m. EDT.
