Second-quarter revenue rose 50% to a record $11.5bn ($11.3bn expected). Growth was led by a 107% rise in Data Center revenue to $6.7bn, while Client & Gaming revenue rose 6% to $3.8bn.
Adjusted operating profit rose 245% to $3.1bn ($3.0bn expected), as strong revenue growth and improved gross margins more than offset higher operating expenses.
Free cash flow was $1.6bn, while net cash, including lease liabilities, rose from $8.5bn to $8.8bn over the quarter.
For the third quarter, AMD expects revenue of around $13.0bn at the midpoint of guidance ($12.5bn expected).
The shares fell 8.8% in early trading.
Our view
AMD’s second-quarter performance adds weight to a material shift in the investment case. We put the negative reaction down to a strong run-up heading into results, rather than any major change to the story.
Data Center revenue now accounts for well over half of group sales, while the outlook points to another step-up. A business once heavily shaped by PC and console cycles is increasingly exposed to structural demand for accelerated compute. That changes the mix and gives AMD a broader, higher margin, and more durable growth engine.
The opportunity is also expanding. Demand for server CPUs has accelerated as increasingly complex AI systems require more general-purpose compute to orchestrate, manage and connect workloads. AMD is gaining share in this niche, while its AI GPU platform is approaching a more meaningful ramp. Its next-gen, rack-scale system, Helios, is expected to begin shipping this quarter, with a handful of large anchor customers for 2027.
Those agreements are sensible, but they complicate the picture. AMD has offered shares in the business to sweeten the deals. Using equity to secure large-scale adoption can help establish the platform and attract further demand, but it effectively gives back part of the benefit. It also makes it harder to judge how much demand is driven by product strength alone. This does not undermine the strategy, but it raises the risk profile and will need close monitoring as revenue ramps.
Competition remains intense. Nvidia has a stronger software ecosystem, more experience delivering rack-scale systems and a significantly larger research and development budget. Its quarterly R&D spend is now almost three times AMD’s, widening the resources available to defend its lead. Still, AMD doesn’t need to beat Nvidia outright. Accelerated computing is growing quickly enough for a credible second player to build a substantial business, especially as large customers look to diversify suppliers.
Outside the AI-related business, demand has held up better than expected, although higher memory and component costs remain a headwind for PCs and Gaming. These businesses are becoming less central to the overall growth story, but they still provide useful diversification.
With the business shifting toward a higher-growth mix, the earnings multiple has settled at a premium level. It's sustainable, but not an area where we see scope for further improvement. The more credible, and in fact, more durable route to upside comes from a powerful earnings growth tailwind, one that, in our view, is still underappreciated.
The main risk is the reverse. AMD trades at a premium multiple to Nvidia, which we view as the stronger competitor, leaving the shares more exposed if sentiment shifts or execution falls short.
Environmental, social and governance (ESG) risk
The semiconductor sector is medium-risk in terms of ESG. Overall, this risk is managed adequately in Europe and North America but has considerable room for improvement in the Asia-Pacific region. Its reliance on highly-specialised workers means labour relations is one of the key risk drivers. Other risks worth monitoring include resource use, business ethics, product governance, and carbon emissions.
According to Sustainalytics, AMD’s management of material ESG risks is strong.
AMD has relatively low ESG risk relative to both the wider sector and the global stock market. It’s managing its own risk well; with board level oversight, strong environmental policies, and a robust whistleblower policy. There are also no ongoing events that pose a financially material risk to the business.
AMD key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.