Advanced Micro Devices (NASDAQ: AMD) is set to release its second-quarter results after Tuesday's market close, followed by a conference call at 5 PM ET. Wall Street anticipates robust growth, but the bar has been raised significantly after the stock more than doubled this year. A simple earnings beat may no longer be enough to satisfy investors.
The company has guided for revenue of approximately $11.2 billion, plus or minus $300 million, implying 46% year-over-year growth at the midpoint. Adjusted gross margin is expected to be near 56%. Visible Alpha consensus sits at $11.3 billion in revenue and $1.61 in adjusted earnings per share.
In the first quarter, AMD reported revenue of $10.3 billion, up 38% year over year, with adjusted earnings rising 43% to $1.37 per share. Data Center revenue surged 57% to $5.8 billion, driven by strong demand for EPYC server processors and the continued ramp of Instinct accelerators.
Analysts have been raising their estimates. Bank of America's Vivek Arya expects a beat-and-raise quarter, citing "exceptional" demand for EPYC chips and AI accelerators. Wedbush's Matt Bryson lifted his revenue estimate to $11.4 billion and adjusted EPS to $1.64, with a price target of $600. Mizuho's Vijay Rakesh increased his target to $625, pointing to upside from the Helios and Venice launches.
However, options markets are pricing a potential move of up to 10% in either direction. If results merely match consensus, the stock could face disappointment, especially given its recent run-up.
AI deals come with strings attached
AMD's recent customer wins are significant. OpenAI expects to bring its Helios system online in the fourth quarter, with deployments accelerating through 2027. Meta is testing workloads and validating AMD's rack-scale system, while Anthropic's first deployments are scheduled for the first half of 2027.
But the terms of these agreements complicate the near-term earnings narrative. OpenAI and Meta each hold performance-based warrants to purchase up to 160 million AMD shares at one cent per share, subject to purchasing, technical, and share-price milestones. As of March 28, none had vested or become exercisable. AMD has also agreed to invest up to $5 billion in Anthropic, tied to deployment milestones.
These arrangements do not necessarily prove the contracts are uneconomic, but they leave investors without clear answers on future dilution, capital requirements, and the margins associated with winning business from Nvidia. The potential for significant share issuance could weigh on the stock if not clearly communicated.
Margins and guidance in focus
Investors will likely focus on Data Center revenue, the mix between EPYC and Instinct sales, gross margin, and third-quarter guidance. Supply availability for GPUs, high-bandwidth memory, and rack systems will also shape the speed of the ramp.
William Blair analyst Sebastien Naji initiated coverage with a Market Perform rating, arguing that AMD's valuation leaves little room for error. Competition, supply constraints, and slower AI spending remain key risks. The same firm offered a bullish counterpoint after AMD's AI event, saying the company was "now on the offense to grab share."
As AMD navigates this critical earnings report, the market will be watching closely. The company's ability to balance growth with profitability and shareholder returns will be crucial. For context, Lam Research's recent AI-driven beat shows the sector's potential, while AI cloud earnings highlight the competitive landscape. Meanwhile, tech rallies have been fueled by AI optimism, but AMD's specific risks could test that narrative.
This article is for informational purposes only and does not constitute financial advice.
