AMD Shares Fall Over 7% Despite Record Revenue and Data Center Boom as Investors Seek Bigger AI Payoff

SANTA CLARA, Calif. — Shares of Advanced Micro Devices fell more than 7% on Wednesday after the chipmaker reported record second-quarter results powered by surging demand for artificial intelligence hardware, yet delivered a revenue outlook that left some investors wanting clearer evidence of accelerating returns from the multibillion-dollar AI spending wave.

AMD stock was last trading near $479.52, down about 7.53% or $39.06, after closing Tuesday at $518.58. The decline came after the shares had risen 7% in the prior regular session. The move was set to erase tens of billions of dollars from the company’s market value as traders digested results that beat Wall Street estimates but failed to fully satisfy elevated expectations built up during a strong year for the stock.

The Santa Clara, California-based company posted second-quarter revenue of $11.5 billion, up 50% from $7.69 billion a year earlier and ahead of analyst forecasts around $11.3 billion. On a non-GAAP basis, diluted earnings per share reached $1.66, exceeding the $1.62 consensus. GAAP diluted earnings were $1.38. Gross margin expanded to 54% on a GAAP basis and 56% non-GAAP.

Data center revenue more than doubled to $6.7 billion, rising 107% year over year and accounting for 58% of total company sales, up from 42% a year ago. The segment’s operating income reached $2.1 billion. Growth was driven by strong demand for AMD’s EPYC server processors and Instinct AI accelerators. Client revenue rose 23% to $3.1 billion on strength in Ryzen processors, while gaming revenue fell 31% to $779 million due to lower semi-custom sales. Embedded revenue increased 19% to $977 million.

For the third quarter, AMD guided revenue to approximately $13 billion, plus or minus $300 million. The midpoint implies about 41% year-over-year growth and a sequential increase of roughly 13%. Non-GAAP gross margin is expected to remain around 56%. The forecast topped the $12.52 billion analyst estimate compiled by LSEG, though some market participants had hoped for guidance closer to $14 billion.

“We delivered an excellent quarter, with record revenue and profitability as Data Center revenue more than doubled year-over-year,” said Dr. Lisa Su, AMD chair and chief executive. “We enter the second half with strong momentum as EPYC demand accelerates, Instinct deployments scale and Helios begins to ramp. More broadly, AI is driving a significant expansion in demand for compute across all of our markets, and our leadership portfolio and growing customer visibility position us exceptionally well to capture this expanding opportunity and deliver substantial revenue and earnings growth in the years ahead.”

Chief Financial Officer Jean Hu added: “Revenue increased 50% year-over-year to a record $11.5 billion, driven by continued strength in our Data Center business, which represented 58% of company revenue in the quarter. We expect Data Center sales to accelerate in the second half of 2026, driving stronger overall revenue growth and continued earnings expansion.”

On the earnings call, Su indicated that data-center revenue is expected to more than double by 2027, with total company revenue growth projected above the previously outlined target of more than 35%. She pointed to server CPU revenue growth of more than 70% in 2027 and described AI GPU growth as well over 100%, supported by the ramp of the Helios rack-scale platform and strategic customer relationships that include OpenAI, Meta and Anthropic.

Despite the strong numbers, investors focused on several points of caution. Capital expenditures rose sharply to $808 million in the quarter from $282 million a year earlier and $389 million in the prior quarter. Free cash flow came in at about $1.56 billion, a 14% margin, lower than the 25% seen in the first quarter as the company invested to support higher data-center demand. Inventory increased to approximately $8.5 billion. Analysts also noted that adjusted gross margins are expected to remain flat sequentially at 56%, offering limited near-term expansion after the stock’s substantial run-up this year.

AMD shares have more than doubled in 2026 on optimism that the company can emerge as a credible alternative to Nvidia in AI accelerators while defending and expanding its position in server CPUs against Intel. That rally raised the bar for quarterly results. Recent customer wins and platform announcements had further heightened expectations.

“We suspect expectations had moved higher following Intel’s results a couple of weeks ago, and the buyside already has a fairly bullish outlook,” said Stacy Rasgon, an analyst at Bernstein.

Other market observers described the results as objectively solid yet insufficient to reset the valuation for a stock that had been trading at elevated multiples of forward earnings. Some pointed to potential supply constraints in advanced process technology and packaging through 2027 as risks that could temper the pace of growth even as demand remains robust.

AMD has been expanding beyond discrete chips into full AI systems that combine processors, accelerators and networking. The company has highlighted the beginning of Helios shipments in the third quarter, with a larger step-up expected in the fourth quarter and continued growth into 2027. Management expressed confidence that current supply arrangements can support the outlined targets, though industry-wide tightness in certain process nodes remains a factor to monitor.

The broader semiconductor sector has been volatile as investors weigh the sustainability of AI infrastructure spending by hyperscalers and enterprises. Nvidia has maintained a dominant position in training and inference accelerators, while Intel has posted improving results that have drawn renewed attention. AMD’s ability to convert its growing customer visibility and product momentum into consistently accelerating free cash flow and higher margins will likely remain a central focus for the market in coming quarters.

Cash and investments stood at $13.1 billion at quarter-end. The company generated $2.4 billion in cash from operations during the period. Management reiterated that AI is expanding demand for compute across markets and that AMD’s portfolio positions it to capture a meaningful share of that opportunity over a multi-year horizon.

Trading volume was elevated as the stock reversed the prior day’s gains. For the year to date, AMD remains significantly higher even after Wednesday’s decline, reflecting the scale of the AI-driven re-rating of its business. Investors will now watch closely for evidence in subsequent quarters that the data-center acceleration and Helios ramp are translating into the faster growth trajectory management has outlined for 2027 and beyond.

The results underscored both the opportunity and the pressure facing AMD as it seeks to convert strong product demand into sustained outperformance relative to the high expectations already embedded in its share price.