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Advanced Micro Devices shares closed 7% lower Wednesday after its second-quarter report failed to clear elevated market expectations. The decline came despite record revenue and stronger data-center sales, which more than doubled from one year earlier.
Investors weighed on the growth pace needed to support AMD stock after a 132% gain this year. SpaceX's decision to use NVIDIA chips exclusively also added pressure, while Wells Fargo raised its AMD price target.
AMD reported revenue of $11.54 billion, up 50% from $7.69 billion one year earlier. Revenue also exceeded the $11.28 billion average analyst estimate cited by Reuters. Non-GAAP earnings reached $1.66 per share, while GAAP earnings were $1.38 per share.
Data-center revenue rose 107% to $6.72 billion and represented 58% of AMD's quarterly sales. Demand for EPYC server processors and Instinct graphics processors drove the increase. The segment now serves as AMD's main growth engine as customers add computing capacity.
AMD forecast third-quarter revenue near $13 billion, with a possible $300 million move in either direction. This outlook topped the $12.52 billion analyst estimate reported by Reuters. However, analysts said investors had set a higher bar after recent customer deals.
Gross margin reached 54% under standard accounting rules, up from 40% one year earlier. Operating income totaled $1.99 billion, compared with a $134 million loss. Net income increased 163% to $2.30 billion. These gains followed higher data-center sales and stronger profitability across AMD's product mix. AMD also reported record quarterly revenue and profitability.
Meanwhile, SpaceX Chief Executive Elon Musk said the company would build its AI computing systems exclusively with NVIDIA hardware. Musk called NVIDIA's architecture ‘the best’ during SpaceX's earnings call. NVIDIA shares gained 3.4% Wednesday as AMD stock moved lower.
The statement changed Musk's earlier position that his companies could purchase processors from AMD, NVIDIA, and other suppliers. AMD Chief Executive Lisa Su responded that she had ‘tremendous respect’ for Musk. She said AMD expected to work with SpaceX over time.
AMD still serves many large technology companies and continues expanding its AI product range. Its Helios rack-scale systems use MI450 accelerators and support AI training and inference. The company expects Helios shipments to rise during the second half of 2026.
Nevertheless, Wells Fargo analyst Aaron Rakers raised the AMD price target to $700 from $615. He also kept an Overweight rating on the shares. The revision came even as the market focused on AMD's valuation and near-term growth rate.
Other analysts described AMD's results and forecast as solid, though market expectations had moved above published estimates. TD Cowen said the company faced a ‘very high bar.’ Deutsche Bank said the quarter beat consensus but missed more optimistic forecasts.
Supply capacity also stayed on investors' watchlist. JPMorgan analysts cited possible limits involving TSMC's N3 manufacturing process and CoWoS packaging through 2027. AMD said stronger customer forecasts have allowed it to plan supply and make broader production investments.
Su expects data-center revenue to more than double by 2027. She also forecasts server revenue growth of 80% during 2026's second half. For 2027, management expects server sales to increase by more than 70% year over year.
The Q2 figures show strong current demand, while Wednesday's selloff reflected the market's demand for faster future gains. AMD stock ended at $482.53, down 6.6%, erasing nearly $59 billion from the company's market value.
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