AMD’s revenue slid 18% in Q2 but ‘AI engagements increased’ big time

Advanced Micro Devices Inc (NASDAQ: AMD) is trading up in after-hours even though its revenue guidance for the current quarter came in a tad below Steet estimates on Tuesday.

Why is AMD stock up in extended hours?

Interestingly, the chipmaker did not beat expectations by a meaningful margin in its second quarter either.

Still, shareholders seem content primarily because CEO Lisa Su made positive comments on the company’s AI push. In the press release, she said:

Our AI engagements increased by more than seven times in Q2. We made strong progress meeting key hardware and software milestones to address the growing customer pull for our data centre AI solutions.

She expects AI chips in data centres to be a $150 billion market by 2027. Su also confirmed that AMD’s high-performance MI300 accelerator for artificial intelligence-focused tasks (read more) is on track to launch in the final quarter of this year.

Key takeaways from AMD’s Q2 earnings report

• Net income printed at $27 million versus the year-ago $447 million
• Per-share earnings also crashed from 27 cents to 2 cents only
• Adjusted EPS came in at 58 cents as per the earnings press release
• Revenue tanked 18% on a year-over-year basis to $5.36 billion
• FactSet consensus was 57 cents a share on $5.3 billion in revenue

Bloomberg expert shares his view on AMD

AMD noted an 11% annualised decline in its data-centre revenue in the second quarter. Still, Kunjan Sobhani of Bloomberg Intelligence said today:

AI is dominated by NVIDIA. In the near-term, best positioned company to come in as a second alternative is AMD. So, for them, even getting a small sliver of the pie could mean significant upside.

Other notable figures in the earnings report include a 4.0% decline in gaming revenue and an agitating 54% hit to the PC business. According to Bloomberg’s Sobhani, though:

H2 is typically a seasonally strong period for PCs. [Plus] AMD is expecting to ramp two of their latest [data centre] products and given the recent share gains, we expect a sequential H2 recovery.

Wall Street currently has a consensus “overweight” rating on AMD stock that has already nearly doubled this year.