AMD stock enters earnings with one risk that could upend the bullish case

Advanced Micro Devices NASDAQ:AMD will report second-quarter results after Tuesday’s close, followed by a 5PM ET call.

Wall Street expects strong growth, but an earnings beat may no longer satisfy investors after the stock more than doubled this year.

The chipmaker has proved that customers want an alternative to Nvidia, but has not shown how profitable securing that demand will be.

AMD is spending heavily through performance-based warrants, a potential $5 billion (approx. R 85,6 billion) Anthropic investment and deployments extending into 2027, with much of the return likely to arrive later.

Wall Street expects more than another earnings beat

AMD has guided for revenue of about $11,2 billion (approx. R 191,7 billion), plus or minus $300 million (approx. R 5,1 billion), representing 46% annual growth at the midpoint. It expects an adjusted gross margin near 56%.

Visible Alpha consensus stands at $11,3 billion (approx. R 194,1 billion) and $1.61 in adjusted earnings per share.

AMD enters the quarter after reporting first-quarter revenue of $10,3 billion (approx. R 175,5 billion), up 38% year over year, while adjusted earnings rose 43% to $1.37 a share.

Data Center revenue increased 57% to $5,8 billion (approx. R 99,3 billion), driven by strong demand for EPYC server processors and the continued ramp of Instinct accelerators.

Analysts have raised estimates. Bank of America’s Vivek Arya expects a beat-and-raise quarter, with Barchart citing “exceptional” demand for EPYC server chips and AI accelerators.

Wedbush’s Matt Bryson raised his revenue estimate to $11,4 billion (approx. R 195,2 billion) and adjusted EPS forecast to $1.64, while lifting his target to $600.

Mizuho’s Vijay Rakesh increased his target to $625, citing upside from the “Helios and Venice launches,” according to TipRanks.

With options pricing a move of as much as 10%, results merely matching consensus could disappoint.

Big AI agreements carry a hidden price

AMD’s customer wins are important as OpenAI expects to bring Helios 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.

The terms complicate the near-term earnings story.

OpenAI and Meta each hold performance-based warrants to buy up to 160 million AMD shares at one cent apiece, subject to purchasing, technical and share-price milestones. AMD said none had vested or become exercisable as of March 28.

AMD has also agreed to invest as much as $5 billion (approx. R 85,6 billion) in Anthropic, tied to deployment milestones.

These arrangements do not prove the contracts are uneconomic, but leave investors without clear answers on future dilution, capital requirements and the margins attached to winning business from Nvidia.

Margins and guidance could decide the reaction

Investors are expected to 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 risks.

The same firm offered a bullish counterpoint after AMD’s AI event, saying the company was “now on the offense to grab share.”