Earnings Preview | The Battle of the AI Chip Titans Escalates! AMD (AMD.US) Earnings Report Will Test the Strength of NVIDIA Corporation as a "Challenger"

AMD (AMD.US) will release its second-quarter financial report after the U.S. stock market closes on August 4 (Tuesday). Against the backdrop of major tech giants ramping up their investments in AI infrastructure, the market is closely monitoring whether AMD can continue to secure AI chip orders and further narrow the gap with industry leaders. As a core challenger to NVIDIA Corporation in the high-performance computing space, this earnings report will serve as a crucial indicator for the market's assessment of the ongoing demand for global AI computing power. The market generally expects AMD's second-quarter revenue to reach $11.32 billion, a year-on-year increase of 47.3%, with earnings per share projected at $1.61, reflecting an impressive growth rate of 235.42%. According to Zacks, AMD has surpassed market expectations in earnings over the past four quarters, with an average beat of 6.5%. AMD's stock price has doubled this year, primarily driven by explosive growth in its data center business; however, due to an overall pullback in the AI sector, the stock has retreated nearly 19% from its June highs. Recent options pricing indicates that traders are betting on a volatility of up to 10% in AMD's stock price this week. If AI chip revenues and guidance for the second half of the year exceed market expectations, AMD's earnings could boost the entire semiconductor sector. Conversely, any disappointing growth in orders, product deliveries, or gross margins could intensify investor concerns about the return on AI capital expenditures. What are the highlights of AMD's Q2 earnings report? Data Center Business Remains Core Growth Driver The market widely anticipates that the data center business will remain the core growth driver of AMD's Q2 performance. Strong demand for EPYC server CPUs and Instinct AI accelerators is expected to propel AMD's revenue growth. With robust demand for AI inference and accelerated implementation of enterprise AI, along with major cloud providers consistently increasing their investments in AI infrastructure, shipments of Instinct GPUs are likely to see a boost. Meanwhile, the widespread adoption of the fifth-generation EPYC processors in hyperscale data centers and enterprise customers is expected to support revenue from server CPUs. Notably, the market interest in AMD's next-generation hardware products continues to rise. AMD CEO Lisa Su recently stated that demand for the MI450 and Helios is exceeding initial expectations, even surpassing the company's internal plan set for 2027. The lines of customers waiting to deploy AMD's platforms indicate strong market interest. According to AMD's forecast, by 2030, the market size for AI accelerators is projected to reach $1.4 trillion, with the data center CPU market expected to reach $220 billion, and the overall computing market projected to reach $2 trillion. The core logic behind this assessment is that the demand for AI infrastructure is no longer limited to training large models. With the emergence of new computing requirements from inference and intelligent agent AI, AMD anticipates further acceleration in server business growth. The Joys and Concerns of Deep Ties with AI Giants A significant portion of AMD's Q2 earnings growth will come from large-scale procurement by leading global cloud providers. Mainstream cloud platforms, such as AWS, Microsoft Corporation Azure, and Alphabet Inc. Class C cloud, are continuously deploying EPYC processors, and collaborations with Meta, Samsung, Tata Consultancy Services, NAVER Cloud, and Upstage are expected to drive growth in AMD's AI infrastructure revenue. Meta has clearly stated its plans to deploy AMD Instinct GPUs and adopt the next-generation EPYC processors. Coupled with ongoing global sovereign AI projects and AMD products performing excellently in the MLPerf benchmark tests, this has further boosted industry customer confidence, helping AMD secure more orders. On the positive side, deep ties with leading AI giants are the most critical support for AMD's long-term computing business growth. Last year, AMD finalized a major strategic partnership, binding itself to OpenAI through a multi-billion-dollar warrant collaboration in exchange for large-scale procurement of its MI350X chips. OpenAI's latest operational data has reinforced optimistic expectations, as it recently disclosed that its annualized revenue for July surpassed the total for the second quarter. From a risk perspective, the rapid iteration of open-source models is quietly changing the logic of industry computing power demand. Concerns are growing that the widespread adoption of rapidly iterating open-source models could impact the pricing and customer base of closed-source vendors such as OpenAI and Anthropic. More critically, the lightweight and high-efficiency nature of open-source models could significantly reduce the GPU computing power required for equivalent AI tasks, thereby lowering overall industry demand for computing power. A sustained loss of customers from closed-source vendors, coupled with a substantial decrease in model computing power requirements, could directly compress AMD's market space for AI chips and weaken its growth narrative over the long term. PC and Embedded Business Expected to Perform Steadily In addition to the high-demand data center business, AMD's traditional business segments are expected to show steady performance. The client segment is anticipated to benefit from stable demand for Ryzen processors and an ongoing increase in the adoption rate of AI PCs. Enterprise device upgrades, the large-scale deployment of commercial Ryzen AI PRO processors, and the concentrated launch of Copilot+ AI PC products are likely to boost shipments of AMDs desktop and laptop processors. Additionally, AMD's market share in the high-end consumer PC segment continues to expand, with strong demand for premium Ryzen X3D processors aimed at gaming and creative design scenarios, further contributing to overall revenue growth in Q2. Moreover, with the continuous improvement in demand from scenarios such as industrial automation and edge AI, AMD's embedded business revenue may remain stable. Intense Industry Competition Poses Limits on Revenue Growth and Gross Margin Recovery Currently, AMD faces fierce competition in its core markets from NVIDIA Corporation, Broadcom Inc., and Intel Corporation. In the AI accelerator domain, NVIDIA Corporation dominates with an absolute market share of around 80%, thanks to its CUDA ecosystem. However, AMD is emerging as a formidable challenger through full-stack solutions, cost-effective hardware, and breakthroughs with key customers. It is particularly noteworthy that on July 23, AMD unveiled a series of new products at the Advancing AI conference, attempting to comprehensively challenge NVIDIA Corporation with an "end-to-end" product strategy from chips to complete systems. AMD claims that its Helios platform, based on the next-generation MI450 series accelerators, can surpass NVIDIA Corporation's next-generation Vera Rubin platform in several key metrics; the performance of the new EPYC "Venice" server CPUs is about 20% higher than NVIDIA Corporation's competitive products. AMD has also indicated that Helios is "in full production," and "customer demand for Helios is extremely strong," with shipments expected to begin by the end of Q3, and Venice-based server systems anticipated to be delivered in Q4 of this year. Furthermore, Intel Corporation is actively competing for server market share by continually expanding its Xeon processor product line, wafer foundry business, and advanced packaging technology. Broadcom Inc. is persistently deepening its focus on the hyperscale cloud customer market, consolidating its competitive advantages in customized AI accelerators and high-performance networking equipment, further squeezing AMD's market space. The intensifying industry competition may affect AMD's revenue growth prospects and profit margin expansion going into Q2 2026. Wall Street Analysts Optimistic Ahead of Earnings Wall Street analysts generally hold a positive outlook on AMD. Among the 35 analysts tracked by Tipranks, 28 recommend buying AMD, 7 give a "neutral" rating, resulting in a consensus rating of "strong buy" with an average target price of $582.65, representing a 22% increase from last Friday's closing price. The iteration and upgrade of AMD's next-generation AI hardware products are the core logic driving analysts' positive outlook on the companys future growth and are a key focus for this earnings report. AMD launched a series of new products during its "Advancing AI" event in July. Following this, analysts from UBS Group AG and Bank of America Corp raised AMD's target prices from $700 and $560 to $730 and $620, respectively. William Blair analysts stated after the event that AMD "is now actively taking action to capture market share and, with a robust product roadmap and emphasis on open standards, is poised to win numerous orders from hyperscale data centers and AI labs."