Advanced Micro Devices (AMD) once again exceeded market expectations with its Q2 earnings report, underscoring the company's strong growth in an environment of rising demand for artificial intelligence and data centre technologies. AMD reported adjusted earnings per share (EPS) of $0.69, beating the Wall Street consensus of $0.68 and marking a significant improvement over last year's EPS of $0.58. Revenue also beat expectations, coming in at $5.8 billion versus forecasts of $5.7 billion, up significantly from $5.4 billion in the same period in 2023.
Data centre and artificial intelligence: Growth drivers
The quarterly results highlight the phenomenal growth in the data centre segment, which came in at US$2.8 billion - a 115% year-on-year increase, well above the US$2.75 billion expected. This explosive growth was primarily driven by strong sales of graphics processing units (GPUs) and central processing units (CPUs) for data centres, largely supported by rapid advances in generative artificial intelligence technologies.
CEO, Lisa Su, highlighted the accelerated growth of their AI business and the company's strategic positioning to continue this momentum in the second half of the year. Su highlighted that "Rapid advancements in generative AI are driving demand for more computing in every market", making the company a leader in providing cutting-edge AI solutions. This information is crucial given that a few days ago the stock market was in a panic due to concerns about the return on investment in AI.
Robust performance in different segments
The company's success is not limited to its efforts in AI and data centres. The client segment, which includes chips for personal computers, posted revenue of $1.5 billion, beating expectations of $1.45 billion and up significantly from last year's $998 million. This increase reflects the continued recovery of the PC market, which has seen a resurgence in demand as consumers look to upgrade devices purchased during the onset of the pandemic.
In addition, gaming revenues, although down 59% year-on-year, slightly exceeded expectations at $648 million, indicating a stabilisation of the market despite previous slowdowns. The gaming industry is expected to see renewed interest due to upcoming product launches from major industry players in late 2024 and 2025.
Investor confidence and future outlook
Investor reaction has been decidedly positive, with AMD stock reacting the same way. Following the announcement of the results, the share price rose by up to 5%. This performance is in stark contrast to the nil response from rival Intel's shares and underlines investor confidence in the company's strategic direction and execution.*
As AMD continues to innovate and expand its product offerings with upcoming launches such as the MI325X and MI350X, it appears well-positioned to take advantage of the growing demands of both AI technologies and traditional computing. Investors and other market participants should undoubtedly keep a close eye on this giant's future developments, as such strong fundamental prospects, combined with the favourable technicals of a stock that is in correction and thus at a discounted price, make this company a quality adepts to include in your investment portfolio.
* Past performance is no guarantee of future results.
AMD's stock performance over the past five years: https://tradingeconomics.com/amd:us
