AMD's Data Center revenue saw a 107% increase to $6.72 billion in the second quarter, with third-quarter guidance predicting revenues of approximately $13 billion, which translates to around 41% growth. Major commitments have been secured from OpenAI, Meta, and Anthropic for up to 14 GW of MI450 GPUs. Management anticipates that Data Center revenue will more than double by 2027.
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As of now, AMD (NASDAQ:AMD) is trading at $507.93, but its stock is characterized by high volatility, having dropped 18.57% over the past month, compared to only a 1% decline in the S&P 500. The stock's trailing earnings multiple stands at 141, along with a beta of 2.454, indicating its susceptibility to market fluctuations.
In the second quarter, total revenue rose by 50.1% to $11.54 billion, exceeding the $11.31 billion consensus estimate. AMD's non-GAAP earnings per share (EPS) were $1.66, slightly above the estimated $1.61. The Data Center sector now accounts for 58% of the company's overall revenue, while the non-GAAP operating margin expanded to 27%, up from 12% the previous year.
OpenAI has committed to 6 GW, Meta to up to 6 GW, and Anthropic to 2 GW of MI450 GPUs, demonstrating strong ongoing demand in the sector. The CEO noted that the demand for Helios is "tracking ahead of our initial forecast" and has led analysts to raise their consensus EPS estimate for 2027 to $15.7553 from $13.4647 just three months earlier.
Despite strong performance, the high trailing earnings multiple of 141x limits room for a reduction in capital expenditures. AMD's valuation presupposes sustained investment from hyperscalers, even as Meta recently reported its first negative free cash flow since 2012, and oil prices surpassed $112 per barrel. Increased oil prices may elevate borrowing costs for AI-related infrastructure, which relies on debt financing.