Despite the cold reception of Q2 financial reports dragging down stock prices, Wall Street major firms still have a positive outlook on AMD's growth prospects

According to the Zhitong Finance APP, AMD (AMD.US) shares fell nearly 5% in pre-market trading on Wednesday after the company reported second-quarter earnings that missed expectations. Nevertheless, Wall Street analysts remain positive about the stock.

The earnings report showed that AMD's second-quarter revenue grew 32% year-over-year to $7.7 billion, exceeding analysts' expectations of $7.43 billion. However, the adjusted earnings per share were $0.48, below Wall Street's expectation of $0.49. Revenue from the data center business grew 14% to $3.2 billion, slightly below the market expectation of $3.25 billion. In contrast, competitor NVIDIA's first-quarter earnings report showed a staggering 73% increase in data center revenue to $39.11 billion. The company also warned that its return to the critical Chinese market remains uncertain, casting a shadow over the originally optimistic AI business outlook.

However, Benchmark reiterated its "Buy" rating on AMD and raised its target price from $170 to $210. Analyst Cody Acree stated that AMD delivered a strong second-quarter report card—revenue of $7.685 billion, a 32% year-over-year increase and a 3% quarter-over-quarter increase, which was $270 million higher than the market's general expectation of $7.415 billion. The guidance for third-quarter performance is also encouraging, with expected revenue of $8.7 billion, representing a 28% year-over-year increase and a 13% quarter-over-quarter increase, which is $377 million higher than the market consensus expectation of $8.323 billion. This guidance has taken into account a potential revenue loss of $1.5 billion over the next two quarters due to increased U.S. export restrictions on AMD and NVIDIA AI accelerators.

Cody Acree noted that AMD's strong revenue growth in the second quarter was primarily due to several factors, including: EPYC server CPUs and Ryzen client CPUs continuing to gain market share in the AI and traditional enterprise markets, achieving record sales; tight supply of Radeon desktop GPUs, which is a rare situation for AMD's gaming GPU demand to reach this level; and increased shipments of semi-custom gaming consoles, as inventory in this market has finally bottomed out, prompting console manufacturers to restock for the holiday season.

Cody Acree stated, "AMD's stock price has risen 26% in the past month and 56% in the past six months. We believe that regardless of what AMD says, investors and traders are ready to lock in short-term profits." Regarding the third quarter, the analyst mentioned, "AMD's growth is expected to be driven by strong double-digit growth in the data center, particularly with the mass production of MI350, while EPYC CPU sales remain strong, client business is expected to see single-digit growth quarter-over-quarter, embedded business returns to growth, and gaming business is expected to remain flat quarter-over-quarter, which means that the combined client and gaming business will see slight growth in the third quarter."

KeyBanc maintained its "Hold" rating on AMD. Analyst John Vinh and his team stated that AMD's second-quarter revenue was strong, and the third-quarter guidance is positive (revenue exceeds expectations, but earnings per share meet expectations due to increased operating expenses). The second quarter's outperformance mainly came from the server and gaming businesses, while the third quarter's outperformance is expected to come from the strong ramp-up of MI355, with server CPUs also expected to achieve double-digit growth quarter-over-quarter Analysts added that AMD indicated there was no contribution from MI308 in the second and third quarters as it is still awaiting approval for shipment to China. The analysts stated, "We are encouraged by these results and the strong volume of MI355."

Oppenheimer maintains a "Market Perform" rating on AMD. Analyst Rick Schafer and his team noted, "AMD's performance and outlook announced on Tuesday exceeded expectations. Second-quarter sales were 4% higher than market expectations." The team added that AMD's plans to enter the rack-scale market are progressing well, with expectations to achieve this through the release of MI400 next year. However, the team also pointed out that they remain cautious until the path to sustained outperformance becomes clearer.

Additionally, Mizuho raised its target price for AMD from $175 to $183.