Advanced Micro Devices (AMD) has long been bolstered by robust server demand, and analysts are now looking ahead to the ramp-up of its new rack-level solutions. When the company reports its second-quarter earnings on Tuesday, investors will focus on two key business segments, driven by recent momentum in the server chip market.
Susquehanna analyst Christopher Roland noted in a client report that the demand environment for AMD's EPYC server central processing units (CPUs) remains strong. He highlighted that the company recently raised its total addressable market estimate to $220 billion by 2030. Roland believes AMD's second-quarter results could exceed expectations, thanks to its data center business, which includes both CPUs and graphics processing units (GPUs).
According to consensus estimates compiled by FactSet, AMD is expected to report overall revenue of $11.3 billion for the June quarter. Its data center segment is projected to see revenue surge 101% year-over-year to $6.5 billion, with server chips contributing $4 billion and AI-related revenue accounting for $2.5 billion. Analysts tracked by FactSet also forecast adjusted earnings per share of $1.62, representing a 237% year-over-year increase, despite the prior year being impacted by export control restrictions to China, which AMD said led to inventory and related charges.
Roland added that the rise of agentic AI has sparked a surge in demand for server chips running these applications, with the ratio of CPUs to GPUs reaching a 1:1 level in some cases. Jefferies analyst Brian Curtis noted that AMD's recently launched Venice series of server CPUs provides upside for the second half of the year. He pointed to a potential "substantial price increase" for these chips, with average selling prices possibly reaching $3,000 to $5,000, compared to around $1,500 in the first quarter.
Meanwhile, Curtis said there is "ample upside" from the upcoming AI ramp, referring to AMD's first rack-level solution, Helios. This system, set to deploy with AMD's next-generation MI450 series GPUs, counts OpenAI and Meta Platforms (META) as clients. AMD CEO Lisa Su stated at the Advancing AI event in July that Helios shipments are on track to begin by the end of the third quarter, and investors will look for more comments on this during AMD's earnings call.
Curtis added that the chipmaker has also secured agreements with Microsoft (MSFT) and Anthropic for Helios, indicating growing adoption. He noted that AMD could benefit from this deployment in the current quarter, but the bulk of revenue ramp will occur in the fourth quarter and into next year. According to FactSet, analysts expect third-quarter revenue of $12.5 billion, with consensus adjusted earnings per share of $1.89.