David Prince
US Equity/Options Fund Manager, Mentor at T3 Live
AMD's Q2 was not good enough for a stock that had rallied 100 points off its lows in a monster year, when the Street wanted a blowout. Adjusted EPS of $1.66 beat the $1.61 consensus, revenue of $11.54B beat $11.31B, and Q3 revenue guidance of $13B, plus or minus $300M, topped the $12.51B consensus. The raised capex is also an issue. x.com x.com x.comÂ
AMD's strong quarter turned into a sell-the-news drop because expectations were too high and capex far exceeded estimates. Q2 revenue was $11.54B versus $11.31B expected, data center revenue rose 107% to $6.72B, and Q3 guidance of about $13B beat $12.5B. But capex hit $808M versus $299M expected, about 171% higher, and the stock had already priced in MI450, Helios, AI GPU and server CPU growth, falling about 7% after hours. x.com x.comÂ
AMD now has to be extraordinary to justify its valuation, because it is priced on what it must deliver in 2027, not on past results. Despite revenue up 50%, data center up 107%, triple-digit profit growth and above-consensus guidance, the stock fell about 8% after hours; great is not enough when great is already priced in. x.comÂ
AMD is a beast after crushing its first-quarter earnings. Per @StockSavvyShay, revenue of $10.25B beat the $9.85B estimate, data center revenue reached $5.8B versus $5.6B expected, gross margin hit 55%, and second-quarter revenue guidance of $11.2B topped the $10.5B estimate. x.comÂ
AMD's numbers are very good, but capex nearly 3x the expected figure means the stock is going to sell off. x.comÂ
Insufficient substrate supply may cap AMD's growth because the company has not secured enough capacity. The author says limited substrate availability drove AMD's lowered guidance, making supply-chain execution the constraint on how far it can grow. This adds an execution risk to the earlier concern that AMD is too expensive to buy despite strong results. x.com x.comÂ
AMD went from limping to sprinting in Q2 FY26, earning an A grade. Revenue rose 50% to $11.54 billion, gross margin jumped from 40% to 54%, and operating income swung from a $134 million loss to a $1.99 billion profit. Net income rose 163%, and EPS climbed from $0.47 to $1.41. x.comÂ
AMD's strong Q2 set up a classic sell-the-news reaction against a stock that had priced in perfection. Capex hit $808M, nearly 3x what many modeled, compressing free cash flow. The roughly $13B Q3 guide beat the $12.5B consensus but not whispers near $14B, with growth slowing to about 41%. Management guided no near-term margin expansion, server CPU supply is constrained, and Helios and the multi-gigawatt Anthropic, OpenAI and Meta deals are mainly a 2027 story. x.comÂ
AMD's valuation is insane for a huge, cyclical chip company: at $408 it sells for about 90x its annualized Q2 GAAP earnings guidance. The non-GAAP figure analysts use strips out a massive amount of stock compensation, so it understates the true cost. x.com x.comÂ
AMD is held for its strong earnings growth, which, when it continues into the next quarter, is a reason to own a company beyond a good-looking chart. Price and risk then decide whether to take the trade. x.comÂ
AMD's stock has outrun its fundamentals, leaving it a bad investment at today's price despite an extremely bullish long-term outlook for the business. From April 2025 to September 2026, AMD rose 8x while revenue grew 55%; Nvidia rose 2.4x while revenue grew 118%. AMD had previously lagged despite improving fundamentals, but the market's catch-up went too far. Its risk/reward is no longer what it was at roughly 20x forward earnings in 2025; a crash could make it attractive again. x.com x.comÂ
