Advanced Micro Devices 2026 Q2 Earnings Call

Thank you, welcome to AMD's second quarter 2026 financial results conference call. By now, you should have had the opportunity to review a copy of our earnings press release and the accompanying slides. If you have not had the chance to review these materials, they can be found on the investor relations page of amd.com. Today, we will refer primarily to non-GAAP financial measures during the call. The full non-GAAP to GAAP reconciliations are available in today's press release and slides posted on our website. As a reminder, our second quarter 2025 results included approximately $800 million of inventory and related charges associated with U.S. export control restrictions on MI308 shipments to China. Unless otherwise noted, comments making year-over-year comparisons exclude the impact of those charges to provide a more comparable and meaningful view of our underlying business performance.

Participants on today's conference call are Dr. Lisa Su, our Chair and CEO, Jean Hu, our Executive Vice President, CFO, and Treasurer. This is a live call, will be replayed via webcast on our website. Before we begin, I would like to note that AMD will participate in the following events for the financial community: KeyBank's Technology Leadership Forum on Tuesday, August 11th, Citi's 2026 Global TMT Conference on Tuesday, September 8th, and the Goldman Sachs Communacopia and Technology Conference on Friday, September 11th. Today's discussions contain forward-looking statements based on the current beliefs, assumptions, expectations, including forward-looking statements regarding financial projections, business and industry trends that speak only as of today, as such, involve risks and uncertainties that could cause actual results to differ materially from our current expectations.

Please refer to the cautionary statement in our press release for more information on these factors that could cause actual results to differ materially. With that, I will hand the call over to Lisa.

Thank you, Matt, and good afternoon to all those listening today. We delivered another outstanding quarter with record revenue and profitability as adoption of our leadership products continued to expand. Revenue increased 50% year-over-year to $11.5 billion, driven by significantly higher sales of EPYC, Instinct, Ryzen, and embedded processors. Data center revenue more than doubled year-over-year and now represents 58% of total revenue, up from 42% a year ago, reflecting the rapidly expanding scale of our server and data center AI businesses. Our record results mark another clear step up in AMD's financial performance and demonstrate the strength of our product portfolio and execution.

We are still in the early stages of a multi-year AI adoption cycle as deployments grow across a broad set of markets and workloads, driving demand for more compute and creating a clear path to significant revenue growth and earnings power in the years ahead. Turning to our segments, data center revenue grew 107% year-over-year to a record $6.7 billion, driven by strong demand for EPYC processors and Instinct accelerators. In server, we delivered our fifth consecutive quarter of record server CPU revenue, with cloud and enterprise sales each growing more than 70% year-over-year, exceeding the outlook we provided last quarter. We gained x86 server revenue share year-over-year as customers expanded deployments of both fifth-gen EPYC Turin and fourth-gen EPYC Genoa families. In cloud, hyperscalers continued expanding EPYC across their internal infrastructure and public cloud offerings, including AWS, Microsoft, Google, Oracle, and others.

Fifth-gen EPYC Turin now powers nearly one-third of the more than 1,600 EPYC public cloud instance types available globally as providers broaden their offerings with new database storage and AI workloads. That expanding footprint is translating into growing adoption of EPYC in the cloud, with healthcare, financial services, media, and technology companies adding tens of millions of instances in the last quarter. In enterprise, we delivered record sales in our fourth consecutive quarter of record sell-through as on-prem adoption accelerated, driven by the leadership performance and TCO advantages of our EPYC portfolio. Growth was broad-based as we won large deployments with leading financial services, manufacturing, telecom, retail, and technology companies. More than 230 fifth-gen EPYC platforms are now in market from HPE, Dell, Lenovo, Supermicro, and others, our broadest enterprise portfolio to date.

Looking ahead, agentic AI is creating a new growth vector for server CPUs, spanning high-frequency AI host nodes, high-density agentic servers, and general-purpose cloud and enterprise workloads. Our sixth-gen EPYC Venice family is purpose-built for this expanding range of workloads and delivers one of the largest generational performance gains in EPYC history. Built on our all-new Zen 6 core and two nanometer technology, Venice extends EPYC leadership in performance and efficiency, delivering more than twice the performance per watt of leading x86 CPUs and up to 3.3 times the performance per watt of leading Arm-based CPUs. The Venice family includes more than 30 processors that combine leadership per core and per socket performance with a broad range of memory and IO configurations, giving customers greater flexibility to optimize performance, efficiency, and TCO across the most widely used cloud, enterprise, and HPC workloads.

Venice is in production now, with every major OEM on track to launch platforms and the leading cloud providers planning deployments beginning later this year. Customer demand for Venice is stronger than for any prior EPYC generation, and we expect to continue growing market share across cloud and enterprise in the coming quarters. Turning to our data center AI business, revenue more than doubled year-over-year, driven by strong demand for Instinct accelerators. MI355X adoption continued to broaden as leading AI companies scaled deployments across a growing range of inferencing and training workloads and cloud providers expanded MI350 series availability. At our Advancing AI event, we launched Helios, our rack scale AI platform combining EPYC Venice CPUs, MI450 series GPUs, Pensando networking, and ROCm software.

Across a broad range of inferencing workloads, Helios delivers up to 15% more throughput at the same rack power and up to 30% more tokens per dollar than the competition. Customer pull for Helios is very strong and tracking ahead of our initial forecasts. In addition to our multi-generation gigawatt scale deployments with OpenAI and Meta, we announced a new strategic partnership with Anthropic. Anthropic will deploy up to 2 gigawatts of MI450 series GPUs in Helios, with deployment of the first gigawatt beginning in the first half of 2027. The partnership includes a multi-year joint engineering collaboration using Claude to optimize workloads for Instinct CPUs and accelerate ROCm software development. We also expanded our longstanding partnership with Microsoft. Microsoft will deploy Helios at scale on Azure for frontier model inferencing across Microsoft, its AI customers, and Azure AI services.

Together, these commitments broaden the group of leading AI companies and cloud providers building their next generation infrastructure on AMD. Helios is now in production with initial shipments on track to begin later this quarter and ramp through the fourth quarter and into 2027 to meet very strong customer demand. Looking beyond Helios, we plan to launch a new rack scale AI platform every year with each generation delivering significant performance, efficiency, and TCO gains. In 2027, our next generation platform combines MI500 series GPUs, Verona CPUs, and Pensando networking with expanded scale-up domains and both copper and optical-based interconnects. Customer engagement on MI500 is very strong, with multiple customers working closely with us as they plan their next generation AI infrastructure. We expect MI500 to deliver the largest generational leap in Instinct history, putting us on track to increase inferencing performance more than 2,000 times in just four years.

Turning to our AI software stack, ROCm has reached an important inflection point with the performance, capabilities, and developer experience customers need to deploy AI in production at scale. The breadth of the ecosystem also continues to expand. More than 3 million models now run out of the box on AMD, the leading open models launch with day zero support for Instinct, and open source contributions to ROCm have increased more than tenfold over the past year. We introduced ROCm.AI, our new AI-assisted development platform for AMD GPUs, last month. ROCm.AI lets developers use today's leading coding agents, including Claude, Codex, and Cursor to create, port, and optimize code for Instinct, making it significantly faster and easier to bring new models and workloads to AMD. ROCm.AI delivers more than twice the training performance and more than three times the inferencing performance of ROCm 7 across a broad range of models.

We are also working closely with the leading AI labs, including OpenAI, Anthropic, Meta, and others to co-optimize ROCm for their models with the improvements benefiting the entire AMD ecosystem. Taking a step back, the overall data center market opportunity is expanding far more rapidly than we projected just six months ago. As AI moves into production across a broader range of applications and workloads, demand for both accelerators and CPUs is growing well above our prior expectations. We now expect the data center AI accelerator market to grow more than 45% annually to approximately $1.4 trillion by 2030. We expect the server CPU market to grow more than 50% annually to approximately $220 billion by 2030. For AMD, this larger opportunity, combined with the strength of our portfolio and growing customer visibility, is creating a steeper growth trajectory for our data center business.

In Data Center AI, the growing number and scale of Helios and MI450 Series Instinct deployments position the business for significant growth in the second half of the year, with growth accelerating in 2027. In server CPUs, with very strong customer demand and improved supply, we now expect server revenue to grow more than 80% year-over-year in the second half of 2026 and more than 70% for the full year 2027 off a much higher base. Taken together, we now expect data center segment revenue to more than double year-over-year in 2027. Turning to client and gaming, segment revenue grew 6% year-over-year to $3.8 billion. In client, revenue increased 23% year-over-year to $3.1 billion, driven by record mobile processor revenue and continued share gains.