AMD Stock Slides as Margin Miss and Soaring Spending Overshadow Record Revenue

Advanced Micro Devices (NASDAQ: AMD) shares fell more than 7% in pre-market trading, as a record-setting quarterly earnings report was undermined by investor concerns over profitability, rising costs, and a significant competitive setback.

Strong Growth Met by Deeper Concerns

AMD announced record Q2 revenue of $11.54 billion, a 50% increase year-over-year, and adjusted earnings per share of $1.66, with both figures topping Wall Street estimates. The company also issued strong third-quarter revenue guidance of approximately $13 billion, ahead of the consensus forecast of around $12.5 billion.

Despite the positive headline numbers, two key figures disappointed investors:

• Gross Margin: The company's gross margin for the quarter was 54%, falling short of the 56% analysts had anticipated. The miss was attributed to near-term cost pressures associated with the ramp-up of its Helios AI infrastructure platform.
• Capital Expenditures: Spending surged to $808 million, more than double the Wall Street forecast of roughly $314 million. This raised concerns about the significant investment required for AMD to compete effectively against rival Nvidia in the AI accelerator market.

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SpaceX Defection Amplifies Sell-Off

Compounding the pressure on the stock, SpaceX announced in its own earnings release that it would stop purchasing AMD chips and would instead use Nvidia (NASDAQ: NVDA) as its exclusive supplier for AI chips. The loss of a high-profile customer to its primary competitor amplified the negative sentiment following AMD's report.

Market Context

The sell-off appeared to be a classic "buy the rumor, sell the news" event. AMD's stock had rallied approximately 9% during the previous regular session in anticipation of a strong report. The subsequent pre-market drop of 7.3% was largely company-specific, as the broader S&P 500 and Nasdaq were nearly flat. For investors, the strong top-line performance was not enough to offset worries about profitability, the escalating costs of the AI race, and a tangible loss in market share.