AMD's Data Center Business Doubled to $6.7 Billion. The Stock Fell 9% Because of What That Growth Costs.

AMD reported record Q2 revenue of $11.5 billion, with its data center segment doubling year-over-year to $6.7 billion. The stock dropped 9% in after-hours trading despite the revenue beat.

The selloff centers on margin pressure and surging capital expenditure. AMD guided Q3 gross margin flat at 56%, unchanged from Q2 even as total revenue climbed 41% year-over-year. Management nearly tripled capital spending to $808 million, a sharp acceleration that's compressing profitability as the company scales AI infrastructure.

The data center doubling reflects strong MI300 AI accelerator demand, but investors are pricing in the cost of that growth. The margin guidance signals AMD is prioritizing market share in AI chips over near-term profitability, a strategy that contrasts with expectations for operating leverage as revenue scales.

The after-hours decline erased gains from what would otherwise be considered a strong quarter, underscoring how sensitive the stock has become to gross margin trajectory in the competitive AI chip landscape.