Advanced Micro Devices (AMD +18.37%) stock witnessed a tremendous rally in the past three months, rising a remarkable 78% during this short period, and it looks like the chipmaker's stunning stock market run is set to get a boost when it releases its second-quarter 2025 results after the market closes on Aug. 5.
The company is benefiting from the artificial intelligence (AI)-fueled growth in the data center and the personal computer (PC) markets. A closer look at recent developments in these areas suggests that it could deliver stronger-than-expected numbers and provide solid guidance.
Let's see why AMD's upcoming results are likely to add fuel to its stunning rally.
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AMD's client and data center businesses could turn in a stronger-than-expected performance
Counterpoint Research points out that global PC shipments rose an impressive 8.4% in the second quarter of 2025. The firm adds that this is the biggest year-over-year increase seen in PC shipments since 2022, driven by factors such as the end of support for Windows 10 PCs, which is driving an upgrade cycle, along with strong demand from commercial customers and the increase in AI PC shipments.
NASDAQ: AMD
Key Data Points
This is great news for AMD as it is witnessing a nice improvement in its share of the PC CPU (central processing unit) space. In desktop PCs, AMD's share increased by 4 percentage points year over year in Q1 to 28%, according to Mercury Research. Its laptop CPU market share was up by 3.2 percentage points year over year to 22.5%.
AMD believes it can earn more market share in client CPUs thanks to its broad portfolio of AI-focused processors. CEO Lisa Su remarked on the company's May earnings conference call, "Looking more broadly across the PC market, we remain confident we can grow client processor revenue well ahead of the market in 2025, led by expanding adoption of our desktop channel and consumer and commercial notebook portfolio as well as a richer mix."
So, the mix of higher-volume shipments and market share gains should pave the way for healthy growth in AMD's client processor business once again, following an impressive year-over-year increase of 68% witnessed in Q1. Meanwhile, the data center business has also found a new catalyst that could help it deliver another quarter of outstanding growth.
AMD's data center revenue increased 57% year over year in Q1 as the company saw robust demand for both its server CPUs and AI graphics processing units (GPUs). It was recently revealed that AMD will now be able to ship its AI accelerators into the Chinese market thanks to the relaxation of restrictions by the U.S. AMD had warned in April that it could incur $800 million in charges due to its inability to ship to Chinese customers because of export restrictions.
But with that problem seemingly out of the way, the chances of AMD beating consensus expectations next month are now stronger than before. On the other hand, AMD's latest AI accelerators are expected to help it close the technology gap with archrival Nvidia, and the good part is that major cloud computing players are set to deploy them for tackling AI workloads.
Why it isn't too late to buy the stock yet
AMD's Q2 revenue guidance of $7.4 billion points toward a 26% increase from the year-ago period. The company had also guided for a slight increase in its non-GAAP (adjusted) gross margin in Q2 on a year-over-year basis. However, the company now seems to be in a position to exceed its guidance thanks to the points discussed above.
Meanwhile, analysts are expecting a 19% year-over-year increase in AMD's revenue in the current quarter, which would be slower than its anticipated growth in Q2. But then, AMD's market share gains in PCs and the potential improvements in its data center business following the launch of its new chips could lead to better-than-expected guidance.
Even better, AMD stock is undervalued when we take into account its future growth potential. This is evident from its price/earnings-to-growth ratio (PEG ratio) of 0.77, which is based on its projected five-year annual earnings growth rate as per Yahoo! Finance. A PEG ratio of less than 1 indicates that a stock is undervalued, which is why buying AMD before it soars higher following its upcoming quarterly report looks like the smart thing to do.
