Advanced Micro Devices (AMD +11.44%) has been on a blistering run in 2026. Despite getting a slow start, the stock has gained 63% over the past month as bullish sentiment for artificial intelligence (AI) began to recover. There was a lot riding on AMD's results, and shareholders were sitting on the edge of their seats ahead of the chipmakers quarterly financial report -- and the company delivered.
For the first quarter, AMD generated revenue that grew 38% year over year to $10.25 billion, driving adjusted earnings per share (EPS) of $1.37, which surged 43%.
For context, analysts' consensus estimates called for revenue of $9.91 billion and adjusted EPS of $1.29, so AMD cleared both hurdles with room to spare.
Image source: The Motley Fool.
The company's gross profit margin expanded by 300 basis points year over year to 53%, while operating expenses grew more slowly than revenue, driving higher profits to the bottom line. On a GAAP basis, net income surged 95% to $1.38 billion, driven higher by its operating margin that expanded 300 basis points to 14%.
AMD chair and CEO Dr. Lisa Su called it an "outstanding quarter," noting that the results were driven by "accelerating demand for AI infrastructure, with data center now the primary driver of our revenue and earnings growth." The chief executive went on to say, "We are seeing strong momentum as inferencing and agentic AI drive increasing demand for high-performance CPUs and accelerators."
Indeed, the data center segment results tell the tale, as revenue jumped 57% year over year to $5.8 billion. AMD saw strong demand for its Epyc CPUs and Instinct GPUs -- which are seeing strong data center demand.
In all, the solid combination of accelerating revenue, expanding margins, and record free cash flow helped lift AMD stock in after-hours trading, up nearly 8% as of 5:37 p.m. ET.
NASDAQ: AMD
Key Data Points
The future is looking up
AMD suggested there's likely more to come. The company highlighted a recent deal with Meta Platforms to deploy 6 gigawatts (GW) of AMD Instinct GPUs. The first GW will be powered by a custom AMD Instinct MI450-based GPU. Meta is also first in line for AMD's upcoming 6th-generation Epyc CPUs.
The company also cited recent collaborations with Amazon Web Services (AWS), Alphabet's Google Cloud, Microsoft Azure, and Tencent Holdings to deploy new and expanded 5th-generation Epyc-powered cloud instances. It highlighted other such deals, but you get the picture.
AMD also noted that customer forecasts are exceeding management's initial expectations. That, combined with the growing number of large-scale deployments and strong demand for its MI450 AI chips and Helios rack-scale servers, is giving the company greater visibility into future growth.
To that end, the company's outlook was more bullish than what Wall Street expected. For the second quarter, AMD's outlook calls for revenue growth of 46% to $11.2 billion at the midpoint of its guidance, far outpacing the $10.5 billion investors anticipated.
At 134 times earnings, AMD is pricey, particularly on the heels of the stock's 63% rise over the past month. However, this ignores the company's accelerating growth rate. Using the more appropriate price/earnings-to-growth (PEG) ratio -- which factors in the company's growth -- returns a multiple of 0.82, when any number less than 1 signals an undervalued stock.
The increasing adoption of AI opens the door to multiple winners in the data center chip space, and AMD has its foot in the door. So, despite its seemingly lofty price tag, the stock is deserving of a premium. That's why AMD is a buy.
