Advanced Micro Devices (NASDAQ:AMD) shares fell 7.3% in pre-market trading after investors looked beyond another quarter of record revenue and stronger-than-expected guidance, focusing instead on weaker gross margins, rising capital expenditure and the loss of a major AI customer.
The semiconductor company reported second-quarter 2026 revenue of $11.54 billion, a 50% increase from a year earlier, while adjusted earnings per share reached $1.66. Both figures exceeded Wall Street expectations. AMD also projected third-quarter revenue of around $13 billion, comfortably ahead of analyst forecasts of approximately $12.5 billion.
Margin disappointment overshadows earnings beat
Despite the stronger-than-expected financial results, investors reacted negatively after the company reported a quarterly gross margin of 54%, below the market consensus of 56%.
Analysts attributed the lower margin to higher short-term costs associated with expanding AMD’s Helios AI infrastructure platform.
Another concern was the company’s sharp increase in investment spending. Capital expenditure totalled $808 million during the quarter, far above Wall Street estimates of roughly $314 million, raising questions about the level of investment required for AMD to remain competitive with Nvidia in the fast-growing AI accelerator market.
SpaceX decision adds to selling pressure
Investor sentiment weakened further after SpaceX announced alongside its own quarterly results that it would stop purchasing AMD chips and instead use Nvidia exclusively for its AI infrastructure.
The decision represented a competitive setback for AMD and added to the decline in the company’s shares following the earnings release.
Company-specific concerns drive decline
The broader market offered little explanation for AMD’s weakness, with the S&P 500 rising around 0.3% and the Nasdaq trading broadly unchanged.
AMD shares had climbed roughly 9% during the previous trading session ahead of the earnings announcement, leaving the stock vulnerable to profit-taking once investors focused on margins, spending and competitive developments.
While AMD continued to deliver strong revenue growth and raised its outlook, investors concluded that the company’s premium valuation left little room for disappointment. The combination of lower-than-expected gross margins, significantly higher capital expenditure and the loss of SpaceX as an AI chip customer outweighed the otherwise positive earnings report.
Advanced Micro Devices stock price
