Why AMD Stock Is Soaring Today

Advanced Micro Devices (NASDAQ: AMD) stock is surging in Wednesday's trading. The semiconductor company's share price was up 7.3% as of 10:45 a.m. ET, according to data from S&P Global Market Intelligence .

After the market closed yesterday, AMD published second-quarter results that beat Wall Street's expectations. In addition to posting sales and earnings performance that came in better than anticipated, the chip specialist also issued encouraging forward guidance.

AMD delivers strong data center growth in Q2

AMD delivered non-GAAP (adjusted) earnings per share of $0.69 on sales of $5.84 billion in the second quarter. Meanwhile, the average analyst estimate had called for per-share earnings of $0.68 and revenue of $5.72 billion.

Crucially, AMD's data center business saw strong performance. Segment sales roughly increased 115% year over year and 15% on a sequential quarterly basis. The growth was driven by increased sales for the AMD Instinct graphics processing unit (GPU) and the fourth-generation AMD Epyc central processing unit (CPU).

The company's client segment saw strong momentum. Thanks to strong performance for its Ryzen processors, client revenue increased 49% year over year and 9% sequentially to hit $1.5 billion. On the other hand, gaming segment revenue fell 59% year over year and 30% sequentially to $648 million due to declining semi-custom processor sales.

What's next for AMD?

AMD's midpoint guidance calls for sales to come in at roughly $6.7 billion in the third quarter. For comparison, the average analyst estimate had previously called for sales of roughly $6.6 billion. If the company were to hit that target, it would mean delivering sales growth of roughly 16% year over year and 15% on a sequential quarterly basis.

Management also guided for an adjusted gross margin of 53.5%. For comparison, the business posted an adjusted gross margin of roughly 51% in last year's quarter.

When it comes to graphics processing units (GPUs) used for artificial intelligence and accelerated computing applications, Advanced Micro Devices is still a distant second to Nvidia . Investors had been eagerly awaiting to see whether AMD can gain meaningful ground in the space. The company's last earnings report arrived with some inventory indicators that suggested somewhat soft demand for its AI processors, but the recent earnings release and guidance have helped to ease concerns and increase bullish sentiment among investors.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy .