Tag: Alphabet Inc. (GOOGL)

The AI Revolution: Why C3.ai (AI) Could Be a Strategic Play

Posted on by The INO.com Team

The world of artificial intelligence (AI) is experiencing unprecedented momentum, with industries across the board leveraging its transformative potential. Amid this evolution, C3.ai, Inc. (NYSE: AI) has emerged as a notable name in the enterprise AI space. By offering scalable AI platforms tailored to diverse industries, C3.ai has positioned itself as a company worth watching.

With a 29% year-over-year revenue growth in the second quarter of FY25, the company is capitalizing on a market hungry for innovation. Strategic alliances, such as its partnership with Microsoft Azure, underscore its ambition to make AI accessible to enterprises at scale. As investors evaluate opportunities in the AI sector, C3.ai presents both promise and questions about long-term value.

Beyond its immediate financial performance, C3.ai’s ability to address the unique needs of different industries makes it stand out. From generative AI pilots to partnerships with global technology firms, the company’s multi-faceted approach aims to tap into one of the fastest-growing markets of the decade.

Sector Trends

The adoption of AI is reshaping industries, with applications spanning energy, manufacturing, defense, and more. In energy, AI is transforming operations by improving resource allocation and enabling predictive maintenance, which reduces downtime and enhances efficiency. Manufacturers leverage AI to optimize supply chains and reduce production costs, while the defense sector increasingly relies on AI for predictive analytics and real-time decision-making, enhancing operational readiness.

The global AI market is projected to grow at a CAGR of 32.9% from $224.4 billion in 2024 to an estimated $1.2 trillion by 2030, driven by advancements in machine learning, big data, and cloud computing. This trend creates significant opportunities for companies like C3.ai, which offers adaptable AI platforms capable of scaling across sectors. However, adoption is not without challenges. High implementation costs, integration complexities, and data privacy concerns remain barriers for enterprises seeking to fully embrace AI.

C3.ai addresses these challenges with its tailored solutions. Its software integrates data from various sources, simplifying the deployment process. Additionally, its enterprise AI platform ensures organizations can begin deriving value without needing extensive in-house expertise, which can be a critical advantage for companies new to AI.

Why C3.ai?

C3.ai’s approach to enterprise AI centers around partnerships and an industry-first strategy, making it a unique player in the competitive AI landscape. Its alliance with Microsoft Azure, established in late 2024, is a pivotal growth driver. This agreement allows C3.ai’s applications to be integrated into Microsoft’s enterprise ecosystem, granting the company unparalleled access to Azure’s sales channels and clients. The benefits of this collaboration are already evident: in Q2 FY25, 62% of C3.ai’s agreements were secured through its partner network, demonstrating the strength of its joint sales strategy.

The federal sector is another pillar of C3.ai’s business. In Q2 FY25, the company secured contracts with the U.S. Department of Defense (DoD) and other government agencies. These include predictive maintenance solutions for military aircraft, a critical area where operational efficiency can significantly impact mission outcomes. Such agreements not only enhance C3.ai’s revenue streams but also validate its technical capabilities in high-stakes environments.

Beyond partnerships and federal contracts, the company is also making strides with its generative AI offerings. These solutions, designed for specific use cases across industries, are gaining traction. Several pilots, including projects with Rolls-Royce and Boston Scientific (BSX), have transitioned into full-scale deployments, underscoring the commercial viability of C3.ai’s innovations.

Risks and Outlook

While C3.ai’s growth trajectory is promising, the company faces several challenges that investors should consider. Competition in the enterprise AI market is fierce, with tech giants like International Business Machines Corporation (IBM), Alphabet Inc. (GOOGL), and Amazon Web Services (AWS) offering rival solutions. These competitors often benefit from deeper pockets and broader brand recognition, which could limit C3.ai’s market share in the long run.

Profitability is another concern. Despite its revenue growth, C3.ai reported a net loss of $65.97 million in Q2 FY25. Although the company has improved its non-GAAP financial metrics, it continues to prioritize growth over near-term profitability. For investors, this trade-off presents both a risk and an opportunity. If C3.ai can execute its strategy effectively, the long-term payoff could be substantial, but the path may be volatile.

Furthermore, the company’s reliance on large contracts with government agencies introduces a degree of uncertainty. Changes in political priorities or budget allocations could impact the stability of these revenue streams. To mitigate this, C3.ai has been expanding its client base across sectors such as manufacturing and energy, where it has secured several multi-year agreements.

Despite these risks, C3.ai has a robust cash position, with $730.4 million in cash and marketable securities as of the second quarter of FY25. This financial cushion provides the company with the flexibility to invest in R&D, expand its product offerings, and weather potential market fluctuations.

Investor Considerations

For growth-oriented investors, C3.ai presents an intriguing opportunity in the AI sector. The company’s ability to secure strategic partnerships, penetrate diverse industries, and drive innovation positions it as a potential leader in enterprise AI. However, investors should approach with a balanced perspective, keeping in mind the competitive landscape and the company’s ongoing losses.

For those willing to accept the risks, C3.ai could offer significant upside as AI continues to permeate global industries. Monitoring key metrics such as revenue growth, contract diversity, and progress toward profitability will be crucial in evaluating the stock’s long-term potential.

Chip Wars Heat Up: Why AMD (AMD) Could Challenge Intel in Data Centers

Posted on by The INO.com Team

The semiconductor landscape is witnessing a seismic shift as Advanced Micro Devices, Inc. (AMD) strengthens its presence in the lucrative data center segment. Traditionally the stronghold of Intel Corporation (INTC), this market is becoming increasingly competitive as AMD introduces cutting-edge technologies to capitalize on the rising demand for high-performance computing and artificial intelligence (AI).

In Q3 2024, AMD reported record-breaking revenue from its data center segment, thanks to a surge in demand for its EPYC CPUs and Instinct accelerators. This performance comes as global cloud providers and AI workloads require increasingly sophisticated hardware solutions. With substantial investments in AI, robust partnerships with cloud giants, and sustained innovation, AMD has positioned itself as a formidable competitor in a space long dominated by Intel.

AMD’s New Chips and Market Share Gains

AMD's recent product launches underscore its aggressive push to redefine performance standards in data centers. The EPYC 9005 Series CPUs, unveiled this year, stand out with their energy-efficient architecture, making them an attractive choice for hyperscale cloud providers. Alongside this, AMD's Instinct MI325X GPUs cater to the most demanding AI applications, combining high memory bandwidth with exceptional computational power.

Cloud providers such as Microsoft Azure and Oracle Cloud Infrastructure have expanded their use of AMD’s GPUs, demonstrating increasing confidence in AMD’s ability to meet large-scale computing needs. Oracle Corporation (ORCL), for instance, has incorporated AMD's Instinct MI300X GPUs into its Compute Supercluster, enhancing performance for AI workloads. These integrations highlight AMD's ability to provide scalable, high-performance solutions that rival Intel's long-standing Xeon lineup.

Market analysts have observed a significant shift in AMD's favor in terms of workload share within data centers. While Intel still commands a majority, AMD’s aggressive pricing, superior energy efficiency, and strategic partnerships have enabled it to claim an estimated 30% of server market workloads—an impressive leap from just a few years ago.

AMD’s Growth in AI and High-Performance Computing

AMD’s evolution into a key player in the data center market is largely tied to its strategic focus on AI. By integrating its Instinct accelerators with the ROCm open software ecosystem, AMD is becoming a popular choice for developing and deploying advanced AI models. Notably, its collaboration with Meta Platforms, Inc. (META) for the Llama 3.2 AI release reinforces AMD’s growing influence in the AI landscape.

Financially, AMD's data center segment has been the cornerstone of its impressive growth. Revenue from this segment rose 122% year-over-year in Q3 2024, contributing $3.5 billion to the company’s total quarterly revenue of $6.8 billion. This rapid growth is further supported by AMD's partnerships with industry leaders such as Alphabet Inc. (GOOGL), Dell Technologies Inc. (DELL), and Hewlett Packard Enterprise Company (HPE), which continue to incorporate its hardware into their offerings.

Additionally, AMD’s pending acquisition of ZT Systems, expected to close in 2025, is set to expand its footprint in hyperscale AI systems. This move could accelerate AMD’s development of rack-scale solutions tailored to meet the growing computational demands of enterprise and cloud environments. The company’s strategic acquisitions and partnerships underline its commitment to long-term growth in high-performance computing and AI.

Navigating Supply Chains and Industry Competition

Despite its successes, AMD faces several challenges that could temper its growth trajectory. The semiconductor industry’s reliance on advanced foundries like Taiwan Semiconductor Manufacturing Company Ltd. (TSM) presents potential supply chain bottlenecks, especially as global demand for cutting-edge chips continues to rise. Ensuring consistent access to production capacity will be critical for AMD to maintain its competitive edge.

The competitive landscape also poses significant hurdles. Intel is ramping up its innovation efforts, including the introduction of new Xeon processors with integrated AI accelerators, to defend its dominant position. Similarly, NVIDIA Corporation (NVDA), which excels in AI and GPU technologies, continues to expand its offerings, posing an additional competitive threat.

Another challenge is managing profitability amidst rising operating expenses. While AMD has successfully improved its non-GAAP gross margin to 54%, its operating expenses have also increased due to heightened R&D investments. Balancing innovation with financial efficiency will be essential for sustained success in this capital-intensive sector.

What Investors Should Consider

AMD’s growth story is compelling, particularly for investors seeking exposure to the booming AI and data center markets. Its innovative product portfolio and strong partnerships position it as a key contender to Intel’s dominance. However, given the volatility of the semiconductor industry, investors should remain cautious and consider AMD’s ability to navigate supply chain constraints and competitive pressures.

For those with a long-term perspective, AMD's strategic focus on high-performance computing and AI suggests it has the potential to outperform in the semiconductor race. As the company continues to expand its market share in data centers, investors may view AMD as a growth stock with substantial upside potential. Still, diversification remains a prudent approach to mitigate industry-specific risks.

Tech Layoffs Surge: Why Salesforce (CRM) Could Emerge Stronger Amid Industry Cuts

Posted on by The INO.com Team

The tech sector, once a powerhouse of growth and high-paying jobs, has seen a dramatic shift, with many leading firms cutting thousands of positions. Companies such as Microsoft Corporation (MSFT), Meta Platforms (META), Amazon.com (AMZN), and Alphabet Inc. (GOOGL) have scaled back their workforce to streamline operations amid a challenging economic environment. Salesforce, Inc. (CRM), the world’s leading provider of customer relationship management software, is no exception, implementing layoffs and cost-cutting measures to bolster financial efficiency. Yet, despite the shake-up, Salesforce appears better equipped than many peers to navigate this uncertain terrain, backed by a robust product lineup and a surging demand for cloud solutions.

The question is whether Salesforce, after these adjustments, can leverage its unique market position and emerge stronger. Financial data from recent quarters suggests that while challenges remain, Salesforce’s adaptability, combined with its essential suite of services, may indeed pave the way for a resilient comeback.

Operational Efficiency in a Tough Market

For Salesforce, recent cuts are part of a broader effort to optimize operations and increase profitability. In Q2 of fiscal year 2025, Salesforce reported an operating margin of 19.1% GAAP and a non-GAAP margin of 33.7%, marking a 210 basis point improvement over the previous year. This improvement aligns with Salesforce's focus on "disciplined profitable growth," a phrase used by CFO Amy Weaver in the earnings press release to emphasize the company’s long-term strategic goals. By reducing workforce redundancies and consolidating office spaces, Salesforce aims to strengthen its bottom line while continuing to invest in high-growth areas such as artificial intelligence (AI).

In addition to workforce reductions, Salesforce has introduced AI-driven efficiencies through its new Agentforce platform, which aims to automate a variety of customer interactions across industries. This innovation allows Salesforce to provide value to customers while easing operational demands. These measures collectively contribute to Salesforce’s projected operating cash flow growth of 23-25% for the fiscal year, a solid indicator of the company’s commitment to streamlining operations for sustained profitability.

Salesforce’s Market Position and Cloud Demand

Salesforce’s resilience in the face of economic turbulence is also due in part to the indispensable nature of its CRM and cloud offerings. Despite the economic downturn, the company reported a revenue of $9.33 billion for Q2 2025, an 8% year-over-year increase that was boosted by its robust Subscription and Support segment, which grew 9%. Demand for CRM services remains essential for businesses striving to retain customers and optimize marketing, sales, and customer service processes. As Marc Benioff, CEO of Salesforce, noted, “In Q2, we delivered strong performance across revenue, cash flow, margin, and cRPO,” underscoring the company’s momentum in capturing market share during tough times.

The rise of AI and data analytics has further entrenched Salesforce as a go-to provider for digital transformation. Its Data Cloud, reportedly the fastest-growing product in Salesforce’s history, processed over 2.3 quadrillion records in Q2, demonstrating the massive scale at which businesses now rely on data integration. This data-centric growth positions Salesforce as a crucial partner for companies looking to transition into a more data-informed operational model. Moreover, Salesforce’s emphasis on AI through tools like Agentforce aligns well with current market trends, allowing the company to address both present and future enterprise needs.

Investment Risks

While Salesforce is positioned for long-term growth, investors should be aware of certain risks. First, competition in the CRM space has intensified, with Microsoft Dynamics 365 and SAP vying for market share, especially among large enterprises. Both companies have invested heavily in AI and cloud technologies, putting pressure on Salesforce to continuously innovate to maintain its leadership.

Additionally, an economic downturn could lead to budget cuts across enterprises, especially in IT spending. Salesforce’s enterprise clients may prioritize cost-saving measures, potentially leading to slower adoption of new Salesforce products. As noted in the company’s earnings materials, a reduction in customer spending could impact its recurring revenue growth. However, Salesforce’s diverse product offerings, including high-demand services like Sales Cloud and Service Cloud, help buffer against a significant decline in any single area.

Another concern is Salesforce's reliance on acquisitions, which can introduce integration challenges and operational complexities. In recent years, acquisitions of Tableau, Slack, and Mulesoft have expanded Salesforce’s suite of offerings but have also added pressure on the company to ensure cohesive integration. With the ongoing layoffs, Salesforce must balance these integration efforts carefully to avoid disruptions in its offerings or customer experience.

Investor Takeaway

For investors evaluating Salesforce, the current market conditions and Salesforce’s operational strategies present both challenges and opportunities. The company’s cost-cutting measures, coupled with strategic investments in AI and cloud solutions, are expected to drive higher margins and sustainable growth. Its solidified position as the number one CRM provider by revenue, a title it has held for 11 consecutive years, underscores Salesforce’s resilience and market dominance.

In a volatile tech market, Salesforce offers a compelling mix of growth potential and defensive qualities, thanks to its essential business services and expanding AI capabilities. The stock may be particularly attractive to those with a long-term investment horizon, as Salesforce’s disciplined approach to profitability and innovation could translate into substantial returns once the economic landscape stabilizes. Investors looking for exposure to cloud-based AI should consider Salesforce’s potential to continue leading in this space despite the risks inherent in an evolving tech industry.

Tech-Healthcare Crossover: Why Alphabet (GOOGL) Could Surge with AI-Driven Health Innovations

Posted on by The INO.com Team

The integration of technology into healthcare is creating a dynamic shift across sectors, especially as artificial intelligence (AI) emerges as a powerful tool in medical diagnosis, patient care, and data management. At the forefront of this tech-health convergence is Alphabet Inc. (GOOGL), which, leveraging its AI capabilities, has made substantial inroads into the healthcare market. By combining its expertise in data science and machine learning, Alphabet is positioning itself not only as a leader in the tech space but as a transformative player in health solutions—a pivot that could drive significant long-term growth for the company.

Alphabet’s involvement in healthcare is vast, including projects such as DeepMind's AI research, Google Health's digital health records, and Verily's life sciences initiatives. Each of these divisions underscores the company’s commitment to using AI and big data to advance diagnostics, treatment options, and healthcare infrastructure. With recent advancements and increased financial backing, Alphabet’s ventures in health technology are setting the stage for an era of accelerated growth and potential stock gains.

Key Partnerships and Financial Growth

Alphabet’s healthcare expansion has seen recent milestones that underscore its long-term potential. In its latest quarterly report, the company highlighted a revenue growth of 15% year-over-year, with a particular focus on advancements in its AI-driven projects, including Google Cloud’s generative AI applications that assist medical organizations with data analysis and machine learning capabilities. Google Cloud, which grew by 35% year-over-year to $11.4 billion in Q3 2024, is instrumental in Alphabet’s healthcare endeavors, offering scalable AI solutions to hospitals, pharmaceutical firms, and insurance providers.

Alphabet’s collaboration with major healthcare entities also solidifies its position. For example, DeepMind’s AlphaFold, an AI system capable of predicting protein structures, is utilized by pharmaceutical companies for drug discovery, illustrating how Alphabet’s technology can accelerate medical research and bring innovations to market faster. Verily, another Alphabet subsidiary has also strengthened its presence in the health sector through partnerships focused on precision health, which tailors treatments based on genetic and lifestyle data. These developments point to Alphabet’s potential for capturing a share of the growing digital health market, projected to grow at a CAGR of 21.1% to reach $1.64 trillion globally by 2033.

Diversification Beyond Core Revenue Streams

Alphabet’s healthcare and “Other Bets” segments reflect a strategic shift away from its reliance on advertising, with healthcare ventures steadily contributing to its diverse revenue portfolio. As of Q3 2024, Alphabet’s "Other Bets" generated $388 million, a 30.6% year-over-year increase, indicating the growing role of non-core ventures, including health-focused initiatives, in the company’s overall revenue structure. In addition, Alphabet’s increased spending on research and development—$12.4 billion in Q3 2024—highlights the company’s commitment to innovation in AI, cloud services, and healthcare solutions.

These investments are not only expanding Alphabet’s technological capabilities but are laying the foundation for sustained growth in healthcare. Given the healthcare industry’s high barriers to entry, Alphabet’s established technology infrastructure and substantial R&D investments give it a competitive edge that will be difficult for other entrants to replicate. This focus on R&D also signals to investors Alphabet’s forward-looking approach, emphasizing sustainable growth over immediate gains, which could contribute to long-term stock value.

Competitive Edge: Outpacing Rivals in AI Healthcare Solutions

Alphabet’s foray into healthcare places it in competition with tech giants like Amazon.com (AMZN), Microsoft Corporation (MSFT), and Apple Inc. (AAPL), all of which have also ventured into health tech. However, Alphabet differentiates itself through its end-to-end capabilities in AI and machine learning. For instance, Google Cloud's Vertex AI is being adopted by healthcare providers for predictive analytics and personalized patient care, which highlights its utility in a clinical setting. This platform is increasingly popular among healthcare firms due to its scalability and compatibility with complex medical data—a feature that Alphabet’s competitors are still developing.

Amazon’s healthcare focus remains predominantly in pharmacy and healthcare logistics, while Microsoft, though making strides with partnerships like Nuance for voice-enabled healthcare documentation, lacks the extensive data capabilities seen in Alphabet’s offerings. Apple, meanwhile, has focused largely on consumer health tracking through devices, a narrower approach compared to Alphabet’s multi-faceted healthcare strategy. As Alphabet deepens its AI capabilities, especially in diagnostics and hospital data systems, it maintains a unique position with significant growth prospects in a competitive landscape.

Investment Recommendation: Strong Long-Term Growth Potential

Alphabet’s robust entry into healthcare, bolstered by its AI prowess and strategic partnerships, marks it as a compelling option for long-term investors interested in tech-health crossovers. Its diversified revenue streams and significant investments in cloud-based healthcare solutions present strong potential for sustainable growth. Additionally, Alphabet’s increased revenue from its “Other Bets” segment—primarily driven by Verily and DeepMind—provides promising signals for investors looking to capitalize on the growing digital health market.

Investors, however, should consider certain risk factors. Regulatory scrutiny in both the tech and healthcare sectors poses a risk that could impact Alphabet’s operational freedom and financial performance. Additionally, healthcare’s stringent compliance requirements and Alphabet’s limited history in this industry mean that unexpected challenges could arise. However, Alphabet’s financial strength and commitment to compliance and R&D serve as mitigants to these risks.

For investors with a long-term outlook, Alphabet’s current ventures in healthcare, coupled with its unparalleled expertise in AI, make it a solid stock to consider for growth-focused portfolios. As AI-driven innovations continue to reshape healthcare, Alphabet is well-positioned to capture value, making it a stock with substantial potential upside in the coming years.

AMD and GOOGL Pull Back from Highs—Here’s Why It’s Time to Buy

Posted on by The INO.com Team

The recent market volatility has created a golden opportunity for investors eyeing two tech giants: Alphabet Inc. (GOOGL) and Advanced Micro Devices, Inc. (AMD). Both companies have seen their stock prices fall considerably from their recent highs. While that might seem worrying, this dip offers an attractive entry point for investors, especially given the long-term growth potential of both companies, driven by advancements in artificial intelligence (AI) and data centers.

With that in mind, let’s explore the fundamentals of these stocks in detail:

Alphabet Inc. (GOOGL)

With a current market cap of $2.04 trillion, Google’s parent company is known for its pioneering internet-related services and products. While the stock has been weighed down by antitrust concerns, many investors are overlooking the company’s long-term growth prospects and strong financials. GOOGL’s valuation particularly looks quite attractive, when you consider its strong financial performance.

In the fiscal 2024 second quarter ended June 30, 2024, GOOGL reported revenues of $80.74 billion, up 13.6% year-over-year. Its income from operations grew 25.6% from the prior year’s quarter to $27.43 billion with a margin of 32%. The company’s biggest revenue driver continues to be its Google Advertising segment, which brought in $64.62 billion. But that’s not the only bright spot.

Google Cloud, which ranks as the third-largest cloud service provider, is expanding at a rapid pace. Cloud revenue surged 29% year-over-year to $10.3 billion, far outpacing the company’s overall growth. As more businesses adopt Google Cloud, particularly for AI-related purposes, this segment could become a larger piece of the pie over time. Furthermore, the company owns the two most popular websites: Google and YouTube, both of which are expected to fuel revenue growth over the long term.

On the bottom line, its net income and earnings per share came in at $23.62 billion and $1.89, representing increases of 28.6% and 31.3% year-over-year, respectively. Its EPS came above the analysts’ estimate of $1.84 by 2.5%. In addition, the tech company’s cash and cash equivalents amounted to $27.23 billion as of June 30, 2024, compared to $24.05 billion as of December 31, 2023.

Street expects GOOGL’s revenue and EPS for the fiscal third quarter (ended September 2024) to increase 12.5% and 18.7% year-over-year to $86.26 billion and $1.84, respectively. Also, the company has topped the consensus EPS and revenue estimates in all four trailing quarters.

GOOGL declined about 13% below its 52-week high. The stock is currently trading at a forward price-to-earnings (P/E) ratio of 21.72, which is a 15.2% discount to its own 5-year average. Besides, GOOGL’s trailing-12-month EBITDA margin of 35.18% is 93.2% higher than the 18.21% industry average. Likewise, the stock’s trailing-12-month net income margin, ROCE, and ROTC of 26.70%, 30.87%, and 20.34% compare to the industry averages of 3.08%, 3.44%, and 3.72%, respectively.

Despite the stock’s recent drop and ongoing regulatory concerns, the company’s long-term potential remains strong. Over the past year, the stock has climbed more than 23% and is up nearly 18% so far in 2024. With a projected upside of 21.8%, GOOGL currently has a consensus rating of “Strong Buy.” This dip offers a great opportunity for investors to scoop up shares at a discount ahead of the tech giant’s Q3 earnings report, expected in late October.

Advanced Micro Devices, Inc. (AMD)

Based in Santa Clara, California, Advanced Micro Devices has been at the forefront of innovation in high-performance computing, graphics, and visualization technologies. The company has firmly established itself as a formidable player in the GPU market, particularly excelling in chips tailored for AI workloads.

As AMD gains significant momentum in the data center space, there is strong potential for its current $262 billion valuation to grow even further. Despite the recent 25% dip in its stock price, AMD’s long-term growth prospects remain robust, offering a prime opportunity for investors to buy in at a discounted price.

AMD’s influence, however, extends beyond hardware. The company has been expanding its presence in AI software as well. In June, AMD introduced its groundbreaking Ryzen™ AI 300 Series processors, which are equipped with the world’s most powerful Neural Processing Unit (NPU). These processors are designed to bring AI capabilities directly to next-generation PCs, enabling AI-infused computing to seamlessly integrate into everyday tasks and applications. Additionally, the next-gen AMD Ryzen™ 9000 Series processors for desktops solidify AMD’s position as a leader in performance and efficiency for gamers, content creators, and prosumers alike.

Moreover, the company has outlined a comprehensive roadmap for its Instinct accelerator series, promising to deliver cutting-edge AI performance and memory capabilities across each generation. With the imminent release of the AMD Instinct MI325X accelerator in Q4 2024 and the upcoming launch of the MI350 series, powered by AMD’s new CDNA™ 4 architecture in 2025, AMD is poised to deliver up to a 35x increase in AI inference performance compared to its previous iterations.

In the second quarter that ended June 30, 2024. AMD’s non-GAAP revenue increased 9% year-over-year to $5.84 billion. Its data center revenue surged 115% year-over-year to $2.83 billion, accounting for nearly half of its total revenue.

The Mi300 series brought in over $1 billion in quarterly revenue for the first time, with its customer base expanding as Microsoft became the first cloud provider to offer general availability for the Instinct Mi300X. As AI applications continue to drive demand for high-performance data center solutions, AMD is well-positioned to see its profitability climb, given the higher margins typically associated with this segment.

Moreover, the company’s non-GAAP operating income grew 18.4% from the year-ago value to $1.26 billion. AMD’s non-GAAP net income and EPS stood at $1.13 million and $0.69, up from $948 million and $0.58, respectively, recorded last year.

Analysts expect its revenue and EPS for the current year (ending December 2024) to increase 12.9% and 27.7% year-over-year to $25.61 billion and $3.38, respectively. If AMD can exceed expectations, the stock could experience significant gains in the coming months. Earlier this year, the company projected $4 billion in AI chip sales for 2024, representing about 15% of its expected revenue.

AMD’s trailing-12-month EBITDA and net income margins of 17.38% and 5.82% are 72.3% and 56.2% above their respective industry averages of 10.09% and 3.72%. After a nearly 30% decline from its 52-week high, AMD is trading at 47.21x forward non-GAAP P/E, which is reasonable considering its AI prospects. Moreover, with the stock already up 57% over the past year, there’s potential for even more significant gains in 2025 and beyond. Thus, investors looking for long-term growth might consider this as a strategic entry point before the market fully prices in its potential.