Chip Maker AMD Advances as Rival Intel Struggles

sophisticated micro devices Inc.

AMD 2.59%

reported a sharp rise in quarterly sales due to strong data center activity, where rival Intel Corp.

INTC -2.57%

has stumbled, but issued a muted outlook for the current period.

AMD said on Tuesday that sales reached $6.6 billion in the second quarter, up 70 percent from a year ago and beating Wall Street expectations. Earnings fell 37% to $447 million, reflecting adjustments related to the acquisition of Xilinx Inc.

The company also issued a subdued outlook for the current quarter, forecasting about $6.7 billion in sales. That number fell short of Wall Street forecasts for sales of $6.84 billion. Unlike Intel, which cut its full-year outlook last week, AMD maintained its full-year sales outlook despite a weaker overall PC market.

AMD shares fell more than 4% in after-hours trading on the results.

Other chip makers have also taken a note of caution. Qualcomm Inc.,

QCOM -0.27%

a major supplier of cellphone chips, cut its smartphone shipment forecast and gave a muted sales outlook last week.

AMD last week overtook Intel in market capitalization after its rival posted disappointing results and said it had suffered setbacks in introducing its newest chips for the booming server market. AMD said its sales for that segment rose 83 percent to $1.5 billion. Intel had reported a 16% decline in its corresponding business unit.

AMD’s new generations of chips for PCs and servers that house massive data centers have been strong competitors to Intel’s offerings, allowing the company to capitalize on its rival’s mistakes. AMD’s market share rose to nearly 28 percent in the first quarter from about 21 percent a year earlier, according to data from Mercury Research. Intel has almost all the rest of the market.

While demand for servers has been healthy, several chip companies this year are struggling with a PC market that saw its biggest decline in years in the second quarter after booming during the pandemic.

Despite a slowdown in key markets, the semiconductor industry is still in the midst of a prolonged shortage. The shortage has affected customers in a range of industries, from car makers to medical devices, among other products.

Beyond its recent foray into selling central processing units, the brains of modern computers, AMD under CEO Lisa Su has built its graphics chip business to rival Nvidia Corp.

, the largest US chipmaker by market value. It also supplies chips that power major video game consoles, including Microsoft’s Body

Xbox and Sony Group Body

PlayStation.

AMD added to its capabilities recently with its landmark acquisition of Xilinx, which specializes in a type of reprogrammable chip commonly used in telecommunications equipment, fighter jets and medical devices.

The company said sales in its PC division rose 25 percent in the second quarter to $2.2 billion. The division that houses its brands for video game consoles and graphics processing chips posted revenue of $1.7 billion, up 32 percent.

Write to Asa Fitch at asa.fitch@wsj.com

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