Advanced Micro Devices (AMD) - Get Report stock surged 9% premarket following a strong second quarter earnings report, but KeyBanc said increased guidance was subdued by higher expenses and that there's still uncertainty about the company's profitability.

Despite AMD's increased revenue guidance, KeyBanc expects EPS for 2017 to be 8 cents, which is in line with prior forecasts given elevated operating expense guidance of $400 million.

KeyBanc decreased their 2018 earnings guidance for AMD to 10 cents from 13 cents due to a greater-than-expected quarter-over-quarter decline in the semi-custom business, higher operating costs required to support growth and the potential for share dilution.

Any further upside for the stock will likely depend on graphics processing unit and central processing unit gains in 2017 and 2018 or additional licensing deals with IP customers, analysts wrote.

Analysts said the improved revenue and margins outlooks are already reflected in the company's stock price, which has jumped 24% since the start of the year. KeyBanc rates AMD "sector weight."

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