Advanced Micro Devices, Inc. (AMD), Financial Analysis

Key conclusions

1. Data Center revenue doubled. Q2 2026 revenue (to 27 Jun 2026) was $11.54bn, up 50%. Data Center revenue was $6.72bn, up 107% and 58% of the total. Q3 2026 guidance is about $13.0bn, up 41%, at a non GAAP gross margin of about 56%.
2. Two 6 GW GPU agreements carry warrants. OpenAI (Oct 2025) plans to deploy 6 GW of Instinct GPUs and Meta (Feb 2026) up to 6 GW, starting with MI450 in H2 2026. Each holds a warrant for up to 160m shares at $0.01. Together the warrants cover 320m shares, 19.6% of shares outstanding. No warrant shares had vested at 27 Jun 2026.
3. Margins rose. TTM gross margin was 53.2% and GAAP operating margin 15.7%. Core operating margin, which adds back acquired intangible amortization and restructuring, was 21.1%. FY2025 carried about $440m of net MI308 export control charges.
4. Commitments grew. Purchase commitments rose to $30.3bn at 27 Jun 2026 from $12.2bn at FY2025 year end. AMD guarantees up to $4.1bn of partners' data center leases. After the quarter it signed $9.5bn of data center leases, issued $4.75bn of notes and agreed to buy World Labs for about $8.2bn in stock.
5. Shares trade at 157x TTM GAAP EPS. At $611.76, shares trade at 157x TTM GAAP EPS and 106x TTM non GAAP EPS of $5.76. The price is 2.9x the end 2025 close and 30.6x the Nov 2025 Analyst Day target of non GAAP EPS above $20.
6. Scenario values for end FY2029 are $88 (worst), $381 (base) and $709 (best) per share. Current price is 111x worst case, 42x base case and 28x best case FY2029 core EPS. In the sensitivity analysis, Data Center revenue and the exit P/E move value the most.

Views on these results differ. Arguments for a lower valuation cite the P/E, warrant dilution of up to 320m shares, lease guarantees, export controls on China and memory supply. Arguments for a higher valuation cite the OpenAI, Meta, Anthropic and Oracle deployments, the call outlook for Data Center revenue to more than double in 2027 and 2026 hyperscaler capex guidance of $720bn to 745bn.

1 Revenue and business model

AMD designs processors and accelerators and outsources manufacturing. Data Center sells EPYC server CPUs, Instinct GPUs, DPUs and AI network cards. Client and Gaming sells Ryzen PC chips, Radeon graphics and console chips. Embedded sells FPGAs and adaptive chips from Xilinx. Data Center was 54% of TTM revenue.

• Acquisitions. Xilinx closed on 14 Feb 2022 for $48.8bn in stock; goodwill rose to $24.2bn. ZT Systems closed on 31 Mar 2025 for $4.4bn. AMD sold the ZT manufacturing business to Sanmina for $2.4bn in cash plus shares on 27 Oct 2025 and kept the design team.
• Customer agreements. OpenAI and Meta: up to 6 GW each, with 160m share warrants. Anthropic: up to 2 GW of MI450 in Helios racks from H1 2027. Oracle: a cluster with an initial 50,000 MI450 GPUs from Q3 2026. Anthropic and Oracle terms come from earnings releases (8-K Ex 99.1); the H1 2027 Anthropic start comes from the call.
• Concentration. No customer reached 10% of revenue in FY2025 or FY2024; one Client and Gaming customer was 18% in FY2023. International sales were 67% of FY2025 revenue. AMD's 10-K states that it depends on a small number of customers for a substantial portion of its business.
• Supply and people. TSMC makes the leading edge wafers; assembly and test run mostly in China, Malaysia and Taiwan. About 31,000 employees.

2 Financial analysis and ratios

H1 2026 revenue rose 44.1% to $21.79bn. GAAP operating income was $3.47bn, against $672m in H1 2025, which carried $800m of MI308 charges. Net income was $3.68bn. Other income of $598m in Q2 2026 includes $483m of gains on long term investments; core earnings exclude these gains.

3 MD&A, guidance and management commentary

AMD guided Q3 2026 revenue to about $13.0bn, plus or minus $0.3bn, up 41%, with a non GAAP gross margin of about 56%. Releases guide one quarter ahead. The 2027 Data Center outlook comes from the call. Multiyear targets come from the Nov 2025 Financial Analyst Day.

• MD&A, FY2025 10-K. Revenue rose 34% to $34.64bn. Data Center rose 32% on EPYC and Instinct MI350. Client rose 51% on 15% more units and a 31% higher average price (10-K/A correction). Embedded fell 3%. Other income of $577m came mainly from gains on long term investments.
• MD&A, Q2 2026 10-Q. Gross margin was 54%, against 40% in Q2 2025. R&D rose 33% to $2.53bn on AI headcount. H1 operating cash flow from continuing operations was $5.32bn. International sales were 70% of Q2 revenue.
• Earnings call, 4 Aug 2026 (third party transcript summaries). CEO Lisa Su said Helios rack shipments start in Q3 2026 and ramp into 2027. She expects Data Center revenue to more than double in 2027, with server CPU revenue up more than 70%, and expects to "significantly exceed our $20 annual EPS target".
• Financial Analyst Day, 11 Nov 2025 (company materials). Targets over three to five years: revenue growth above 35% a year, Data Center above 60%, Data Center AI above 80%, non GAAP operating margin above 35% and non GAAP EPS above $20.

4 Sector and competitor analysis

AMD's year to date revenue growth of 44.1% is below Micron (203.0%), NVIDIA (95.8%) and Broadcom (55.0%), and above Marvell, Intel and Qualcomm. Its TTM gross margin of 53.2% compares with 74.7% at NVIDIA and 38.6% at Intel. Its TTM GAAP P/E of 157x is the highest in the group.

• Hyperscaler capital spending. Microsoft spent $115.9bn in its year to Jun 2026, Amazon $131.8bn in 2025, Alphabet $91.4bn and Meta $69.7bn (10-K filings). Their combined 2026 guidance is about $720bn to 745bn; Meta's is from its 8-K, the others from earnings calls.
• Accelerators. Dell'Oro projects the data center accelerator market to grow 25% a year over five years (Feb 2026). AMD put data center market size at $1tn by 2030 (Analyst Day).
• Server and PC CPUs. Mercury Research put AMD at 34.5% of server CPU units in Q2 2026, up from 27.3% a year earlier, and 46.2% of server CPU revenue in Q1 2026 (as reported by The Register and Tom's Hardware). IDC counted 68.2m PCs shipped in Q2 2026, down 4.9%.
• China and memory. Revenue billed to China, including Hong Kong, was $7.75bn in FY2025, 22% of revenue. Licensed MI325 chips for China must be inspected in the US first and carry a 25% tariff on that import (Q2 2026 10-Q). The 10-Q also cites an industry wide memory shortage and higher memory prices.

6 Annual shareholder meeting, ownership and insider activity

Annual shareholder meeting, 13 May 2026

Shareholders elected all eight directors, ratified the auditor and added 65m shares to the equity plan. Say on pay passed with 92.6% of votes cast for or against, up from 85.6% in 2025. A shareholder proposal to let holders of 10% call a special meeting received 37.5%. About 1,270m of 1,630m shares were represented (computed).

• Board. Abhi Talwalkar had the lowest support, 91.7%; Lisa Su had 93.3%. In 2025 a charter amendment limiting officer liability failed; it needed a majority of shares outstanding.
• Pay. Lisa Su's reported pay was $55.2m in FY2025, $31.0m in FY2024 and $30.3m in FY2023. In Feb 2026 the board granted her a one time award of $75m target performance shares that pay 0% to 200% on share price hurdles through Mar 2031, with the top level at $600. CEO pay ratio was 341 to 1 (DEF 14A 0001193125-26-129057).

7 Share price and valuation history

EV to sales was 9.9x at the Dec 2025 close. It is now 23.9x TTM revenue and 20.0x the model FY2026 revenue of $49.48bn. Market capitalization is $998.7bn. TTM free cash flow is 0.8% of market capitalization. Closing prices over 52 weeks ranged from $164.01 (1 Oct 2025) to $630.63 (25 Sep 2026).

Critical factors behind the best case

Core assumptions and demand drivers

• Demand. Best case follows the call outlook for Data Center to more than double in 2027. Base case uses 70%, 35% and 20% growth. Worst case uses 20%, 5% and (5%), as hyperscaler spending slows or GPU deployments slip. Other segments grow 0% to 10% a year.
• Margin. Core margin counts stock compensation (4.6% of TTM revenue) as a cost and excludes acquired intangible amortization and restructuring. In the base case it rises from 21.5% in FY2026 to 30% in FY2029.
• Per share. Warrant shares vest as OpenAI and Meta take GPUs and as the share price passes targets up to $600; the scenarios issue 20m to 320m of them. Warrant fair value reduces revenue as related sales are booked; the model excludes this effect.
• Excluded. World Labs, other acquisitions, guarantee payments, changes in export rules and one off items.

9 Sensitivity analysis

1 of 25 combinations in Figure 9.1 reach today's $611.76: $630 at 34x and a 38% margin. 1 of 25 combinations in Table 9.1 reach it: $651 at 34x and 140% of base.

Other sensitivities

• Dilution. If all 320m warrant shares vest, the share count rises 19.6%. World Labs adds about $8.2bn of stock, about 13m shares at today's price.
• Export controls. FY2025 carried about $440m of net MI308 charges. US officials expect 15% of licensed MI308 China revenue; the 10-K notes that the US has yet to publish a regulation.
• Rates. All notes are fixed rate. Net cash was $9.9bn at 27 Jun 2026.

Appendix: method, sources and definitions

• Data. Financial statements from XBRL in the 10-K for FY2021 to FY2025 and 10-Q filings for Q1 2025 to Q2 2026, retrieved through the SEC-API.io MCP server. Q4 2025 equals full year less the first nine months; quarterly cash flows are derived from year to date statements.
• Other sources. Earnings call of 4 Aug 2026 from third party transcript summaries; Financial Analyst Day press release. Peer data from peer 10-K and 10-Q filings. Sector data: hyperscaler filings, Dell'Oro, Mercury Research and IDC as reported by trade press. Market prices: 30 Sep 2026.
• Definitions. FCF = operating cash flow from continuing operations less capex. Core earnings exclude items in Table 2.3. Net cash = cash and short term investments less debt.
• Scenario model. EPS = ((Data Center plus other revenue) x core margin plus $0.3bn) x (1 less 13%) over diluted shares. Implied value = FY2029 EPS x exit P/E, undiscounted.