$365 per share
23.2x 2027 EPS and 8.2x 2030 EPS. In our DCF, with stock pay and warrants counted, it needs a 13.6% discount rate.
Chip Street Capital Research · Equity research report
Advanced Micro Devices, Inc. (NASDAQ: AMD)
The AI challenger is executing. The Street target needs it to keep winning.
Last price$561.00Delayed quote
Street target (avg)$636.21Consensus, 55 analysts
Upside to target+13.4%From the last price
Target range$365 to $1,250Lowest to highest target
Analyst ratings44 of 55 Buy11 hold, 0 sell
Target multiple40.5x2027E adjusted EPS
Economic moatNarrowx86 IP and design scale
UncertaintyVery highFew customers, large commitments
Price targets and estimates are Street consensus from Koyfin, 14 October 2026, not our own estimate. Upside updates with the delayed price. Section 07 tests the targets with a discounted cash flow.
01 / Analyst note
A record quarter, and a Street that expects more.
Second quarter revenue rose 50% to $11.5B. Data Center more than doubled to $6.7B on demand for EPYC server processors and Instinct MI350 GPUs, and is now 58% of revenue. Gross margin was 54% against 40% a year earlier, when AMD took inventory charges on MI308 GPUs blocked by U.S. export controls. GAAP operating income was $2.0B against a $134M loss.
Reported net income of $2.3B flatters the run rate: it includes $598M of other income, mostly unrealized gains on equity holdings that listed publicly in the quarter. The bigger story sits in two agreements. OpenAI and Meta each intend to deploy up to 6 gigawatts of AMD data center GPUs, starting with MI450, and each received a warrant for up to 160 million AMD shares at $0.01, vesting as their GPU purchases hit milestones.
The Street's average price target is $636.21, from 55 analysts, 44 of them rating the stock a buy. That target is about 40 times 2027 consensus EPS. Our discounted cash flow check, on the same consensus forecast, reaches it at a 11.4% discount rate when costs are treated the way the Street usually treats them. Management guided third quarter revenue of about $13.0B; results are due 3 November 2026.
02 / Business description
CPUs, GPUs and AI accelerators, from laptops to rack scale systems.
AMD designs processors and outsources their manufacture. Data Center sells EPYC server CPUs, Instinct AI accelerators, networking and FPGAs. Client and Gaming sells Ryzen PC processors, Radeon graphics and the semi-custom chips inside game consoles. Embedded sells adaptive chips into industrial, automotive and communications markets. In 2025 AMD bought ZT Systems for its rack scale design team and sold the manufacturing business, so it can deliver full AI systems rather than single chips.
| Q2 2026, $M | Revenue | Q2 2025 | Growth | Operating income | Q2 2025 | Margin |
|---|---|---|---|---|---|---|
| Data Center | $6,718 | $3,240 | +107% | $2,103 | −$155 | 31.3% |
| of which Client | $3,062 | $2,499 | +23% | n/a | n/a | n/a |
| of which Gaming | $779 | $1,122 | -31% | n/a | n/a | n/a |
| Client and Gaming | $3,841 | $3,621 | +6% | $582 | $767 | 15.2% |
| Embedded | $977 | $824 | +19% | $386 | $275 | 39.5% |
| All other (amortization, stock pay, other) | −$1,081 | n/a | ||||
| Total | $11,536 | $7,685 | +50% | $1,990 | −$134 | 17.3% |
AMD reports operating income for Client and Gaming combined. Client grew on a 34% rise in processor units; Gaming fell on lower semi-custom console revenue.
03 / Business strategy and outlook
From second source to system supplier in AI.
Consensus has revenue rising from $34.6B in 2025 to $225B in 2030. Most of that is data center. The table shows what the forecast asks of AMD in its two big markets.
The plan has three parts. Keep taking server CPU share from Intel with EPYC. Close the gap with Nvidia in AI accelerators through a yearly Instinct cadence, MI350 now and MI450 next, sold as Helios rack scale systems using the ZT Systems design team. And lock in demand with multi year, gigawatt scale customer agreements, paid for partly in AMD stock through the OpenAI and Meta warrants.
| Revenue build | 2026E | 2027E | 2028E | 2029E | 2030E |
|---|---|---|---|---|---|
| Server CPU market ($B) | $44 | $65 | $98 | $147 | $220 |
| AMD share | 33.3% | 34.5% | 35.7% | 36.8% | 38.0% |
| AI accelerator market ($B) | $290 | $437 | $660 | $995 | $1,500 |
| AMD share | 5.5% | 10.2% | 10.0% | 8.4% | 7.7% |
| Implied data center revenue ($B) | $30.6 | $67.0 | $101.0 | $137.7 | $199.1 |
| Consensus total revenue ($B) | $51.0 | $88.9 | $123.8 | $161.9 | $225.0 |
Consensus does not need AMD to win AI. Its accelerator share peaks near 10% and drifts back below 8% as the market grows to $1.5 trillion. It does need that market to arrive: about $116B of accelerator revenue in 2030, from roughly $16B in 2026.
Market sizes and shares are model assumptions, calibrated so the build matches consensus revenue. The rest of revenue is Client, Gaming and Embedded.
04 / Bulls say, bears say
The debate in six points.
Bulls say
- Data Center revenue grew 107% to $6.7B and earned $2.1B of operating income, against a loss a year ago.
- OpenAI and Meta each intend to deploy up to 6 gigawatts of AMD GPUs. Few challengers get that kind of visibility from two of the largest AI buyers.
- On consensus, the stock trades at 12.9x 2030 adjusted EPS of $44.31, with $9.9B of net cash.
Bears say
- The warrants cover up to 320M shares at $0.01, 20% of the $1,632M outstanding. If they vest, they lower value per share by about 16% in our DCF.
- Commitments are growing: $30.3B of purchase commitments, $4.1B of data center lease guarantees, and another $5.0B of investments and $9.5B of leases signed after the quarter.
- Nvidia sets the pace in AI hardware and software, and China depends on export licenses: $440M of MI308 charges in 2025.
05 / Economic moat
Narrow: a strong CPU franchise, a follower in AI.
AMD and Intel are the only two scale suppliers of x86 processors, the instruction set most servers and PCs run. Decades of design IP, chiplet packaging, and a product line that now covers CPUs, GPUs, networking and rack scale systems are hard to copy. AMD spent $4.9B on research and development in the first half of 2026, up 36%, and a 54% gross margin says customers pay for the result.
We stop at narrow. In AI accelerators AMD is the challenger: Nvidia leads on software and developer lock in, and the largest buyers are designing their own chips. AMD does not make its chips, so it depends on outside foundries. Goodwill and intangibles from past deals, including Xilinx and ZT Systems, total $41.1B, or 49% of $84.5B in assets.
06 / Price target: Street consensus
$636.21 average target, 11.2% above the 14 October price.
The headline target is the Street consensus, not our own estimate. Most analysts set a 12 month target by applying a price to earnings multiple to forward adjusted EPS, so the table shows the multiple each target implies on consensus EPS.
| Street target | Price target | vs $572.17 | P/E 2026E | P/E 2027E | P/E 2028E | P/E 2030E |
|---|---|---|---|---|---|---|
| Low | $365 | −36.2% | 48.1x | 23.2x | 16.0x | 8.2x |
| Average | $636.21 | +11.2% | 83.8x | 40.5x | 27.9x | 14.4x |
| High | $1,250 | +118.5% | 164.7x | 79.5x | 54.8x | 28.2x |
| Price today | $572.17 | 75.4x | 36.4x | 25.1x | 12.9x |
| Consensus | FY2025A | FY2026E | FY2027E | FY2028E | FY2029E | FY2030E |
|---|---|---|---|---|---|---|
| Revenue ($M) | $34,640 | $50,950 | $88,940 | $123,760 | $161,900 | $225,000 |
| Growth | n/a | 47.1% | 74.6% | 39.1% | 30.8% | 39.0% |
| Gross margin | n/a | 55.5% | 55.3% | 55.3% | 55.7% | 56.7% |
| EBITDA ($M) | $6,700 | $13,440 | $30,050 | $45,940 | n/a | n/a |
| FCF margin | n/a | 14.5% | 18.4% | 24.5% | 26.3% | 27.1% |
| Adjusted EPS | $4.17 | $7.59 | $15.72 | $22.82 | $31.48 | $44.31 |
| GAAP EPS | $2.65 | $5.73 | $13.49 | $20.39 | $27.06 | $40.51 |
| Price, 14 Oct 2026 | $572.17 |
|---|---|
| Market capitalization | $934B |
| Analyst ratings (55) | 5 strong buy, 39 buy, 11 hold |
| Forward P/E | 51.5x |
| Street average price target | $636.21 |
The spread is wide: the high target is 3.4 times the low. At the average, investors would pay about 28 times 2028 EPS, and at today's price 12.9 times 2030 EPS of $44.31. The targets work if the 2030 numbers arrive, which is why the strategy and risk sections matter more than the multiple.
Consensus revenue and EPS: Koyfin, 14 October 2026 for 2025 to 2028, 7 October 2026 for 2029, 2030 and free cash flow margins.
07 / DCF check
The average target holds at a 11.4% discount rate.
A discounted cash flow tests what the targets require. It uses the same consensus revenue and free cash flow margin to 2030. After 2030, growth fades in a straight line from 39% to 3% by 2035, then grows at 3% a year.
| How costs are treated | Discount rate that gives $636.21 |
|---|---|
| Street style: stock pay and warrants not deducted | 11.4% |
| Stock pay deducted, warrants not counted | 10.7% |
| Stock pay deducted, all 320M warrant shares counted | 9.6% |
For reference, CAPM with a 4.7% risk free rate, a 1.7 beta and a 5.0% equity risk premium gives 13.2%. At that stricter rate, with stock pay and warrants counted, the DCF gives $380 per share ($455 before warrants), close to the lowest Street target of $365. So the average target is reasonable if you see AMD as less risky than its beta, or treat stock pay and the warrants the way most of the Street does.
| $M, consensus years | 2026E | 2027E | 2028E | 2029E | 2030E |
|---|---|---|---|---|---|
| Revenue | $50,950 | $88,940 | $123,760 | $161,900 | $225,000 |
| Growth | 47.1% | 74.6% | 39.1% | 30.8% | 39.0% |
| Free cash flow | $7,413 | $16,392 | $30,346 | $42,580 | $61,065 |
| FCF margin | 14.5% | 18.4% | 24.5% | 26.3% | 27.1% |
| Stock based pay | −$1,987 | −$3,157 | −$3,960 | −$4,614 | −$5,625 |
| Owner free cash flow | $5,426 | $13,234 | $26,386 | $37,966 | $55,440 |
| $M, fade years | 2031E | 2032E | 2033E | 2034E | 2035E |
|---|---|---|---|---|---|
| Revenue | $296,504 | $369,400 | $433,638 | $477,847 | $492,182 |
| Growth | 31.8% | 24.6% | 17.4% | 10.2% | 3.0% |
| FCF margin | 27.1% | 27.1% | 27.1% | 27.1% | 27.1% |
| Stock based pay | −$7,413 | −$9,235 | −$10,841 | −$11,946 | −$12,305 |
| Owner free cash flow | $73,059 | $91,020 | $106,848 | $117,741 | $121,274 |
Owner free cash flow is free cash flow minus stock based compensation. Stock based pay falls from 3.9% of revenue in 2026 to 2.5% by 2030; it was 4.5% in the first half of 2026. The valuation date is 14 October 2026, so only the rest of 2026 is counted. The warrants vest on the GPU purchases that consensus revenue includes, which is why the strict case counts them.
| Value per share after warrants: discount rate ↓ / terminal growth → | 2.0% | 2.5% | 3.0% | 3.5% | 4.0% |
|---|---|---|---|---|---|
| 10.0% | $529 | $559 | $593 | $633 | $679 |
| 11.0% | $460 | $483 | $508 | $536 | $569 |
| 12.0% | $405 | $423 | $442 | $463 | $487 |
| 13.2% | $353 | $366 | $380 | $396 | $413 |
| 14.0% | $324 | $335 | $347 | $360 | $374 |
The discount rate moves the answer more than any forecast year: $380 at 13.2%, $508 at 11% and $593 at 10%. Reverse DCF at today's $572.17: with everything counted, the price implies a 10.2% discount rate. Stricter scenarios at 13.2% range from $177 (growth at 60% of consensus, warrants unvested) to $638 (growth 15% above consensus at a 12% rate).
08 / Risk and uncertainty
Very high uncertainty: a few customers, large commitments, and a long forecast.
Consensus has revenue growing more than sixfold from 2025 to 2030, and the Street's targets run from $365 to $1,250. Each card shows what a target implies.
$636.21 per share
40.5x 2027 EPS and 14.4x 2030 EPS. In our DCF, with stock pay and warrants counted, it needs a 9.6% discount rate.
$1,250 per share
79.5x 2027 EPS and 28.2x 2030 EPS. In our DCF, with stock pay and warrants counted, it needs a 6.6% discount rate.
Customer concentrationThe OpenAI and Meta agreements state what each customer intends to deploy over several years. Delays to MI450 or to their own data center build outs would hit revenue and the warrant math at once.
CompetitionNvidia leads in AI accelerators and software, and hyperscalers are designing their own chips. Intel remains the incumbent in server CPUs.
Export controlsMI308 sales to China need licenses, and U.S. officials expect 15% of that revenue. MI325 licenses require U.S. inspection, which brings a 25% tariff.
Commitments$30.3B of purchase commitments, $17.4B of them due in the rest of 2026, plus lease guarantees and new investment commitments. If demand slows, these are costs AMD cannot easily cut.
Warrant accountingThe warrants are classified as liabilities until conditions for equity classification are met, so changes in their value could move reported earnings.
Earnings qualityQ2 net income included $598M of other income, mostly unrealized investment gains, which will not repeat on schedule.
09 / Capital allocation
Standard: a strong balance sheet, paying for growth partly in stock.
AMD holds $13.1B of cash and short term investments against $3.2B of debt, for $9.9B of net cash, with a $5.0B revolving credit facility undrawn. First half operating cash flow was $5.3B and capital spending $1.2B, leaving $4.1B of free cash flow.
Buybacks have been small. AMD repurchased 1.1M shares for $221M in the first half, with $9.2B left under its $14B program, while stock based pay was $990M. The larger decision was the warrants: paying for two anchor customers with up to 20% of the company. That may prove a good trade, but shareholders carry the dilution. No dividend is paid. We rate allocation standard.
10 / Financial summary
Reported figures.
| $M | Q2 2026 | Q2 2025 | H1 2026 | H1 2025 |
|---|---|---|---|---|
| Revenue | $11,536 | $7,685 | $21,789 | $15,123 |
| Gross margin | 53.8% | 39.8% | 53.3% | 44.9% |
| GAAP operating income | $1,990 | −$134 | $3,466 | $672 |
| Net income | $2,297 | $872 | $3,680 | $1,581 |
| Diluted EPS | $1.38 | $0.54 | $2.22 | $0.97 |
| Operating cash flow | n/a | n/a | $5,321 | $2,401 |
| Capital spending | n/a | n/a | −$1,197 | −$494 |
| Free cash flow | n/a | n/a | $4,124 | $1,907 |
| Stock based compensation | $503 | $371 | $990 | $733 |
| Owner free cash flow | n/a | n/a | $3,134 | $1,174 |
Continuing operations. The 10-Q gives cash flows for six months only, so quarterly cash flow is n/a. Free cash flow is operating cash flow less purchases of property and equipment. Q2 2025 includes the MI308 export control charges, and Q2 2025 net income includes a one off tax benefit.