J.P. Morgan: AMD expects revenue growth of over 80% in 2027 as data centers take over from PCs

Why did third-quarter results exceed expectations?

AMD reported third-quarter 2026 revenue of $13.4 billion, up 45% year over year and 16% sequentially, above the market consensus of approximately $13.1 billion. Adjusted earnings per share were $2.09, also above the consensus of $1.97.
Data center revenue was $8.55 billion, up 97% year over year and 27% sequentially, making it the main source of the upside. Server CPU revenue grew more than 90% year over year. As shipments of the MI455X “Helios” rack-scale AI computing platform began to ramp up, JPMorgan estimated that data center GPU revenue grew approximately 35% sequentially.
Embedded revenue rose 14% sequentially and 29% year over year, driven by demand from customers in networking, aerospace and defense, among other sectors. Over the same period, client revenue fell 4% sequentially and gaming revenue declined approximately 1%.

The midpoint of AMD’s fourth-quarter 2026 revenue guidance was $17 billion, plus or minus 3%, above market consensus of approximately $16.3 billion. The midpoint implies sequential total revenue growth of approximately 27%.
The company expects a ramp-up in AI accelerator shipments and increased adoption of EPYC server processors to drive sequential data center revenue growth of approximately 50%. Embedded revenue is also expected to grow by a double-digit percentage sequentially.
On the other side, PC demand is weakening: management observed at the end of the third quarter that rising memory prices and component costs were suppressing end-market sales. The company expects both client and gaming revenue to decline more than 20% sequentially in the fourth quarter, and non-GAAP gross margin to be approximately 55%, below market consensus of approximately 55.5%.

AMD management expects total revenue to grow more than 80% in calendar 2027, above the approximately 75% that the market estimated before the earnings call using a lower 2026 revenue base. The company expects data center revenue to more than double and account for over 80% of total revenue by then.
The company expects server CPU revenue to double year over year and data center AI revenue to grow faster, driven by the ramp-up of MI450 and the Helios platform, as well as continued EPYC share gains. JPMorgan believes increased supplies of wafers, advanced packaging and components will help the company meet demand, which still exceeds supply.
PCs are a countervailing factor: AMD expects unit sales in the overall PC market to decline by a double-digit percentage in 2027, but believes data center growth will be sufficient to offset the impact. A rising share of AI revenue could also weigh on overall gross margin. Management expects operating expenses to grow at less than half the rate of revenue, driving an improvement in operating margin.

At the end of the third quarter, inventory rose to $11.5 billion from $8.5 billion in the previous quarter, while free cash flow fell to $554 million from $1.6 billion. Over the same period, cash and short-term investments rose to $15.8 billion from $13.1 billion.
JPMorgan raised its 2027 adjusted earnings-per-share forecast to $17.55 from $14.38, and its price target to $575 from $550. The target is based on approximately 22 times the bank’s 2028 earnings-per-share forecast of $26.50.
The bank maintained its Neutral rating, believing the share price is close to fully reflecting the company’s value. At the same time, AMD still needs to incur substantial operating expenses, especially on research and development, to keep pace with industry leaders, and long-term share gains remain uncertain.