Advanced Micro Devices ($AMD) stock took a summer pause, but the business kept accelerating. After more than doubling this year, the stock traded somewhat flat between June and August. Yet the business has hardly cooled, as second-quarter revenue rose 50% to $11.54 billion, while Data Center sales more than doubled to $6.72 billion.
CEO Lisa Su called it a quarter of “record revenue and profitability,” and AMD guided third-quarter revenue to about $13 billion, implying another 41% increase. I think the stock has found its footing, and I remain bullish on another leg higher.
For context, Advanced Micro Devices (AMD) is a semiconductor company and a global supplier of computing and graphics technologies headquartered in California.
AMD’s Summer Pause Looks Temporary
The summer rally pause looks temporary, in my view, as AMD’s latest numbers were stronger beneath the headline than even the 50% revenue gain suggests. Since late July, the stock has largely churned around the high $400s. Meanwhile, Data Center now contributes 58% of sales. EPYC server processor revenue continued to benefit from higher shipments and average selling prices, keeping AMD on track toward its long-term target of over 70% growth in server central processing unit (CPU) sales.
Client revenue also advanced 23% to $3.06 billion, demonstrating AMD is taking part in the AI-PC refresh without needing it to carry the story. Also, let’s not forget that earnings per share (EPS) of $1.66 beat the $1.61 consensus, and adjusted operating margin reached 27%. I think the market should pay attention to this mix because EPYC CPUs feed and manage accelerator-heavy servers. This means artificial intelligence (AI) spending helps AMD twice: first through Instinct GPUs, then via the host processors and broader data-center infrastructure surrounding them.
It’s also noteworthy that the company’s $13 billion Q3 midpoint sits above the pre-report consensus of roughly $12.6 billion. Management also expects Data Center sales to accelerate during the second half. Gaming will remain a drag, of course, and component costs deserve watching. However, I believe neither changes the central point. Demand is broadening faster than AMD can currently recognize it as revenue, which translates to ever better medium-term prospects.
AMD’s AI Runway Is Still Opening
Speaking of AMD’s medium-term growth prospects, the company’s AI runway is still expanding. Also, the customer commitments are finally large enough to change the earnings base. OpenAI and Meta ($META) have each revealed plans to deploy up to six gigawatts of AMD accelerators across multiple generations, beginning with MI450-based systems. Anthropic has added a further two-gigawatt commitment, with its first gigawatt expected in the first half of 2027. Together, those agreements represent as much as 14 gigawatts.
I view these as a powerful validation as well, as three frontier-model builders are willing to design infrastructure around AMD.
Yet the deeper opportunity could be Helios. This is AMD’s first rack-scale AI platform. It bundles Instinct GPUs, sixth-generation EPYC CPUs, networking, and ROCm software into a deployable system. It should allow AMD to capture more of each data-center dollar.
OpenAI expects to bring Helios online in Q4, with deployments accelerating through 2027. Meta is already validating the platform. Meanwhile, Anthropic will use Claude to help optimize ROCm. I like that last detail because Nvidia’s ($NVDA) CUDA software ecosystem remains AMD’s hardest competitive barrier.
AMD has other avenues to drive growth as well. The company targets more than 50% server-CPU revenue share. Also, Ryzen can keep gaining in commercial PCs while Embedded has returned to growth. Notably, management’s three-to-five-year model calls for company revenue to compound above 35%, Data Center above 60%, and data-center AI above 80%. While those targets are ambitious, Q2’s acceleration and the announced deployment pipeline make them considerably less speculative.
AMD’s Growth Changes the Valuation Math
This spectacular growth changes the valuation math. Look, AMD is obviously not cheap on this year’s earnings. At about $481, shares trade near 63x the current 2026 consensus EPS estimate of $7.57. That multiple leaves little tolerance for a delayed Helios ramp, weaker AI capital spending, fresh export restrictions, or an unexpectedly aggressive response from Nvidia.
We shouldn’t forget the risks here, especially since AMD is still chasing Nvidia in accelerators. Yet the valuation changes quite quickly once we move beyond this year. Consensus calls for EPS of $15.45 in 2027, up 104%, which puts the stock at about 31x next year’s earnings.
Analysts then expect growth of roughly 40% in 2028 and another 33% in 2029. That would take EPS to around $21.72 and $28.90, respectively. At today’s share price, those figures translate into multiples of roughly 22x and 16.6x. The current valuation is demanding, then, but it may not stay that way for long.
I do not find that degree of earnings growth unreasonable. AMD already bears much of the cost of developing its chips and software, so additional high-margin Data Center sales should carry an outsized share of revenue down to operating profit. Consensus could still be too bullish, of course.
Even so, AMD does not need to overtake Nvidia for the thesis to work. Instead, it needs to establish itself as the clear second choice in a market still growing at a remarkable pace. Its recent customer wins suggest it is getting there.
Is AMD a Buy, Sell, or Hold?
Today, AMD has a Strong Buy consensus rating on Wall Street. This is based on 28 Buy ratings and six Hold ratings. Notably, no analyst rates the stock a Sell. Also, AMD’s average price target of $647.19 implies about 34% upside potential over the next 12 months.
Conclusion
AMD still has plenty to prove at this valuation. However, the stock has spent much of the summer going nowhere, even as the business has continued to pick up speed. Helios is no longer just another product on a roadmap, either. Deployments are beginning, and some of the largest AI customers are making serious commitments.
If AMD delivers on those orders, earnings could rise much faster than the market currently expects. That, in my view, would be enough to send the stock on another run.
