Speaker A
Hey fools, welcome back to another episode. Today, we are going to take a closer look at AMD, a company most of you should be familiar with. The company just reported earnings, and unfortunately, after the reports, the stock was down.
In-depth analysis of AMD's recent earnings, growth prospects, and challenges with expert insights and future outlook.
Ask about this video. Answers come from its transcript only — with the timestamp, so you can check them.
Generated from the transcript and can be wrong — check the timestamp.
Key Takeaways
- AMD shows strong growth potential, especially in the data center AI market with the Helios platform.
- Despite a recent stock price drop, AMD has significantly outperformed competitors like Nvidia in 2026.
- Long-term financial targets suggest substantial earnings growth, possibly exceeding initial guidance.
- Supply chain and competitive risks remain but are balanced by strong partnerships and product innovation.
- Investor confidence is tied to AMD meeting its aggressive growth and product deployment timelines.
What the video covers
- AMD recently reported earnings with strong revenue growth but the stock price dropped post-report.
- AMD stock has doubled year-to-date, outperforming Nvidia and the broader market in 2026.
- Data center segment revenue doubled year-over-year, driven by the new Helios rack-scale AI platform.
- Management expects accelerated growth in the second half of 2026 and a doubling of revenue in 2027.
- Helios product launch is key to AMD’s future growth, competing directly with Nvidia’s offerings.
- AMD’s long-term guidance includes a 30-40% compounded annual growth rate and earnings per share exceeding $20 within 3-5 years.
- The stock’s current forward PE ratio is high but looks more reasonable when considering earnings 3 years out.
- There are some risks including supply chain issues and market competition from other chip makers.
- The video includes a critique of AMD CEO Lisa Su’s communication style during earnings calls.
- Partnerships with major players like Meta, Microsoft, and OpenAI support AMD’s growth outlook.
Chapters
- 00:00Introduction and Overview of AMD Earnings
- 00:53Initial Thoughts on AMD Stock Performance
- 01:53AMD vs Nvidia and Market Outperformance
- 02:472027 Growth Expectations and Revenue Doubling
- 03:52Helios AI Platform and Data Center Growth Story
- 05:10Q3 and Q4 Growth Projections
- 06:16Long-Term Financial Guidance and EPS Targets
- 07:10Valuation Discussion and Forward PE Ratios
- 09:12Risks, Challenges, and Market Competition
- 15:09Closing Remarks and Critique of CEO Communication
Full Transcript — Download SRT & Markdown
Speaker A
Now, in today's episode, I want to take a closer look at some of the things that management said, and luckily, I'm not alone. I am joined by Neo. Also, later on in this episode, I want to make a bit of
Speaker A
a complaint about something I'm not too happy about Lisa Su, and I'm going to see if Neo feels the same way. Welcome, fools, and let's get started with today's episode. Now, before we continue with today's episode, if you want market-
Speaker A
beating stock picks from our analyst, make sure to check out the pinned comment and the description. Using that link gets you a promotional offer as our thanks for being a viewer. Thank you, and let's get back to today's episode. Hey
Speaker A
Neil, welcome to the first but hopefully many, many episodes that we're going to be doing here on the Mly Fool channel.
Speaker A
Uh, like the intro, I mentioned we were going to take a closer look at AMD. Um, first, any just top-level thoughts here on AMD? What did you like? What didn't you like? And, um, I mean, the stock is, is
Speaker A
is down. Anything about that? Yeah. So for, for those, let's, let's start with, with the first couple of things.
Speaker A
AMD has been performing, the stock has been performing extremely good this year. It's up tripled. I mean, it has doubled. Let's face it. It has doubled year to date. It is now experiencing a drawdown of around 15 to 20% or so,
Speaker A
really depending on, on when you're looking at the stock price. So the growth has been there in the stock price. A lot of it was baked in going into this report. The results were still good despite the stock being down. The
Speaker A
results were still good. So we're more talking about what could be better, right? We, we, we are seeing a company that is growing. There is even more growth around the corner, some accelerated growth there as well. We'll talk about all of that in a bit. But
Speaker A
what you should know is this is a company that has outperformed the market, has outperformed, for example, Nvidia in 2026. Nvidia is up, I think, 12% year to date. AMD is up over 100%. PE ratios, forward PEs, AMD is much higher than
Speaker A
Nvidia. We can discuss that as well later on. But right now, this is a nice little intro.
Speaker A
Yeah. I, I mean, you talked about acceleration and revenue numbers. I mean, revenue was up roughly 50%, um, a little bit over 50% year-over-year.
Speaker A
Uh, mainly driven by the data center market. That data center market doubled, um, uh, year-over-year. I think it was up about 107%.
Speaker A
Now, one of the commentaries that really got me excited from management, Neil, was, um, they mentioned that the second half was going to accelerate at a faster, it was going to accelerate compared to the first half, um, of this year. Uh, they
Speaker A
also gave kind of, uh, commentary about 2027 where they expected to at least double, uh, throughout the earnings call.
Speaker A
I think we also even had, uh, Lisa Su go a little bit more and kind of saying when we're talking about double, we're not talking about just 100%. I think she mentioned to think higher than 100%. So Neil, any kind of backstory here for the
Speaker A
viewers? What is driving this acceleration and why is it happening next quarter and in the second half in 2027 and what's different compared to now?
Speaker A
Yes. So they, they expect for the data center a segment, right? That's expected to more than double in 2027 as Helios, their MI450 deployment scale and server supply keeps expanding. That's important because server CPUs, they also said that
Speaker A
they're expecting above 80% year-over-year growth in the second half of 2026 and then over 70% growth for the full year of 2027, which, of course, is going to come off a much higher base.
Speaker A
Now, of course, the big growth story is because of the Helios product, which is the new rack-scale AI platform, which should be competing or be more competitive with what Nvidia has been doing. And of course, since that is a new product which should
Speaker A
be highly, highly competitive, it is normal to see an acceleration in growth because all of their customers are probably waiting to maybe diversify a bit away from Nvidia if, of course, the results are the same if not exceeding.
Speaker A
Right now, we had the MI355 series which has been performing well. But if we go back to the discussion of why isn't AMD growing much faster? Well, from a logical point here, why would customers jump into the MI350 series if the MI450
Speaker A
is just around the corner and is so much better dollar per value basically, which, which is exactly why the growth, the acceleration in growth is around the corner and that's also why you have been paying a premium to own AMD especially
Speaker A
more recently. Right? This is not something new. We knew the MI450 series was going to start to ramp towards the back half of this year, start shipment in Q3, which is this quarter right now, and then really ramp through 2027. So
Speaker A
that, that's really the growth story that's going to happen from, from here on out. Yeah, I, I think that the numbers were quarter three really starting in September. So pretty even much in the end of September 3. So you're, we're
Speaker A
going to see a nice bump up because of the Helios, but like you continue to mention quarter 4, you have the full quarter and then you ramp up to the to 2027. Now there are a few bearish points
Speaker A
I want to touch, uh, Neil, but first I kind of want to, uh, talk about one more thing. Um, with the Helios rack, one good thing, and like you mentioned, you're paying a premium, but there's also some kind of like known backlog. Maybe not
Speaker A
numerically, but customer-wise, right? Right. We know Enthropic is, is doing 2 gigawatts. Uh, they have a partnership with, with Meta, with Microsoft and with, uh, OpenAI and those are all expected to somehow not full deployment but shipment start in this process here. Uh, so the
Speaker A
market is giving that premium based on that information that we know. So hopefully AMD stays on schedule. But the other good thing that I wanted to mention, Neo, was they talked a little bit about their financial numbers of, of, of
Speaker A
long-term expectations. I think in November they had their analyst day and in their analyst day, um, they talked about compounded annual growth rate of I don't know if it was, it was somewhere between 30 to 40%, um, in compounded
Speaker A
annual growth rate that they announced in November and earnings per share of at least $20 within the next 3 to 5 years.
Speaker A
Now Neil, in this earnings call, they Lisa Su actually mentioned that they're exceeding that $20. To me, exceeding is something big. It's not like you're going to get $21 or $22. I'm thinking 25 plus. And I also am I've been an
Speaker A
investor of AMD for a long time that I feel Lisa Su sandbags a lot. So if she tells me three or five years, I'm going to put it closer to the three-year than to the 5-year.
Speaker A
Thoughts there? Am I over? I, I know you've been an AMD investor as well.
Speaker A
When you hear that exceeding number, uh, for the financial earnings per share and three to five year, how do you see it numerically wise and how do you see the timeline as well?
Speaker A
Yes. So the first of all the 3 to 5 years, which means we are already, I mean, almost one year in in that time frame. So if we are going to say, let's say it's 3 years or four years but if
Speaker A
it's four years, it's only 3 years down the line. If it's 3 years, it's only now two, two years down the line. And revenue-wise, you're right. It's, they set substantially above their prior over 35%, uh, target for the revenue. And then
Speaker A
for the EPS is significantly exceed the 20% annual EPS target. And let's say it is $25.
Speaker A
If it's $25 and we take today's price, then it's trading at around 18, 19 times earnings. But then again, it's earnings three years out. So I don't know how many people would, would like us to, to use a PE ratio that's 3 years out. But
Speaker A
it looks much better than the 58 times that we have right now. Like you said, they, they usually give us long-term midterm guidance and either they raise it like the the total add
Speaker A
been increasing every couple of quarters. But you're right that Lisasu is not the kind of of CEO that puts a target and never meets it. It's it's usually they put a target and if they know they're going to
Speaker A
exceed it, then they probably will increase that target, which is something that we've seen happen over the past couple of quarters. So, yeah, I mean, as long and it's not just on the AMD thing, it's it's for many other companies out
Speaker A
there. If you have a medium-term target or a longerterm target and as long as you're still on track to meet or beat it, I'm completely fine. Doesn't matter what happens in the short run. Stock can go down, stock can go up. But if you are
Speaker A
going to go and reach above $20 EPS 3 years down the line, if you're still expected to grow above 35% revenue for the next couple of years, I I I'm I don't really care that much if the stock
Speaker A
is down or 7% after it's been up over 100% year to date. But yeah, it's uh we we know we've talked about this time and time again. We would always like to get more information from Lisa during the
Speaker A
call, which is something that we didn't really get for for a couple of quarters.
Speaker A
Analysts also ask questions every single quarter is the same, but we don't really have that clearcut answer. But hey, as long as the long-term or medium-term target doesn't really change on the downside, I'm I'm good.
Speaker A
Yeah. And so I mean Neil, we we definitely talked a lot about kind of the bullish aspects of AMD, but we have to also kind of see some of the risk um or some of the things that maybe we
Speaker A
didn't like about management. You touched a little bit of something that honestly we're both not a fan of. Maybe we can deep dive a little bit closer into that. Um but do you have any what do you think are some of your biggest
Speaker A
risk uh for AMD right now? Um especially as they're coming out with this Rex scale solution and this market continues to evolve. I mean, as as we're recording this episode, just SpaceX also just reported and Elon mentioned that he was
Speaker A
going exclusive with Nvidia. Do you think it's a fear now that other companies start to say that as well? And and is this an added risk? Um, or are there other risks that you're more worried about for this player instead?
Speaker A
Yes. So, so risk wise, I think again, it's it's not just an AMD thing, it's the memory cost inflation there that that's happening. Although AMD did say that they had some good agreements. So, okay, we'll we'll see what happens with
Speaker A
that. I do think that memory prices are bound to come down over the next 12 months as everybody tries to figure out how how to diversify and how to make the use of of memory more efficient. Another thing is remember they had that
Speaker A
agreement with Oracle. We we we don't hear anything about Oracle anymore which is which is quite interesting. But then again, I I rather hear them speak about Meta and Microsoft companies that do have uh some not crazy debt.
Speaker A
Yeah, not crazy debt and and still a little bit well Microsoft still out of free cash flow. Meta free cash flow wise is is still okay compared to an oracle.
Speaker A
But as for the the SpaceX comments, which by the way, there is going to be another episode where we will discuss SpaceX uh results as well. It's it's quite interesting because AMD is also an investor in XAI. So I don't know exactly
Speaker A
how how they'll take it. So if XAI SpaceX wins and they don't buy from AMD then AMD wins as well because they are invested in SpaceX XAI. I I I don't know how that works out and if if th those
Speaker A
comments from Elon yesterday was were so well received by AMD leadership, but it it's not I mean we know that Nvidia dominates the market, right? They still have over what is it 85% close to 90% maybe of of the market right now. The
Speaker A
market is growing. So that there is going to of course be a place for AMD.
Speaker A
There's going to be a place for everybody that's creating their own chips, right? TPUs are are having gaining a lot of traction. Actually, Amazon's Tranium, Graviton are gaining a lot of traction as well, mostly for internal workloads. Okay, that's fine.
Speaker A
But I'm not I'm not that surprised that SpaceX is going with Nvidia only. We've seen some new cloud players, right? And Nebus at Core Reef seems like they're also only going with Nvidia, which makes sense because Nvidia is an investor in
Speaker A
those companies and financially they they are helping them out. But is it a risk?
Speaker A
No. Because if AMD's products are really so good, then the customers will come. Mhm.
Speaker A
If it isn't, then then yeah, the fact that people are going or companies are going exclusively with Nvidia is is the least of our issues.
Speaker A
Mhm. Yeah. and and new I mean for for me some of the risk here are uh like you mentioned right supply chain um very much an issue with that you can consider like memory and and and kind of the
Speaker A
manufacturing side the only thing is again very similar like you mentioned it's not just an AMD problem right it it's it's it's it's an everybody problem and everybody needs to make sure they they handle this situation correctly you
Speaker A
can't overpromise to some of these supply chains and then you don't have the orders for it but you also can't under orderer and then you're you're you're limiting your your gap so you have to have some form of leeway. U it
Speaker A
seems management is feeling confident about that but we will see. The other thing for me uh is Helios is going to be their first rack scale system. Now a Nvidia when they did it they did have some issues. The great
Speaker A
thing about AMD is it's always harder for the first person because the second person can can learn from it. But I believe it's still going to be somewhat difficult, right? Somewhat difficult.
Speaker A
They're going to learn from this. Um, so you might get a lot of random reports, media just kind of if they hear a sniff anything about delays or about an issue, which might not be a crazy issue, the
Speaker A
market might run with it on the negative side. Um, the final thing that I would say is kind of like a a bearish sentiment or a risk sentiment uh for me, Neil, is it doesn't have that safety net. You were talking about it.
Speaker A
valuation is a lot stretched compared to like an Nvidia right now. So if an Nvidia had a bit of a delay, it's like sure maybe the market we're already pricing it at a forward PE ratio of 21 or whatever. Even if the stock drops, I
Speaker A
don't think it would be a major drop for Nvidia. I think for AMD is a different story with this type of valuation. If there's a whiff of maybe them losing Open AI or Anthropic or Enthropic not going with the next generation, that
Speaker A
risk um safety net based on valuation is a little bit further. I am still very much bullish but I do understand that those could be the negative stuff. Um actually I have one more and it's Lisa Sue Neil I I have to make a a formal
Speaker A
complaint here. I wish she was more direct Neil. I mean you mentioned it right she even in the every every number even for the financial numbers that we were talking she would just give us a strong adjective before extremely
Speaker A
uh I forget what it was like ex meeting expectations exceeding expectations um but it was never a true number even when we kind an analyst asked Lisa Sue how much revenue per gigawatt was given um was expected Lisa Sue just said double
Speaker A
digits It's billions of dollars. That's 10 to 99 billion range. I wish you can give us a little bit more clarity um with everything. Luckily, we did get at least 2027 guidance or or commentary in 2027, that's something I did enjoy um of
Speaker A
over 100%. But even then, she said when we say over 100%, it has to be over 100%. And we don't mean 100% of that, but better commentary, I think just better communication of the direction, I think, could be something that can go a
Speaker A
long way and can add more confident to investors. If we look at Q3 guidance, they're expecting around 13 billion, give or take $300 million. We we know that they usually beat the the estimates by what is it four or 5% or so. That
Speaker A
does represent, and they did beat the analyst expectations, which were at $12.5 billion. So, it's a $500 million uh difference there, which does represent 41% year-over-year growth, 13% growth quarter over quarter. Gross margins stay at 56%, which again is is
Speaker A
okay when when you're starting to to ramp up a new a new product. But yeah, I mean we've we've been complaining about that doubledigit billions of dollars for for over a year now because we yeah it's between 10 to 99. We don't know. But
Speaker A
maybe maybe as they do ramp up more and as this business does become a multi- I mean tens of billions of dollars in revenue, then maybe they they could get give us a a a clearer number, right?
Speaker A
Because with Nvidia, I mean they're already generating tens of billions of dollars each and every quarter. they've been doing so for for the last two years or so. So, they can maybe see a little bit better what's going on there with
Speaker A
regards to answering those questions more specifically because if we're being honest, if you look at the difference between AMD and and Nvidia revenue-wise, it's it's as if you you're looking at a veteran NBA player and and a rookie
Speaker A
college player, right? Um, the rookie college player could be uh the next superstar, but there is still a a big a big difference there.
Speaker A
All right, Neil, that was I think this is a great way to end this episode and thank you for for joining me. Like I mentioned, this is the first recording of us together here on the MLY channel, but it's not the last. In the next day
Speaker A
or so, we will be dropping another video on SpaceX. So fools, if you haven't, make sure to hit the thumbs up, make sure to hit the subscribe button, and let us know in the comments below, what are your thoughts on AMD after these
Speaker A
earnings? And when Lisa Sue mentions exceeding that $20 earnings per share, what do you think she means? Do you think she means 25, 30, or something beyond that? Would love to hear your response. And take care. Have a good day
Speaker A
and see you all next
Topics:AMDearnings reportstock analysisHelios AI platformdata center growthLisa SuNvidia comparison2027 growth outlooktechnology stocksinvestment insights
