Advanced Micro Devices (AMD) is approaching its third-quarter earnings announcement with significant investor attention, as the market looks for concrete signs that its artificial intelligence business can sustain the stock's recent rally. While expectations for the company's traditional business lines remain positive, all eyes are on the progress of its AI chip division and the tangible results of its high-profile partnership with OpenAI.
Analysts anticipate the company will report revenue of approximately $8.8 billion for the third quarter. However, the key focus will be on the data-center and AI revenue figures, which are seen as the primary drivers for future growth and the main battleground in its competition with Nvidia.
Key Takeaways
- Wall Street expects AMD to report strong third-quarter results for its non-AI business but has questions about its AI segment.
- The upcoming MI450 GPU series is considered crucial for AMD's long-term success in the AI market, particularly for its partnership with OpenAI.
- Analysts are watching for data-center GPU revenue, projected to be $6.5 billion this year and potentially growing to $14 billion by 2026.
- Challenges remain, including competition from custom-built ASIC chips and the need to improve its ROCm software ecosystem.
Expectations for the Quarter
Investors are bracing for AMD's third-quarter financial disclosure, with consensus estimates pointing to total revenue of $8.8 billion and adjusted earnings of $1.17 per share. Within that total, the data-center server segment is projected to contribute $2.4 billion, while the closely watched AI division is expected to bring in $1.7 billion.
Looking ahead, projections for the fourth quarter are even more optimistic, with analysts forecasting revenue of $9.2 billion and adjusted earnings of $1.32 per share. This positive outlook hinges on AMD's ability to capitalize on the booming demand for AI hardware.
Despite the strong overall numbers, the narrative for AMD is split. The company's core businesses, such as client computing and gaming, are on solid footing. The primary uncertainty, and therefore the area of most intense scrutiny, revolves around its ability to capture a meaningful share of the lucrative AI accelerator market dominated by Nvidia.
The OpenAI Factor
A significant portion of the recent investor enthusiasm stems from AMD's partnership with OpenAI. The deal, which involves deploying six gigawatts' worth of AMD systems, caused the company's stock to surge 24% on the day of the announcement and has continued to climb since.
This collaboration is viewed as a major validation of AMD's technology. However, the execution of this large-scale deployment presents considerable challenges. The rollout will depend on coordination with various cloud providers, and the first gigawatt, powered by AMD's future MI450 chips, is not expected to begin until late 2026.
Future-Facing Technology
The success of the OpenAI partnership and AMD's broader AI ambitions are heavily tied to its next-generation products. The MI450 GPU series and the Helios rack-scale system, both scheduled for launch in the second half of next year, are central to the company's strategy. Investors will be listening for any updates or proof points regarding the performance and development timeline of these key technologies during the upcoming earnings call and subsequent analyst day.
Navigating Market Challenges
While the OpenAI deal provides a powerful tailwind, AMD faces several hurdles. Some industry experts suggest that anticipation for the more powerful MI450 is causing customers to pause orders for current-generation products like the MI355x. This could create a temporary dip in demand before the new hardware becomes available.
Another significant challenge comes from the software side. AMD's ROCm software stack, its alternative to Nvidia's dominant CUDA platform, continues to receive mixed feedback from developers. Gaining broader adoption and resolving ecosystem issues are critical for convincing customers to switch from the established market leader.
Revenue Growth Projections
Analysts project AMD's data-center GPU revenue will reach $6.5 billion this year. Fueled by new products and partnerships, this figure is expected to more than double to $14 billion in 2026, with the potential for another doubling the following year.
The Rise of Custom Chips
The competitive landscape is further complicated by the rise of application-specific integrated circuits (ASICs). These are custom-built chips designed for specific AI tasks. Major cloud providers, including Microsoft, are increasingly developing their own in-house ASICs to optimize performance and reduce reliance on third-party GPU suppliers like AMD and Nvidia.
This trend toward custom silicon represents a long-term threat. While GPUs offer flexibility, ASICs can provide superior performance and efficiency for certain AI workloads, particularly inference. Experts note that for AMD to secure market share, it must demonstrate a better return on investment than both Nvidia's GPUs and the custom ASICs being developed by its largest potential customers.
A Critical Moment for AMD
The upcoming earnings report and analyst day represent a pivotal moment for AMD. The company's stock has performed exceptionally well, reflecting high expectations for its role in the AI revolution. Management now faces the task of providing concrete evidence that this optimism is justified.
Investors will be looking for more than just strong quarterly numbers. They will seek clear signals about the production ramp of next-generation GPUs, progress in the software ecosystem, and a detailed strategy for competing against both Nvidia and the growing field of custom ASICs.
Ultimately, the company's ability to deliver on its ambitious AI roadmap will determine whether the recent stock rally is the beginning of a new chapter of growth or a peak built on future promises yet to be fulfilled.