TLDR
- AMD reported Q2 revenue of $11.54 billion, up 50% year-over-year, with non-GAAP EPS of $1.66, beating estimates
- Q3 revenue guidance of $12.7 billion to $13.3 billion came in above Wall Street expectations
- Virginia Retirement Systems bought a new $165 million stake in AMD, now its 13th-largest holding
- Street consensus gives AMD a Strong Buy rating with an average price target of around $647, implying over 40% upside
- AMD trades at roughly 123 times earnings, and insiders have sold around $109.5 million worth of stock in the past three months
AMD opened at $477.57 on Tuesday, up 4.69% on the week, as investors digested a strong earnings beat and bullish analyst commentary heading into the fall.
Advanced Micro Devices, Inc., AMD
Q2 results were hard to argue with. Revenue came in at $11.54 billion, up 50% year-over-year, while non-GAAP EPS hit $1.66, topping the consensus estimate of $1.62. Data center operating income flipped to a $2.1 billion profit.
Management guided Q3 revenue between $12.7 billion and $13.3 billion, clearing Wall Street’s bar. Demand for MI accelerators and Helios rack-scale systems is driving the optimism.
Virginia Retirement Systems disclosed a new $165.15 million position in AMD during Q2, picking up 284,286 units of stock. That makes AMD its 13th-largest holding, at 1% of the portfolio. Institutional investors now own 71.34% of the company.
Analyst upgrades kept coming. Argus raised its price target from $450 to $625 with a Buy rating. KeyCorp set a $650 target. Citigroup upgraded AMD from Market Perform to Buy in July. The average price target sits at $553.72, though the Street’s collective Strong Buy consensus points to an average target near $647.
AMD Eyes Intel’s Server Turf
On the CPU side, AMD is going after Intel’s installed base with its 5th Gen EPYC processors and upcoming 6th Gen Venice chips. The pitch is straightforward: customers can cut Intel Xeon server counts by up to 86%, reduce power consumption by 69%, and lower three-year total cost of ownership by 41%.
J.P. Morgan’s Harlan Sur projects AMD’s server CPU revenue could grow more than 70% year-over-year in 2027, with data center revenue potentially more than doubling. He has a Neutral rating but a $550 price target, implying around 20% upside from current levels.
AMD also unveiled a $100,000-plus AI workstation planned for 2027, expanding its push beyond data center chips into high-end AI systems.
Margin Pressures and Valuation Concerns
Not everything is clean. AMD’s use of high-capacity HBM4 memory could require rack price hikes of roughly 9% to 10% by 2027 just to protect margins. Sur flagged that growing MI450 volumes could pressure gross margins through 2027.
Valuation is also a sticking point. AMD has risen more than 200% over the past year and now trades at roughly 123 times earnings, making it more expensive than both Nvidia and Broadcom on that metric.
Insiders have been selling. CEO Lisa Su sold 125,000 units at $460.69 in June, and EVP Mark Papermaster sold 28,811 units at $471.87 in August. Total insider sales over the past three months reached roughly $109.5 million.
Despite the selling, one analyst forecast sees data center revenue exceeding 70% of total AMD revenue by 2027, based on its current growth trajectory outpacing all other segments.
Analysts predict AMD will post $6.44 EPS for the current fiscal year.
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