Goldman Sachs reviews AMD (AMD.US) Q3 performance: strong data center CPU and GPU performance, clear visibility of growth in 2027

The Zhitong Finance App learned that Goldman Sachs released a research report to maintain the AMD (AMD.US) “buy” rating. The target price for 12 months is 675 US dollars, which is 39.5% higher than the latest closing price. Goldman Sachs pointed out that AMD's third quarter results and fourth quarter guidance were higher than market expectations. Data center server CPUs and GPUs are strong at the same time. Management expects the company's overall revenue to grow by more than 80% and data center revenue by more than 100% in 2027, although there are still headwinds in the PC market. Goldman Sachs says these growth targets are clearly visible.

Third quarter results exceeded expectations

AMD's third-quarter revenue was US$13.4 billion, higher than Goldman Sachs's forecast of US$13.3 billion and market expectations of US$13.1 billion; gross profit margin of 55.9%, which was basically the same as expectations; operating profit margin of 29%, higher than Goldman Sachs's expectations of 28.7% and market expectations of 28.0%; non-GAAP earnings per share of $2.09, higher than Goldman Sachs's forecast of $2.03 billion and market expectations of $1.95. By business, data center revenue of 8.5 billion US dollars and game revenue of 773 million US dollars were all higher than expected; embedded revenue of 1.1 billion US dollars was basically in line with expectations.

AMD's median revenue guide for the fourth quarter was US$17 billion, slightly lower than Goldman Sachs's estimate of US$17.6 billion, but higher than the market's estimate of US$16.3 billion. By business, data center revenue is expected to increase by about 50% month-on-month, embedded double-digit month-on-month growth, and client/game decline of more than 20% month-on-month. Non-GAAP gross margin guidance for the fourth quarter was 55%, and non-GAAP earnings per share (excluding equity incentives) were implied at $2.92, higher than market expectations of $2.65, and slightly lower than Goldman Sachs's forecast of $2.97.

The data center and CPU business is strong, and revenue is expected to grow by more than 80% in 2027

AMD's third-quarter data center revenue increased 97% year over year to US$8.5 billion. The company said that initial shipments of the MI455 to a number of key hyperscale cloud vendors and other customers began in the third quarter; management expects OEMs such as HPE Technology and Dell to ship in bulk in the fourth quarter. AMD expects data center revenue to increase by far more than 100% year-on-year in 2027, and the company's overall revenue will increase by more than 80%. The report said that after Intel (INTC.US) gave weak guidance last week, investors' expectations for AMD have declined markedly, but the current results and guidance still support Goldman Sachs's optimistic outlook.

AMD said that demand for server CPUs was strong after Venice's release. Server CPU revenue is expected to increase 20% month-on-month in the fourth quarter and 100% year-on-year in 2027. Increased supply availability is one reason for the upward outlook. The company expects the server CPU market to grow at a CAGR of approximately 50% to USD 220 billion by 2030. In terms of gross margin, AMD expects that 2027 will still be affected by the product structure, but the increase in the fixed cost absorption scale is a good trend, and Goldman Sachs expects gross margin to remain at around 55%. The company also expects operating expenses to grow less than half of the revenue growth rate (over 80%) in 2027, thus achieving significant operating leverage.