On the evening of November 3, U.S. Eastern Time, Advanced Micro Devices (AMD.US) held its fiscal year 2026 third-quarter earnings conference call after market close.
Quarterly revenue reached $13.377 billion, up 45% year-over-year, marking a record high for a single quarter and surpassing market expectations of approximately $13.09 billion. Non-GAAP diluted earnings per share came in at $2.09, up 74% year-over-year, beating expectations of about $1.94. GAAP diluted earnings per share was $1.46, which included an $11 billion non-cash warrant fair value remeasurement. Data center revenue totaled $8.546 billion, up 97% year-over-year, accounting for 64% of total revenue compared to 47% in the prior-year period. Regarding the stock, shares closed regular trading up 3.65% at $483.90 and briefly surged more than 9% in after-hours trading following the earnings release.
The most significant information from the call was the company's substantial upward revision to its 2027 outlook. CEO Su Zifeng stated on the call that based on current visibility, revenue is expected to grow more than 80% in 2027, which is more than double the growth rate provided in the long-term financial model at last November's Analyst Day. Server revenue is expected to roughly double, data center AI business growth will significantly exceed doubling, and data center will account for more than 80% of total revenue.
Supply was the most heavily questioned topic by analysts, with Barclays, Morgan Stanley, and other institutions pressing on whether wafer, advanced packaging, and memory supply could support such growth rates. Su Zifeng responded that demand is indeed outpacing supply, and the company has engaged in multi-year joint planning with customers and the supply chain. AMD is collaborating to expand key component supply including wafers, substrates, advanced packaging, and memory, and is "very confident" about data center growth in 2027. Jacob Bourne, an analyst at Emarketer, believes this earnings performance will encourage investors amid increasingly rigorous scrutiny of AI spending and returns.
Data Center and AI Business: Acceleration and Crossover. Su Zifeng said data center revenue growth has accelerated sequentially every quarter this year. EPYC Turin has become the most widely deployed EPYC generation, with over 540 public cloud instance types, and agentic workloads are becoming an important driver of CPU demand. The new-generation EPYC Venice has begun shipping, with over 240 platforms committed by OEMs/ODMs. MI455X has started volume shipments, and the first Helios racks for Anthropic, Meta, Microsoft, OpenAI, and Oracle are now online. CFO Hu Jin expects data center AI revenue to surpass server CPU business for the first time in the fourth quarter.
2027 Outlook: Triple Upgrade. In addition to revenue growth exceeding 80%, Su Zifeng provided three coordinates: server revenue roughly doubling, data center AI growth "significantly exceeding double," and data center accounting for more than 80% of total revenue. External commentary from Huatai and other outlets interpreted this as AMD's confident stance on AI compute demand.
Client and Gaming: PC Market Under Pressure Warning. Client and gaming combined revenue was $3.7 billion, down 8% year-over-year, with gaming down 40% year-over-year. Su Zifeng explicitly warned that PC market shipments are expected to see a double-digit percentage decline in 2027, primarily due to component price increases driving up system prices and consumer market price sensitivity. AMD will focus on high-value segments including enterprise, high-end consumer, and desktop channels, and leverage the interchangeability of PC and data center supply chains to flexibly allocate supply.
Supply and Cost: Demand Exceeds Supply. Management confirmed in multiple Q&A sessions that demand exceeds supply and is working with the supply chain to expand wafer, substrate, advanced packaging, and memory supply. Regarding HBM and other component price increases, Hu Jin stated the company has signed long-term agreements with some suppliers and customers and is negotiating with customers to share cost increases.
Fourth Quarter Guidance: Approximately 27% Sequential Growth. The company expects Q4 revenue of approximately $17 billion (±3%), with the midpoint representing 66% year-over-year growth and approximately 27% sequential growth, above market expectations of about $16.3 billion. Non-GAAP gross margin is expected at approximately 55%, with operating expenses of approximately $3.75 billion. Data center is expected to grow approximately 50% sequentially, client and gaming to decline more than 20% sequentially, and embedded to grow double digits.
Warrants and Capital Structure. Regarding warrant arrangements with customers including OpenAI, Hu Jin explained that revenue guidance already incorporates warrant deductions at grant-date fair value with no adjustment needed. Dilution only occurs after customers meet vesting and exercise conditions, with clear guidance to be provided in 2027. Quarterly non-cash fair value remeasurements do not affect non-GAAP results or free cash flow. Quarterly free cash flow was $554 million, ending cash and short-term investments were $15.8 billion, and total debt was $7.1 billion.
Conference Call Details: Matt Ramsay, Vice President of Financial Strategy and Investor Relations, welcomed participants to AMD's fiscal year 2026 third-quarter earnings call, noting the call contains forward-looking statements subject to risks and uncertainties and referring participants to the company's SEC filings. The call discusses non-GAAP metrics with reconciliations available in the earnings press release.
Su Zifeng, Chairman and CEO, stated that AMD delivered its highest revenue and most profitable quarter in history. Third-quarter revenue was $13.4 billion, up 45% year-over-year, with non-GAAP earnings per share of $2.09, up 74% year-over-year. Data center was the largest driver with revenue of $8.5 billion, up 97% year-over-year, accounting for 64% of total revenue compared to 47% in the prior-year period. Data center revenue growth accelerated sequentially every quarter this year. Client and gaming revenue was $3.7 billion, down 8% year-over-year, with client at $2.9 billion, up 7%, and gaming at $773 million, down 40%. Embedded revenue was $1.1 billion, up 29% year-over-year, accelerating for the fourth consecutive quarter.
In data center CPU, EPYC Turin has become the most widely deployed EPYC generation in public cloud with over 540 instance types. Agentic workloads are becoming an important driver of CPU demand — Meta's Muse agent surpassed 10 million activations within 6 weeks, and OpenAI selected Turin as the host CPU for its first custom accelerator platform. The new-generation EPYC Venice processor has begun shipping with over 240 platforms committed by OEMs/ODMs, 20% more than Turin at the same stage. The company also introduced the Helion rack reference design, with a full CPU rack accommodating 144 Venice processors.
In data center AI, MI455X has begun volume shipments, and the first Helios racks for Anthropic, Meta, Microsoft, OpenAI, and Oracle are online and operational. The company released the ROCm 10 software stack. EuroHPC selected systems equipped with MI430X for Europe's flagship supercomputer LUMI-AI, expected to come online in the second half of 2027. The company also announced the acquisitions of Taalas and World Labs — World Labs was founded by AI pioneer Dr. Fei-Fei Li, who will join AMD as Chief Scientist upon deal completion — with both acquisitions expected to close by year-end.
Based on current visibility, we now expect revenue to grow more than 80% in 2027, more than double the growth rate provided in the long-term financial model at last November's Analyst Day. Server revenue is expected to roughly double, data center AI business growth will significantly exceed doubling, and data center will account for more than 80% of total revenue.
Hu Jin, Executive Vice President, CFO and Treasurer, stated third-quarter non-GAAP gross margin was 56%, up 190 basis points year-over-year. Operating expenses were $3.6 billion, up 29% year-over-year. Operating income was $3.9 billion, up 75% year-over-year, with operating margin of 29%, up more than 5 percentage points. Data center operating income was $2.9 billion, up 168% year-over-year, with operating margin of 34% compared to 25% in the prior-year period. GAAP earnings per share was $1.46, including an $11 billion non-cash warrant fair value remeasurement primarily reflecting the company's stock price increase and changes in the probability of warrant conditions being met, which does not affect non-GAAP results or free cash flow. Inventory increased approximately $3 billion sequentially to $11.5 billion. Operating cash flow was $1.2 billion and free cash flow was $554 million. Ending cash and short-term investments were $15.8 billion, and total debt was $7.1 billion including $4.75 billion in senior notes issued in August.
Fourth quarter guidance: revenue of approximately $17 billion, plus or minus 3%, with the midpoint representing 66% year-over-year growth and approximately 27% sequential growth. Data center revenue is expected to grow approximately 50% sequentially, with data center AI revenue surpassing server CPU business for the first time. Client and gaming combined are expected to decline more than 20% sequentially. Embedded is expected to grow double digits sequentially. Non-GAAP gross margin of approximately 55%, operating expenses of approximately $3.75 billion, tax rate of 13%, and diluted share count of approximately 1.67 billion shares including the impact of Taalas and World Labs acquisitions.
Q&A Session: Tom O'Malley from Barclays asked whether supply including wafers, packaging, substrates, and memory would be sufficient to support over 80% growth in 2027 and whether actual demand would be higher if supply were more abundant. Su Zifeng responded that demand exceeds supply. The company has engaged in multi-year joint planning with customers and the supply chain and is collaborating to expand wafer, substrate, advanced packaging, and memory supply. She is very confident about data center growth in 2027.
Tom O'Malley from Barclays asked about Q4 client declining more than 20% sequentially and the sustainability of PC market correction in 2027 and how AMD would navigate the trough. Su Zifeng said the company had previously signaled weaker seasonality in client business in the second half. Component price increases are driving up system prices, and the consumer market is more price sensitive. The company is carefully managing inventory, assuming a double-digit PC market decline in 2027, and will focus on high-value segments including enterprise, high-end consumer, and desktop channels. PC and data center supply chains are interchangeable, allowing flexible supply allocation.
Vivek Arya from Bank of America Securities asked about confidence in financing approximately 3GW of AMD deployments and infrastructure including land, power, and enclosures, and how competitor offerings with residual value guarantees and other flexible products would affect the competitive landscape in 2028. Su Zifeng said she is very confident in the competitiveness of Venice, MI455, and Helios. The company plans jointly with customers and knows which data centers and locations GPUs will be deployed to. For 2028 and beyond, AMD will prioritize investing in its own growth including R&D and supply chain, and selectively and strategically co-invest in data center infrastructure with leading partners.
Vivek Arya from Bank of America Securities asked how frontier lab customers choose between custom ASICs and AMD products. Su Zifeng said the core is total cost of ownership advantage and tokens per dollar. The Helios rack system is a major investment for the company. Q3 was the first revenue-generating quarter for MI455 and Helios racks, with significant ramp expected in Q4. After MI450, the company is developing MI500 and MI600, deeply co-optimized with frontier lab requirements.
Joshua Buchalter from TD Cowen asked how HBM cost increases would affect the Instinct business model, whether the $15-20 billion revenue per GW assumption could be maintained, and whether costs could be passed to large customers. Su Zifeng said the company has long-term agreements with some suppliers and customers. Memory and other components are facing inflationary pressure, and the company is negotiating with customers to share costs. Even with inflationary pressure, the company can still deliver leading TCO for AI workloads.
Joshua Buchalter from TD Cowen asked about operating expense growth in 2027 and whether the 55% gross margin floor could be maintained. Hu Jin said 2027 revenue growth will far exceed operating expense growth, with OpEx growth less than half of revenue growth, driving significant operating margin expansion in 2027. Data center AI business is slightly dilutive to gross margin, but gross profit dollars will grow substantially. Gross margin will fluctuate quarter to quarter due to product mix.
Timothy Arcuri from UBS asked about the dollar-scale breakdown of GPU and CPU businesses within data center in 2027 and the cadence throughout the year. Su Zifeng said server CPU business will roughly double in 2027, and data center AI business growth will "significantly exceed double." Q4 is the quarter when data center AI first surpasses CPU business in scale, after which both will continue to grow.
Timothy Arcuri from UBS asked how warrants would flow through revenue, share count, and expense models. Hu Jin explained in three parts: First, revenue guidance already incorporates warrant deductions at grant-date fair value with no further adjustment needed. Second, dilution only occurs after customers meet vesting and exercise conditions, with clear guidance to be provided in 2027. Third, quarterly non-cash fair value remeasurements do not affect non-GAAP results and free cash flow.
CJ Muse from Cantor Fitzgerald asked about the composition of approximately 100% server CPU growth in 2027 in terms of units, core count, and ASP. Su Zifeng said growth mainly comes from increased unit shipments and core counts, with ASP increases being relatively small and rising somewhat with core count increases.
CJ Muse from Cantor Fitzgerald asked about Q1 seasonality outlook for client and data center, and embedded. Hu Jin said embedded typically has seasonality in Q1, but will grow significantly throughout 2027 and strengthen each quarter.
Stacy Rasgon from Bernstein asked whether the Q4 GPU and CPU crossover would be marginal or significant. Hu Jin said MI450 will increase substantially sequentially. Q4 data center AI revenue in dollar terms will be far higher than server CPU business.
Stacy Rasgon from Bernstein asked whether entry and exit gross margin rates for 2027 could be guided. Hu Jin said quarterly gross margin guidance cannot be provided because the business mix within data center between AI and CPU determines the company's gross margin, and there is currently insufficient visibility. He suggested using Q4 as a baseline, where AI business proportion is far higher than CPU, and noted that quarters in 2027 may vary.
Joe Moore from Morgan Stanley asked how the Helion rack in pure CPU version differs from traditional racks for agentic workloads and whether there are GPU blade attachment opportunities. Su Zifeng said Helion racks are optimized for deployment environments — hyperscale cloud uses full CPU high-density configuration with Venice delivering industry-leading performance per socket, while enterprise market can use CPU plus GPU hybrid configuration. The company has contributed open-source designs to OCP, and OEM/ODM and customer feedback has been very positive.
Joe Moore from Morgan Stanley asked whether the doubling of server business in 2027 is share gains or total addressable market expansion, and whether it is meeting backlog demand or persistent shortage. Su Zifeng said growth comes from both share gains and TAM expansion — including traditional cloud and enterprise markets, agentic CPU, and head node, three areas. Demand indeed exceeds supply, and the company is working with the supply chain to expand supply including substrates and DDR5 components. Demand is broad-based expansion across the entire customer base rather than driven by individual customers.
Harsh Kumar from BMO Capital Markets asked about share targets for Helios rack systems and whether the company would enter the enterprise market. Su Zifeng said the goal is to become an important compute supplier to the largest customers including frontier labs and hyperscale cloud providers. The company is in deep discussions with its largest customers regarding MI500 and MI600. Enterprise market development is slower but important, and the company has launched enterprise-specific GPUs and hopes to expand its enterprise footprint.
Harsh Kumar from BMO Capital Markets asked whether AMD would follow if competitors cut PC prices. Su Zifeng said the company adheres to an end-to-end AI strategy from cloud to edge to client. It maintains disciplined focus on the highest-value, most profitable PC segments including enterprise, high-end consumer, and desktop channels, with minimal exposure to low-end price-sensitive segments.
The moderator noted that the originally scheduled Goldman Sachs analyst Jim Schneider's question could not be connected due to line issues, and the call concluded with Harsh Kumar's question from BMO.
Comments