AMD (AMD.US) Q3 conference call: Su Zifeng responds to tight supply and expects revenue growth of over 80% in 2027

The Zhitong Finance App learned that after the US stock market on November 3, EST, AMD (AMD.US) held a conference call on results for the third quarter of the 2026 fiscal year. Revenue for the quarter was US$13.377 billion, up 45% year on year, to a record high of US$13.09 billion in a single quarter; non-GAAP diluted earnings per share of US$2.09, up 74% year over year, higher than expected of approximately US$1.94; GAAP diluted earnings per share of US$1.46, including fair value revaluation of US$1.1 billion in non-cash warrants. Data center revenue was US$8.546 billion, up 97% year over year, accounting for 64% of total revenue, compared to 47% in the same period last year. In terms of stock prices, it closed up 3.65% to 483.90 US dollars during the regular period; after the results were announced, it rose more than 9% after the market.

The most important message from this call was the company's sharp increase in the 2027 outlook. CEO Su Zifeng said at the conference that based on current visibility, revenue is expected to grow by more than 80% in 2027, which is more than double the growth rate given by analysts in November last year; among them, server revenue is expected to approximately double, the data center AI business growth rate will significantly more than double, and data centers will account for more than 80% of total revenue. Supply is the topic most heavily questioned by analysts. Institutions such as Barclays and Morgan Stanley have successively asked whether the supply of wafers, advanced packaging, and storage can support this growth rate. In response, Su Zifeng said that current demand is indeed higher than supply. The company has been making joint plans with customers and supply chains for many years, is collaborating to expand the supply of key components such as wafers, substrates, advanced packaging, and memory, and is “very confident” about data center growth in 2027. Emarketer analyst Jacob Bourne believes that in a context where investors are increasingly scrutinizing AI spending and their returns, this performance will give investors encouragement.

Highlights of the call include:

Data Centers and AI Businesses: Accelerate and Intersect. Su Zifeng said that data center revenue growth has been accelerating sequentially every quarter this year; EPYC Turin has become the most widely deployed EPYC generation, with more than 540 public cloud instances, and agentic (agentic) workloads have become an important driving force for CPU demand; the new generation EPYC Venice has begun shipping, with more than 240 OEM/ODM commitment platforms; the MI455X has begun batch shipping, and the first batch of Helios racks from Anthropic, Meta, Microsoft, OpenAI, and Oracle have launched. CFO Hu Jin predicts that data center AI revenue in the fourth quarter will surpass the server CPU business for the first time.

2027 outlook: triple increase. In addition to the revenue growth rate exceeding 80%, Su Zifeng gave three coordinates: server revenue almost doubled; data center AI growth rate “significantly more than doubled”; data centers accounted for more than 80% of total revenue. External reviews such as Huatai and Wall Street News interpret this as AMD's statement of confidence in AI computing power requirements.

Clients and games: Warning that the PC market is under pressure. The total customer and game business was 3.7 billion US dollars, down 8% year on year, with game business falling 40% year over year. Su Zifeng clearly warned that PC market shipments are expected to drop by a double-digit percentage in 2027, mainly due to component price increases, and the consumer market is price sensitive; AMD will focus on high-value segments such as enterprises, high-end consumption, and desktop channels, and use the interchangeable characteristics of the PC and data center supply chains to flexibly arrange supply.

Supply and cost: Demand exceeds supply. Management confirmed in several questions and answers that demand is higher than supply, and that they are cooperating with the supply chain to expand the supply of wafers, substrates, advanced packaging, storage, etc.; in response to price increases for HBM and other components, Hu Jin said that the company has signed long-term agreements with some suppliers and customers and is negotiating with customers to share the rising costs.

Fourth quarter guidance: increase of about 27% month-on-month. The company expects Q4 revenue to be about US$17 billion (± 3%), with a median increase of 66% year on year and 27% month-on-month, higher than market expectations of about US$16.3 billion; non-GAAP gross margin of about 55% and operating expenses of about US$3.75 billion; of these, data centers will increase by about 50% month-on-month, clients and games will drop by more than 20% month-on-month, and embedded double-digit growth.

Warrants and capital structure. Regarding warrants arrangements with OpenAI and other customers, Hu Jin explained that the revenue guidelines have included warrants deductions according to fair value on the grant date, and no adjustments are required; dilution only occurs after the customer satisfies the conditions of ownership and exercise of rights, and clear guidelines will be given in 2027; quarterly non-cash fair value revaluation does not affect non-GAAP performance and free cash flow. Free cash flow for the quarter was US$554 million, end-of-period cash and short-term investments of US$15.8 billion, and total debt of US$7.1 billion.

The details of the conference call are as follows:

Management statement

Matt Ramsay (Vice President, Financial Strategy and Investor Relations): Welcome to AMD's financial results conference call for the third quarter of fiscal year 2026. Please refer to the company's documents submitted to the SEC; this conference discusses non-GAAP metrics; see the company's financial press release for adjustments.

Su Zifeng (Chairman and CEO):

AMD handed over the highest-grossing and most profitable quarter in history. Third-quarter revenue of $13.4 billion, up 45% year over year; non-GAAP earnings per share were $2.09, up 74% year over year. The data center business is the biggest driving force, with revenue of 8.5 billion US dollars, up 97% year on year, accounting for 64% of total revenue, compared to 47% in the same period last year; data center revenue growth has been accelerating every quarter of the year.

Revenue from the customer and game business was $3.7 billion, down 8% year over year. Among them, the client business was 2.9 billion US dollars, up 7% year on year; the game business was 773 million US dollars, down 40% year on year. Revenue from the embedded business was $1.1 billion, up 29% year over year, and accelerated for the fourth consecutive quarter.

In terms of data center CPU: EPYC Turin has become the most widely deployed EPYC generation in the public cloud, with more than 540 instance types on the cloud. Agentic workloads are becoming an important driver of CPU demand — Meta's Muse Agent had more than 10 million activators within 6 weeks; OpenAI chose Turin as the host CPU for its first self-developed accelerator platform. Shipments of the new generation EPYC Venice processors have begun, and the number of platforms promised by OEM/ODM exceeds 240, 20% more than in the same period in Turin. The company also introduced the Helion rack reference design, where a full CPU rack can hold 144 Venice processors.

Data center AI aspect: The MI455X has begun batch shipping, and the first Helios racks from Anthropic, Meta, Microsoft, OpenAI, and Oracle have been launched and put into operation. The company released the ROCm 10 software stack. EuroHPC selected a system equipped with the MI430x for Europe's flagship supercomputer Lumi-AI, which is expected to be launched in the second half of 2027. The company also announced the acquisition of Taalas and World Labs — World Labs was founded by AI pioneer Dr. Li Feifei, who will join AMD as chief scientist after the deal is completed — and the two acquisitions are expected to be completed before the end of the year.

Based on current visibility, we now expect revenue growth of more than 80% in 2027, which is more than double the growth rate given by Analyst Day's long-term financial model in November last year. Among them, server revenue is expected to almost double, the data center AI business growth rate will significantly more than double, and data centers will account for more than 80% of total revenue.

Hu Jin (Executive Vice President, CFO and Treasurer):

Non-GAAP gross margin for the third quarter was 56%, up 190 basis points year over year. Operating expenses were $3.6 billion, up 29% year over year. Operating profit was 3.9 billion US dollars, up 75% year on year, and operating profit margin was 29%, up more than 5 percentage points year over year. The data center operating profit was US$2.9 billion, up 168% year over year, and the operating margin was 34%, compared to 25% in the same period last year.

GAAP earnings of $1.46 per share, including a fair value revaluation of $1.1 billion in non-cash warrants, mainly reflecting the increase in the company's share price and changes in the probability that warrant conditions will be met; this does not affect non-GAAP performance and free cash flow.

Inventories increased by approximately US$3 billion to US$11.5 billion month-on-month; operating cash flow was US$1.2 billion and free cash flow was US$554 million. Cash and short-term investments at the end of the period were US$15.8 billion, with total debt of US$7.1 billion (including US$4.75 billion senior notes issued in August).

Fourth quarter guidance: Revenue of approximately US$17 billion, fluctuating 3%, median increase of 66% year-on-year and 27% month-on-month. Among them, data center revenue increased by about 50% month-on-month, and data center AI revenue will surpass server CPU business for the first time; total client and game decline by more than 20% month-on-month; and embedded double-digit month-on-month growth. Non-GAAP gross margin of approximately 55%; operating expenses of approximately US$3.75 billion; tax rate 13%; diluted share capital of approximately 1.67 billion shares (included in the impact of Taalas and World Labs acquisitions).

Q & A session

Tom O'Malley (Barclays): With a growth rate of over 80% in 2027, will the supply side (wafer, package, substrate, storage) be sufficient to support it? If supply were more adequate, would actual demand be higher?

Su Zifeng: Demand is higher than supply. The company has been making joint plans with customers and supply chains for many years, and is collaborating to expand the supply of wafers, substrates, advanced packaging, memory, etc. Very confident about data center growth in 2027.

Tom O'Malley (Barclays): Q4 clients fell by more than 20% month-on-month. How will the 2027 PC market correction continue? How did AMD get through the trough?

Su Zifeng: We have previously predicted that the client business will be seasonally weak in the second half of the year. The increase in component prices is driving up the price of the whole machine, and the consumer market is more sensitive to prices. The company is carefully managing inventory. Assuming a double-digit decline in the PC market in 2027, it will focus on high-value segments such as enterprises, high-end consumption, and desktop channels. The PC and data center supply chains are interchangeable, and supply can be flexibly deployed.

Vivek Arya (Bank of America Securities): What confidence do you have about 3GW of AMD's financing and infrastructure such as land, electricity, and chassis? What impact will competitors provide flexible products such as surplus value guarantees on the 2028 competitive landscape?

Su Zifeng: I am very confident in the competitiveness of Venice, MI455, and Helios; plan jointly with customers to understand which data centers and locations the GPUs will be deployed to. For 2028 and beyond, priority will be given to investing in our own growth (R&D, supply chain), and we will selectively and strategically invest in data center infrastructure with leading partners.

Vivek Arya (Bank of America Securities): How do Frontier Labs customers choose between self-developed ASICs and AMD products?

Su Zifeng: The core is total cost of ownership (TCO) advantage and tokens per dollar (number of tokens produced per dollar). The Helios rack system is a major investment for the company; Q3 is the first revenue generation quarter for the Mi455 and Helios racks, and Q4 will increase significantly. After the MI450, the MI500 and MI600 were also being developed, which were thoroughly optimized in collaboration with the needs of cutting-edge laboratories.

Joshua Buchalter (TD Cowen): How are rising HBM costs affecting the Instinct business model? Can the assumption of revenue between US$15 billion and US$20 billion per GW be maintained? Can costs be passed on to major customers?

Su Zifeng: The company has long-term agreements with some suppliers and customers; memory and other components are facing inflationary pressure and are negotiating with customers to share costs. Even with inflationary pressures, the company is able to provide leading TCO for AI workloads.

Joshua Buchalter (TD Cowen): How will operating expenses increase in 2027? Can the 55% gross margin bottom line be maintained?

Hu Jin: The revenue growth rate in 2027 will far exceed the growth rate of operating expenses (the growth rate of OpEx will be less than half of the revenue growth rate), which will drive a significant expansion in operating profit margins in 2027. The data center AI business slightly dilutes gross margin, but the gross profit amount will increase significantly; quarterly gross margin will fluctuate depending on the product portfolio.

Timothy Arcuri (UBS): The dollar-scale split of GPU and CPU businesses in data centers in 2027 and the pace for the whole year?

Su Zifeng: The server CPU business will almost double in 2027, and the data center AI business will “significantly more than double”. Q4 was the first quarter that data center AI surpassed the CPU business in scale, and both will continue to grow thereafter.

Timothy Arcuri (UBS): How will warrants permeate revenue, equity, and expense models?

Hu Jin: There are three parts: 1. The revenue guidelines have been included in the warrant deduction according to the fair value on the grant date, and no further adjustments are required; 2. Dilution only occurs after the customer has met the conditions of ownership and exercise of rights, and clear guidance will be provided in 2027; 3. Quarterly non-cash fair value revaluation does not affect non-GAAP performance and free cash flow.

CJ Muse (Cantor Fitzgerald): With server CPUs growing by about 100% in 2027, what is the composition of shipments, number of cores, and ASP?

Su Zifeng: The increase is mainly due to an increase in shipment volume and an increase in the number of cores. The increase in ASP was small (increased as the number of cores increased).

CJ Muse (Cantor Fitzgerald): What is the seasonal outlook for Q1 (client and data center)? What about embedded?

Hu Jin: The embedded business is usually seasonal in Q1, but it will grow significantly and strengthen quarter by quarter throughout 2027.

Stacy Rasgon (Bernstein): Did the Q4 GPU and CPU business crossover (crossover) barely meet the standards or significantly exceed it?

Hu Jin: The MI450 increased significantly from month to month; the Q4 data center AI revenue in dollar terms will be much higher than the server CPU business.

Stacy Rasgon (Bernstein): Can the 2027 gross margin import and export rates guide?

Hu Jin: Quarterly gross margin guidance cannot be provided because the business mix within the data center (AI and CPU) determines the company's gross profit margin, and there is currently insufficient visibility. The recommendation is based on Q4 (the share of AI business in Q4 is much higher than CPU), and may vary from quarter to quarter in 2027.

Joe Moore (Morgan Stanley): How is the Helion rack (pure CPU version) different from traditional racks for intelligent workloads? Is there a chance for the GPU blade to attach?

Su Zifeng: The Helion rack is optimized according to the deployment environment - the hyperscale cloud has a full CPU high density configuration (Venice has the highest performance per slot in the industry), and the enterprise market can use a mixed CPU+GPU configuration. The company has contributed open source design to OCP, and OEM/ODM and customer feedback has been very positive.

Joe Moore (Morgan Stanley): Is the doubling of servers in 2027 an increase in share or an industry-wide TAM expansion? Is it meeting backlog demand or continuing shortages?

Su Zifeng: Growth comes from both increased share and TAM expansion—including traditional cloud and enterprise markets, smart CPUs, and head nodes. Demand is indeed greater than supply, and the company is cooperating with the supply chain to expand supply (including components such as substrates and DDR5); demand is a broad expansion of the entire customer base, not driven by individual customers.

Harsh Kumar (BMO Capital Markets): Share target for Helios rack machines? Entering the corporate market?

Su Zifeng: The goal is to become an important computing power supplier for the largest customers (cutting-edge laboratories and hyperscale cloud vendors); we are having in-depth conversations with the largest customers on the MI500 and MI600. The enterprise market is developing slightly slowly but it is important. The company has launched enterprise-specific GPUs, hoping to expand its corporate footprint.

Harsh Kumar (BMO Capital Markets): If competitors cut prices on the PC side, will AMD follow?

Su Zifeng: The company adheres to an end-to-end AI strategy (cloud to edge to client); the discipline focuses on the highest value and most profitable PC segments (enterprise, high-end consumption, desktop channels), and has minimal exposure to low-end price-sensitive market segments.

Moderator: Goldman Sachs (Goldman Sachs) Jim Schneider asked a question that could not be connected due to the line, and the meeting ended with BMO's Harsh Kumar question.