Damo raised AMD (AMD.US) price target to $550: server CPU growth forecast to jump from 70% to 100% in 2027

The Zhitong Finance App learned that thanks to the strong performance of data centers, particularly the unexpected improvement in the server CPU business, AMD (AMD.US) successfully hedged the weakness of the PC market thanks to the strong performance of the data center. Damo raised AMD's revenue forecast for the 2027 fiscal year from US$89.13 billion to US$98.94 billion, raised its non-GAAP earnings per share (EPS) forecast from US$15.64 to US$18.77, and raised the target price from $510 to US$550; however, considering that the valuation was already higher than that of peers such as Nvidia and Broadcom, the bank maintained the “same as the market” rating.

According to financial data, AMD's third-fiscal quarter revenue reached US$13.377 billion, up 44.7% year on year, up 16% month on month, higher than market expectations of US$13.096 billion; EPS under non-GAAP rules was US$2.09, exceeding market expectations of US$1.95; and non-GAAP gross margin of 55.9%, in line with expectations. By business, data center business revenue was US$8.546 billion, up 96.9% year on year, up 27.2% month on month; client business revenue was US$2,949 million, up 7.2% year on year; game business revenue was US$773 million, down 40.4% year on year; and embedded business revenue was US$1,109 billion, up 29.4% year on year.

Most notable is the growth prospects for server CPUs. Damo pointed out in the report that in the first three quarters of 2026, AMD server CPU shipments increased by about 50% year on year (Intel only increased 4% during the same period), and revenue increased by about 90% year on year; however, the company's guidance on server CPU revenue growth in 2027 has been raised from 70% to more than 100%, and supply bottlenecks have not limited AMD as much as limiting Intel. Damo estimates that AMD will contribute slightly more than 60% of the two companies' combined server CPU shipments next year, and Intel will lose roughly a fair share — even in the tight supply environment where the IDM (own factory) model theoretically benefits the most, Intel has not been able to reverse the trend of losing share. At the same time, the report also warned that Intel will not be able to provide competitive benchmarking products until the second half of 2028 at the earliest, and AMD's long-term growth track is still clear.

In terms of AI GPUs, AMD confirmed Helios rack-level product revenue for the first time this quarter. The company said all core customers are in high demand for 2027, and internal forecasts have been further raised from 90 days ago. Damo raised its 2027 GPU revenue forecast slightly by 500 million US dollars to 40 billion US dollars, basically maintaining the benchmark judgment on the installed capacity of about 3 GW next year. But the report also suggests the “cost” of growth: AMD confirmed $1.1 billion in warrants-related accounting fees this quarter, resulting in GAAP EPS being approximately 43% lower than non-GAAP. Damo believes that this cost, which is not small compared to the quarterly GPU revenue of about 3.5 billion US dollars, should be reflected in AMD's valuation discount, like market concerns about “circular financing” for large technology companies.

Furthermore, the PC business remains a source of concern. AMD's client revenue guidance for the fourth quarter fell about 23% month-on-month, about $400 million lower than the latest forecast before Tamo's earnings report. The trend is similar to Intel's previous performance revisions. However, since PCs currently only account for less than 10% of AMD's revenue and have a limited impact on overall profits, Damo expects client CPUs to bottom out in the second quarter of 2026 (30% + year-on-year decline).

Based on the new profit forecast, Damo gave AMD a target valuation of about 20 times the 2028 EPS ($27.59), corresponding to the target price of $550 — there is about 14% upside compared to the closing price of $483.90 on November 3. The bank also gave a target range of $750 for a bull market and $300 for a bear market. Damo concluded that AMD's execution on server CPUs is “excellent,” and clearly favors AMD over Intel in terms of CPU; however, considering that the GPU business will account for 42%/46% of its revenue in 2027/2028, and the leaders in this field currently only trade about 10 times the 2028 price-earnings ratio, AMD's valuation premium of about 20 times is “too broad”, and its 100% server growth rate is probably still difficult to outperform the ARM camp, so maintain an “equal match” rating and wait for a better time to step in.