Can AMD stock extend its rally on an upbeat 2027 outlook?

Advanced Micro Devices (AMD) reported record third-quarter 2026 revenue of $13.4 billion, marking a 45% increase from a year earlier. The chipmaker also beat Wall Street expectations, supported by strong demand for artificial intelligence processors and data centre products. Non-GAAP earnings per share rose 74% year-on-year to $2.09, compared with analysts' estimates of $1.94. (Sources: CNBC, Digitimes, Yahoo Finance)

AMD's data centre business emerged as the biggest growth driver, with revenue surging 97% year-on-year to a record $8.5 billion in the third quarter. The segment accounted for around 64% of the company's total revenue, reflecting growing demand for AMD's EPYC server processors and Instinct AI accelerators. Data centre operating margins also expanded to 34% from 25% a year earlier.

AMD expects fourth-quarter revenue of approximately $17 billion, plus or minus 3%, indicating continued momentum in its AI and data centre businesses. The company anticipates further growth as production of its next-generation Helios systems and Venice processors scales up. Management also expects data centre AI revenue to surpass server CPU revenue in the fourth quarter.

AMD projects total company revenue growth of more than 80% in 2027, signalling confidence in the long-term opportunity created by rising AI infrastructure spending. The data centre business is expected to contribute more than 80% of total revenue next year, highlighting the growing importance of AI accelerators and server processors to the company's expansion strategy.

AMD shares gained around 8% in extended trading following the earnings announcement as investors responded to the stronger-than-expected results and upbeat growth forecast. The performance reinforces AMD's ambitions to challenge Nvidia's dominance in the AI chip market. However, the company continues to face supply constraints as demand for its data centre products outpaces available capacity.

(Disclaimer: This slideshow is based on inputs from agencies. These do not represent the views of The Economic Times.)