Morningstar

AMD Earnings: Server CPU Demand Is Skyrocketing

We’ve significantly raised our fair value estimate of AMD stock.

The AMD Logo photographed off the screen of an iphone.
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Securities in This Article
Advanced Micro Devices Inc
(AMD)

Key Morningstar Metrics for Advanced Micro Devices

  • Fair Value Estimate
    : $450.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of Advanced Micro Devices’ Earnings

Advanced Micro Devices AMD reported first-quarter revenue of $10.25 billion, up 38% year over year and above the high end of guidance. AMD expects June-quarter revenue to be $11.2 billion at the midpoint, up 45% year over year and above the FactSet consensus estimate of $10.5 billion.

Why it matters: AMD reported a blowout quarter, thanks to robust server processor (CPU) demand used in agentic AI. The highlight was the firm doubling its forecast for the server CPU market versus its forecast just six months ago. The market should now rise at a 35% compound annual growth rate to $120 billion by 2030.

  • AMD disclosed that its server CPU business, which makes up about half of its data center revenue segment, grew more than 50% year over year, with 50%-plus growth to both cloud and enterprise server customers.
  • Meanwhile, AMD’s closely watched AI processor (GPU) market held up well, down slightly on a sequential basis, due to lower sales into China. However, we’re pleased that AMD remains on pace to bring its important Helios MI450 AI rack-scale solutions to market toward the end of 2026.

The bottom line: We raise our fair value estimate for narrow-moat AMD to $450 per share from $300. We retain our Very High Morningstar Uncertainty Rating, given the warp-speed pace of AI development, as agentic AI and server CPUs went from an afterthought to a critical component in short supply in just a few months.

  • Shares rose as much as 15% after hours, and we think the rise is justified, given the massive expansion ahead in server CPUs. We’ve long thought AMD’s CPU business and its share gains over Intel were underappreciated, but we underestimated the potential for CPU growth in agentic AI.
  • Looking ahead, we think AMD remains well-positioned as a leading x86 server CPU provider. More CPU cores need to be brought to market to orchestrate the exponential rise in AI agents as they connect AI GPU-based servers and traditional data centers.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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