AMD Raises Growth Expectations as AI Demand Accelerates

Advanced Micro Devices (AMD) forecast 2027 revenue growth above Wall Street expectations on Tuesday, supported by strong demand for its data-center chips as the company intensifies its challenge to Nvidia’s dominance in the artificial intelligence semiconductor market.

Chief Executive Lisa Su told analysts that AMD expects overall revenue to increase more than 80% in 2027, exceeding the 77% growth projected by analysts, according to LSEG data.

Su said data-center chips are expected to account for approximately 80% of the company’s sales next year and drive the majority of its revenue and earnings growth.

The outlook provided support for investors amid concerns about the rising costs of AI infrastructure expansion and weaker forecasts from Intel.

Data Center Business Delivers Record Revenue

AMD’s data-center revenue increased 97% to a record $8.55 billion in the third quarter, surpassing analyst expectations of $8.20 billion.

The company’s position in graphics processing units and central processors is benefiting from a shift in AI workloads toward running models in real-world applications.

AMD is also expanding its product strategy beyond individual processors to compete with Nvidia’s integrated rack-scale systems.

The company’s flagship Helios rack, which combines its MI455X accelerator with its new Venice server chips, is already in production and is expected to enter a larger production ramp-up in the fourth quarter. Initial systems are being tested at Meta Platforms.

Fourth-Quarter Guidance Exceeds Analyst Estimates

AMD expects fourth-quarter revenue of approximately $17 billion, plus or minus 3%, compared with the average analyst estimate of $16.23 billion.

The company reported third-quarter revenue of $13.38 billion, representing a 45% increase from the previous year and exceeding expectations of $13.09 billion.

Adjusted earnings reached $2.09 per share, above the analyst consensus of $1.95.

Adjusted gross margin is expected to be approximately 55% in the fourth quarter, broadly in line with the 55.27% analyst estimate and below the 56% reported in the third quarter.

Meta Partnership Strengthens AI Chip Opportunity

AMD’s AI expansion is supported by major commercial agreements, including its February agreement to supply Meta with up to $60 billion worth of AI chips over five years.

The agreement also allows Meta to purchase as much as 10% of AMD.

The relationship provides an important opportunity for AMD to expand its presence in large-scale data-center infrastructure as major technology companies continue investing in AI computing capacity.

AMD has also expanded beyond semiconductor hardware. In September, the company agreed to acquire World Labs, a startup developing AI systems that model three-dimensional environments, in an $8.2 billion stock transaction.

The acquisition is intended to provide AMD with a position in research involving physical AI systems.

PC and Gaming Segment Faces Pressure

Despite the strength in data-center operations, AMD reported weaker performance in its client and gaming segment.

Third-quarter sales in the segment, which includes PC chips and console processors, declined 8% to $3.72 billion, missing analyst expectations of $3.79 billion.

The semiconductor industry is also facing a global memory shortage, with high-bandwidth memory used in AI processors remaining in limited supply as manufacturers work to increase production.

These constraints represent an additional consideration for the industry’s ability to meet growing demand for AI infrastructure.

Market Reaction and Competitive Position

AMD shares jumped more than 8% in extended trading following the forecast. The stock has more than doubled so far this year.

Other semiconductor stocks also advanced, with Intel gaining 2%, Nvidia rising more than 1% and Broadcom increasing 1.2%.

Market participants viewed AMD’s results as support for its expanding role in AI infrastructure. Analysts also pointed to the company’s ability to gain market share as demand for data-center processors and accelerators increases.

What Investors Should Watch Next

Investors will be monitoring AMD’s ability to translate its strong data-center performance into sustained revenue and earnings growth throughout 2027.

The production ramp-up of its Helios systems, execution of its Meta supply agreement and availability of high-bandwidth memory will be important factors in assessing its growth trajectory.

The company’s ability to expand its AI market position while managing weaker performance in its PC and gaming segment will also remain central to its financial outlook.