AMD Q3: The Catalyst is Expected in H2 2026, Could Ramp Sooner

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AMD’s bigger moment was intra-quarter when the OpenAI deal was announced, as it’s a clear signal the company is able to grab the attention of AI’s leading development firm. According to Lisa Su, the 6GW deal is expected to amount to “generate well over $100 billion in revenue over the next few years.”  

However, as noted in July’s Top 15 Report, “the risk to AMD is primarily in Q2’s data center growth decline, and how quickly the company can ramp its MI355s and subsequent MI400s while in the midst of Nvidia’s large shadow – will we see a solid surprise arrive in Q3, Q4 or even into next year? My best guess is the most meaningful AMD moment is not likely to occur during Blackwell’s NVL72s release – I think 2025 belongs to Nvidia and somewhere between 2026-2027 we switch it up.” 

After putting the loss of China revenue in the rear-view mirror, the data center segment sharply rebounded this quarter, up 22% YoY and 34% QoQ for revenue of $4.34 billion. However, we aren’t quite there yet in terms of a strong inflection as it was stated data center would grow 4% QoQ with strong growth server (a nod toward CPUs instead of GPUs). 

AMD is a stock where I’ve been intentional about managing expectations. The upside is compelling — as the second place in data center GPUs is wide open. Yet for those who have followed our coverage, the timing has always been key: meaningful execution in AI accelerators is not expected to materialize until the second half of 2026. In other words, the long-term opportunity is substantial, but patience remains part of the thesis.

MI400s Arriving in H2 2026 

As stated in the most recent Top 15 AI Stocks report: “The MI400 series will be the start of rack-scale systems for AMD, starting with Helios, which will connect up to 72 GPUs similar to Nvidia’s NVL72 systems […] AMD stated in their last earnings report they have an ambitious goal of reaching tens of billions in MI400 sales. Investors should take note that management is specifically calling out the MI400 for this, arriving in H2 2026. The readthrough is that OpenAI is an early validator that the MI400s have serious chops, and where OpenAI goes, the rest of the AI market tends to follow.” 

I’m quoting all of my previous comments so the timing is crystal clear. Here was the update this evening in terms of timing – aligned with my current understanding: “But given what we see today, we see a very good demand environment into 2026, so we would expect that MI355 continue to ramp in the first half of '26. And then, as we mentioned, MI450 Series comes online in the second half of 2026, and we would expect a sharper ramp as we go into the second half of 2026 of our data center AI business.” 

Last month, more information was shared on AMD’s Helios systems, primarily that Meta’s Open Rack Wide specifications were met, which refers to improvements for power, cooling and serviceability. The end result is ecosystem validation that AMD can offer an open standard for AI infrastructure based on Meta’s data center rack designs.  

One key area where Helios stands out is memory — the platform offers roughly 50% more total memory capacity compared to Nvidia’s Vera Rubin rack architecture. That said, if you’ve followed AMD’s AI story as closely as I have (and I know many of you have), then the most important leap in this generation of GPUs is not found in Helios specs or even this quarter’s commentary. Rather, it’s in the demand signals. For the first time, some of the most influential AI customers — including OpenAI, Oracle, and Meta — are preparing to deploy the MI400 Series in meaningful volume. That level of hyperscaler commitment is something AMD hasn’t enjoyed in prior GPU generations (MI300s), and it represents an important shift in the company’s competitive positioning. 

AMD Signs 6GW Partnership with OpenAI 

In early October, AMD signed a landmark deal with OpenAI to supply the ChatGPT parent with 6GW worth of GPUs, starting with 1GW worth of AMD’s MI450 GPUs in the second half of 2026. AMD said the deal would be worth “tens of billions” but declined to provide exact specifics, yet analysts have chalked the deal as worth potentially upwards of $100 billion at the full 6GW scale. In conjunction with the deal, AMD is issuing a warrant to OpenAI to purchase up to 160 million shares. This enables OpenAI to take up to a 10% stake in the chipmaker, though vesting will not begin until the first 1GW deployment and is tied to certain share price targets. 

The deal is expected to provide significant upside potential for both revenue and earnings by 2030, per BofA’s estimates, even assuming a significant discount to Nvidia’s GPUs on a GW basis – AMD’s opportunity per GW is pegged at $17.5 billion, compared to $25 billion-plus for Nvidia’s Blackwell Ultra GPUs.  

BofA’s scenario analysis projects AMD’s total revenue as high as $63.1 billion by calendar 2027 assuming one full GW is deployed, a rather quick timeline considering first shipments are not expected to commence until the second half of next year.  

Under this assumption, BofA projects AMD’s earnings power as high as $10.15, a 35% uplift to consensus estimates at the time for $7.50. By calendar 2030, deployments are expected to culminate with 2GW, or ~$35 billion assuming the opportunity per GW remains flat at $17.5 billion; this could result in EPS as high as $15.80, per BofA, 47% above consensus prior to the deal.  

However, considering that next-gen GPUs continue to command higher prices (such as Nvidia’s Rubin and Rubin Ultra moving to $30-35 billion per GW), AMD may also be able to charge a higher premium for its GPUs and still maintain a significant price-performance advantage to Nvidia. Thus, assuming a mid-$20 billion per GW opportunity by 2030, AMD could see $45 billion-plus with 2GW delivered in the final tranches. Given consensus estimates were ~$65 billion prior to the deal, this would project revenue potentially at $110 billion by 2030. 

Our estimates are aligned with Lisa Su’s commentary, where she stated in the opening remarks that “We expect this partnership will significantly accelerate our data center AI business with the potential to generate well over $100 billion in revenue over the next few years.” 

One major question surrounding the deal is OpenAI’s spending spree, and how the company will not only fund this, but its other GPU and cloud computing deals it has signed over the last month. In September, OpenAI had already projected cash burn at $115 billion through 2029, yet has signed $1.4 trillion worth of deals with Nvidia, Oracle, Azure, AWS and others.  

Commentary for AI Growth in FY26-FY27 

The last guide that AMD provided on GPUs was $6.5 billion in revenue by the time we exit this year. Management is hinting they will see “tens of billions” in their AI business by 2027. If we assume this means a minimum of $20B (perhaps more) then it coincides with roughly minimum 200% growth in AMD’s AI business over a two-year time span.  

“In summary, our AI business is entering a new phase of growth and is on a clear trajectory towards tens of billions in annual revenue in 2027, driven by our leadership rack scale solutions, expanding customer adoption and an increasing number of large-scale global deployments. I look forward to providing more details on our data center AI growth plans at our Financial Analyst Day next week.” 

Current Consensus Estimates Show Mismatch In FY28-29 

Though it is still uncertain as to how the OpenAI deal will ramp with the subsequent 5GW and timing for those deployments, consensus estimates still show a mismatch in FY28-29, with YoY growth pegged at <2%.  

Some of this stems from the inherent difficulty from projecting 3+ years into the future (and a much smaller # of analysts projecting long-term, dropping from 32 in FY28 to 5 in FY29). However, running off the assumption that 6GW is worth >$110 billion with the opportunity per GW rising from $17.5 billion to mid-$20 billion over the course of the deal, there is a >$30 billion mismatch in forward estimates.  

For example, post-deal, estimates for FY27 have risen 22.5%, FY28 by 37% and FY29 by 22.5%. On a dollar basis, FY27 has risen by nearly $11 billion, FY28 by $14 billion, and FY29 by $11.5 billion. Adding in the $2 billion jump in FY26 and a ~$48 billion jump in FY30 (limited data but initial consensus at approx. $65 billion), the total increase in estimates amounts to ~$86.5 billion.  

Based on rough back-of-the-napkin math for ~$110 billion in the total opportunity, $23.5 billion is unaccounted for, likely landing in the FY27-29 time frame as deployments ramp. Thus, there could exist future upside to revenue estimates later in the decade as the pace and timing of the ramp becomes more clear.  

Oracle to Deploy 50K MI450 GPUs with Expansion Potential 

Oracle has emerged as another large, public backer for AMD’s upcoming MI450 GPUs, with the company announcing on October 14 that it would be deploying an initial 50,000 GPU cluster starting in the second half of 2026, with room to expand in 2027 and beyond. This builds on an existing planned deployment of a zetta-scale cluster of 131,072 MI355X GPUs announced earlier this summer. 

This deployment is expected to carry an all-in cost of $3.5 billion to $4 billion to Oracle for ~700 72-GPU racks, including storage and networking, or nearly $5.4 million per rack at the midpoint. For comparison, Nvidia’s GB300’s are estimated to carry an all-in cost of $80,000 per GPU, or ~$5.6 million per rack. 

Oracle Cloud Infrastructure executives said that they believe “customers are going to take up AMD very, very well — especially in the inferencing space.” This is where AMD is packing a punch with 31.1TB of HBM content in the MI450’s Helios rack, 1.5x more than the GB300 NVL72, to significantly increase bandwidth and throughput for inference tasks. The I/O Fund was early to discuss this angle in the analysis “AMD vs Nvidia” 

AMD expressed confidence in delivering for Oracle in future years, as well: “Oracle announced they will also be a lead launch partner for the MI450 Series, deploying tens of thousands of MI450 GPUs across Oracle Cloud Infrastructure beginning in 2026 and expanding through 2027 and beyond.” 

Q3 Revenue Grew by 36% 

AMD’s Q3 revenue grew by 35.6% YoY and 20.3% QoQ to a record $9.25 billion, beating estimates by 5.7%. The revenue growth accelerated by 400 basis points from the 31.6% growth reported in Q2, reflecting strong momentum across the data center AI, server and PC businesses. The strong sequential revenue growth was primarily driven by growth in the data center, client & gaming segment, as well as modest growth in the embedded segment. 

The company also guided for a strong Q4 revenue of $9.6 billion at the midpoint, representing a YoY growth of 25.4% and 3.8% sequentially. It beat the analyst's estimates by 4.3%. The revenue growth will be primarily driven by strong double-digit growth in the data center and client & gaming segments. Similarly, to the last quarter, the revenue guidance does not include any MI308 chip sales to China. However, this time management indicated that MI308 chip sales could be coming soon.  

“So look, it's still a pretty dynamic situation with MI308. So that's the reason that we did not include any MI308 revenue in the Q4 guide. We have received some licenses for MI308, so we're appreciative of the administration supporting some licenses for MI308. We're still working with our customers on the demand environment and sort of what the overall opportunity is. And so we'll be able to update that more in the next couple of months.” 

Analysts expect revenue to grow 19.4% YoY to $8.88 billion in Q1 and then accelerate to 24.6% growth to $9.58 billion in Q2 2026. Looking forward, analysts expect revenue to grow 27.9% YoY to $42.33 billion in 2026 and accelerate 8.5 percentage points to 36.4% YoY growth to $57.72 billion in 2027. 

Data Center Segment Grew by 34% QoQ 

Data Center revenue rebounded strongly in Q3 as it grew by 22% YoY and 34% QoQ to a record $4.3 billion. The strong growth was primarily driven by the ramp of the Instinct MI350 Series GPUs and server share gains. Server CPU revenue reached an all-time high as adoption of 5th Gen EPYC Turin processors accelerated rapidly, accounting for nearly half of overall EPYC revenue in the quarter. The sales of prior generation EPYC processors also continued to be strong. 

The company also reported record sales as hyperscalers expanded EPYC CPU deployments to power both their own first-party services and public cloud offerings. Hyperscalers launched more than 160 EPYC-powered instances in the quarter. Currently, there are more than 1,350 public EPYC cloud instances available globally, up by about 50% YoY. 

Management expects cloud demand to remain very strong as hyperscalers are significantly increasing their general-purpose compute capacity as they scale their AI workloads. Many customers are now planning substantially larger CPU buildouts in the coming quarters to support the strong AI demand. Also, enterprise demand is very strong as the EPYC server sell-through increased sharply YoY and sequentially, reflecting accelerating enterprise adoption. 

AMD’s Instinct GPU business continues to accelerate. It is witnessing a sharp ramp of MI350 GPU sales and broader MI300 deployments. Multiple MI350 Series deployments are underway with large cloud and AI providers, with additional large-scale rollouts on track to ramp up over the coming quarters. 

Management was quite optimistic about future AI business growth. “Looking ahead, our data center AI business is entering its next phase of growth with customer momentum building rapidly ahead of the launch of our next-gen MI400 Series accelerators and Helios rack-scale solutions in 2026.” 

Client and Gaming Segment Grew by 73% YoY 

The client and gaming segment grew by 73% YoY and 12% QoQ to $4.05 billion. The strong growth was primarily driven by the acceleration in the Ryzen portfolio. It was stated: 

“Our PC processor business is performing exceptionally well with record quarterly sales as the strong demand environment and breadth of our leadership Ryzen portfolio accelerates growth. Desktop CPU sales reached an all-time high with record channel sell-in and sell-out led by robust demand for our Ryzen 9000 processors which deliver unmatched performance across gaming, productivity and content creation applications. OEM sell-through of Ryzen-powered notebooks also increased sharply in the quarter reflecting sustained end customer pull for premium gaming and commercial AMD PCs.” 

The gaming revenue grew by 181% YoY and 16% QoQ to $1.3 billion. The strong growth was driven by higher semi-custom revenue and strong demand for the Radeon GPUs. Management stated, “Semi-custom revenue increased as Sony and Microsoft prepare for the upcoming holiday sales period. In gaming graphics, revenue and channel sell-out grew significantly driven by the performance per dollar leadership of the Radeon 9000 family.” 

Embedded revenue was down (8%) YoY and up 4% sequentially to $857 million. Revenue increased sequentially as the demand environment strengthened across multiple markets. 

Margins 

The company’s profits are growing. However, margins are negatively impacted by higher operating expenses to support strong future AI opportunities.  

  • The company’s Q3 gross profits grew by 40% YoY and 56% QoQ to $4.78 billion. The gross margin was 52%, up 200 basis points YoY primarily driven by a higher profitable product mix. The adjusted gross margin was 54%, in-line with management guidance. Management has guided an adjusted gross margin of 54.5% for the fourth quarter. 
  • Operating income was up 75% YoY and up 1048% QoQ to $1.27 billion. The operating margin improved by 300 basis points YoY to 14%. Adjusted operating margin was down by 100 basis points YoY to 24% and missed the management guidance of 25% as the adjusted operating expenses increased by 42% YoY to support the significant AI opportunities and go-to-market activities for revenue growth. Management has guided an adjusted operating margin of 25% for the fourth quarter. 
  • Net income was up 61% YoY to $1.24 billion or 13% of revenue, up 200 basis points YoY. The adjusted net income was up 31% YoY to $1.97 billion or 21% of revenue, down 100 basis points YoY.

Adjusted EPS Grew by 30% YoY 

The company’s GAAP EPS grew by 59.6% YoY to $0.75, beating estimates by 10%. Adjusted EPS rose by 30.4% YoY to $1.20, beating estimates by 2.4%. 

Analysts expect adjusted EPS to grow by 22.3% YoY to $1.33 in Q4 and accelerate to 26.4% growth in Q1 and 183.2% YoY growth in Q2 to $1.36. Looking forward, they expect the adjusted EPS to grow by 61% YoY to $6.35 in 2026 and 45.7% YoY to $9.25 in 2027.

Cash Flow and Balance Sheet 

The company’s cash flows are growing primarily driven by higher revenue and profits.  

  • Q3 operating cash flows grew by 185% YoY to $1.79 billion or 19% of revenue, up 10 percentage points YoY. 
  • Q3 free cash flows grew by 208% YoY to $1.53 billion or 17% of revenue, up 10 percentage points YoY. 
  • The company had cash and short-term investments of $7.24 billion at the end of the quarter, up from $5.87 billion in the previous quarter. While debt remained the same at $3.22 billion. 
  • Inventories increased by 10% sequentially to $7.3 billion. 

Conclusion 

For the far majority of stocks, we would not have a placeholder in the I/O Fund portfolio this far ahead of execution. AMD is unique because the data center GPU market desperately needs a second-place contender. Investors may appreciate Nvidia’s pricing power, but hyperscalers and companies like OpenAI do not; they’d like to see more competition and optionality including lower prices. That is why we are seeing Meta work alongside AMD to bring Helios to market. There are many investment opportunities in AI across AI networking, AI energy, AI software, AI data layer and more – but none compare to the sheer size and strategic importance of GPUs, particularly when there are so few players competing for that share. That scarcity dynamic is precisely why AMD remains a special case in our portfolio. 

Equity Analyst Royston Roche contributed to this analysis. 

Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.

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