AMD Shares Rise on Positive Analyst Outlook

Shares of Advanced Micro Devices (AMD) (NASDAQ:AMD) rose on Monday during pre-market trading following a note from analysts at Northland Capital Markets. They believe that AMD will report revenue at or above the high end of its guidance for the third quarter.

> “We expect AMD to continue to gain a share in server CPUs and AI accelerators in CY25. Slowing earnings growth will likely be OPEX as AMD invests billions of dollars to capture tens of billions of future annual revenue,” the analysts noted.

The anticipated revenue increase is likely to boost AMD's bottom line, with non-GAAP earnings expected to surpass the consensus estimate of $0.92 per share.

The analysts highlighted AMD's ability to gain market share in the server CPU segment, a trend reinforced by improvements in the enterprise market over the last three months.

Demand for non-AI server products is also reportedly picking up, further contributing to AMD's momentum in data center AI solutions. Northland expects AMD to guide for revenue above consensus for the fourth quarter, driven by strength in its AI, server CPU, and client product lines.

Analysts do not expect AMD to provide guidance for calendar year 2025 in the upcoming earnings report anticipated in January 2025. However, a significant increase in AMD’s revenue share in the server market is notable, rising from 2% in 2019 to 34% in the first half of 2024.

This growth is attributed to AMD's competitive product offerings, which continue to surpass those of its main rival, Intel (NASDAQ:INTC). Early performance benchmarks suggest that AMD will maintain its upward market share trajectory with the next generation of server CPUs expected to launch in 2025.

AMD’s share in the AI accelerator market is also projected to grow, with estimates indicating an increase from 0.7% in 2023 to 3.9% in 2024. Northland analysts believe AMD will increasingly capture a larger portion of the accelerator market, particularly as NVIDIA (NASDAQ:NVDA) faces delays with its Blackwell product family.

The anticipated release of AMD’s next-generation MI325x accelerators in early 2025 is expected to solidify the company's market position against NVIDIA's offerings.

The shift towards AMD is driven partly by cloud service providers' (CSPs) desire for alternatives to NVIDIA, evidenced by year-over-year growth in AMD's AI revenue. Northland estimates that AMD could double its market share in the next two years, aided by strategic partnerships with industry leaders like Google (NASDAQ:GOOGL), Oracle (NYSE:ORCL), Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), and Hugging Face.

Projections beyond 2025 suggest that AMD could generate between $18 billion and $28 billion in AI revenue by 2027, making up 6.2% to 9.7% of the AI accelerator market. Total revenue for AMD in 2027 might range from $45 billion to $55 billion, contingent on steady growth across its other product lines.

Analysts forecast potential earnings of $6 to $9 per share by that time, although operating expenses remain a significant variable in these estimates. Despite concerns over necessary investments to compete with NVIDIA, Northland asserts that AMD's share gains against Intel showcase the long-term value of AMD's strategic investments.