AMD's Third Quarter Earnings and AI Agreements

Advanced Micro Devices (AMD) is preparing to announce its financial third-quarter earnings after the market closes on Tuesday. This announcement comes after significant AI chip agreements with tech giants such as OpenAI and Oracle.

Last month, AMD signed a deal to supply 6 gigawatts of graphics processing units (GPUs) to OpenAI. In exchange for this, OpenAI agreed to purchase 160 million shares, representing 10% of AMD's stock.

Additionally, AMD plans to distribute 50,000 GPUs to Oracle's data centers in collaboration with the cloud company. AMD is also supplying chips to power two Department of Energy supercomputers at the Oak Ridge National Laboratory. Once completed, these systems will represent $1 billion in public and private investment.

These developments have boosted AMD's stock price by 56% over the past month. The shares have gained 113% since the beginning of the year and 81% over the last 12 months.

However, AMD is lagging behind Nvidia, which holds the majority share of the AI market. Nvidia's market capitalization has surpassed $5 trillion, while AMD's market value stands at approximately $418 billion.

For the third quarter, according to Bloomberg's consensus estimates, AMD is expected to report earnings per share (EPS) of $1.17 and revenues of $8.7 billion. These figures represent an increase from $0.92 and $6.8 billion recorded in the third quarter of 2024.

Analysts do not expect a significant impact from AMD's recent agreements in the third quarter. Instead, these effects are likely to be seen in upcoming quarters.

OpenAI and Oracle will begin using AMD's next-generation MI450 GPU series in the second half of 2026. AMD will provide its MI450 GPUs in a rack-scale format that can be integrated into large server clusters.

UBS Global Research analyst Timothy Arcuri noted in a note to investors, "We initially expect a tool upgrade in the second half of 2025, so we believe many customers are waiting to transition from MI355x to MI455 racks."

Morgan Stanley analyst Joseph Moore stated that AMD's MI450 chips and rack-scale products will be a critical part of the company's future growth strategy. "The rack-scale solution AMD plans to launch next year is crucial, and we are excited to see what the company can achieve," he said.

Nonetheless, analysts expressed that they expect AMD to benefit from strong CPU sales. AMD's data center revenue is expected to reach $4.1 billion in the third quarter, higher than $3.5 billion a year earlier. The company's client segment, which comprises CPUs for laptops and desktops, is projected to rise by 38% year-over-year to reach $2.6 billion.

On the other hand, AMD's gaming segment is expected to generate $1.1 billion in revenue, representing a 139% increase.