How Server CPUs Could Give AMD Stock a Big Boost After August 4

Its shares have climbed 174% over the past 52 weeks, while the stock has advanced 129.7% since the start of the year. Buying interest has remained strong in recent months as well. Over the past three months alone, the shares have gained another 38.8%, supported by improving industry conditions and increasingly bullish views from analysts.

However, success has not come cheap. AMD stock is now trading at 65.17 times forward adjusted price-to-earnings and 15.92 times sales. Both valuation multiples stand well above industry averages as well as the company’s own five-year historical averages, showing that the stock is trading at a rich premium. 

Advanced Micro Surpasses Q1 Earnings

Advanced Micro reported its Q1 FY2026 results on May 5, wherein revenue increased 37.8% year-over-year (YOY) to $10.25 billion, beating analysts’ estimate of $9.9 billion. The result reflected healthy demand across AMD’s product lineup rather than strength from a single segment, highlighting the company’s broad exposure to fast-growing markets.

The data center division’s revenue climbed 57% YOY to $5.8 billion as customers continued adopting AMD EPYC™ processors and shipments of AMD Instinct™ GPUs kept rising. That business has remained a major driver of AMD’s expansion as enterprises continue investing in AI infrastructure.

The client segment’s revenue grew 26% from the year-ago value to $2.9 billion. The gaming business’ revenue rose 11% YOY to $720 million, supported by healthy demand for AMD Radeon™ GPUs. Also, the embedded segment generated revenue of $873 million, up 6% from the previous year as demand improved across several end markets.

Consequently, the stronger sales performance lifted profitability. Non-GAAP gross margin was 55% during the quarter, while non-GAAP operating income increased 42.8% YOY to $2.5 billion. Non-GAAP net income climbed 44.6% to $2.3 billion while adjusted EPS reached $1.37 after rising 42.7% from the prior year, and ahead of the Street’s estimate of $1.29.

Further, AMD generated substantial cash. Adjusted EBITDA increased 40.5% from a year earlier to $2.7 billion. Free cash flow more than tripled to a record $2.6 billion as higher sales of EPYC CPUs, Instinct GPUs, and Ryzen processors flowed through the business. 

Management expects that momentum to carry into the current quarter. AMD forecasts Q2 FY2026 revenue of approximately $11.2 billion, plus or minus $300 million. The midpoint of that outlook represents YOY growth of approximately 46%, while non-GAAP gross margin is expected to come in at approximately 56%.

Wall Street also expects Advanced Micro to keep building on that performance. Analysts project Q2 FY2026 EPS of $1.35, representing a 400% YOY increase. Full-year FY2026 EPS is expected to reach $6.27, up 91.74% from the previous year, while estimates for FY2027 call for EPS of $11.85, marking an 89% increase from the prior year.

What Do Analysts Expect for Advanced Micro Stock?

AMD is enjoying strong backing from Wall Street, and recent analyst calls show that confidence has only grown stronger. Susquehanna analyst Christopher Rolland maintains his “Positive” rating while raising his price target to $500.

Mizuho analyst Vijay Rakesh also reiterated a “Buy” rating and increased his target to $625 from $615. Jefferies analyst Blayne Curtis followed with an even bigger revision, lifting his price target to $640 from $515 while keeping his “Buy” rating unchanged.

The broader analyst community has anchored AMD stock with an overall “Strong Buy” rating. Among 45 analysts covering the name, 35 recommend a “Strong Buy,” two assign a “Moderate Buy” rating, and eight stick with “Hold.”

Price targets suggest analysts believe the rally may not be over yet. The average price target of $578.46 represents potential upside of 18.4%. Meanwhile, the Street-High target of $1,250 suggests a gain of 155.8% from the current levels. 

On the date of publication, Aanchal Sugandh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com