AMD needs strong earnings to calm investors
AMD has been a standout performer among chipmakers this year, but growing doubts about artificial intelligence investments mean the company must deliver standout earnings and a bold future outlook to keep its upward trend alive when it releases its financial results.
Neville Javeri, portfolio manager at Allspring Global Investments, which owns the stock, said AMD needs a significant beat and a pretty significant outlook to keep the momentum going.
A mediocre performance won’t suffice, according to Neville Javeri. Though Wall Street anticipates a solid showing from AMD, the timing is tricky—shares of other tech firms have faced steep declines whenever earnings fall short of expectations.
Intel suffered its worst single-day stock performance since at least 1982 after revealing a disappointing outlook.
AMD’s Performance
AMD’s stock followed Intel’s decline, plunging 10% on Friday and closing October down over 17%. The downward trend continued with a 7.5% drop on Monday, though the company’s shares remain up roughly 130% for the year.
On Tuesday, AMD shares rose as much as 6.6 per cent, demonstrating the stock’s volatility and the market’s anticipation of the earnings report.
The rally has made AMD’s stock look relatively expensive compared with shares of other chipmakers. It’s trading at 33.5 times profits estimated over the next 12 months, which is the fourth-highest multiple in the Philadelphia Stock Exchange Semiconductor Index. This multiple is down from a high of 56 on June 30, but still reflects the stock’s pricey nature, with an average multiple of around 34 since 2017.
Wall Street analysts expect AMD to report a 92 per cent jump in third-quarter earnings on a 41 per cent rise in revenue, and both figures are projected to increase further in 2027.
AI Infrastructure
CPUs play a critical role in AI infrastructure because they are essential for the functioning of so-called agents, which have taken the market by storm thanks to the success of Meta’s Muse. The chips were responsible for nearly a quarter of AMD’s 2025 revenue.
Meta represents AMD’s second-largest customer, contributing 5.5% of its revenue. The success of Muse has led some experts to increase their revenue forecasts for the chipmaker.
Kevin Cassidy, analyst at Rosenblatt Securities, named AMD the top long idea going into earnings.
Risk and Valuation
Jim Worden, chief investment officer at the Wealth Consulting Group, exited his AMD position because of the uncertain backdrop and the stock’s high valuation.
He said it’s possible AMD goes from good growth to hypergrowth, with things like Muse acting as an accelerator, but he’s just not super comfortable with the valuation.
Wall Street’s consensus expectations for AMD’s 2027 net income have risen 23 per cent over the last three months and estimates for revenue are up 14 per cent, with even stronger gains seen in 2028. The stock is expected to rise 33 per cent over the next 12 months based on the average of analysts’ price targets tracked by Bloomberg.
