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AMD is Trading at a Premium at 38.39X P/E: Is the Stock Still a Buy?
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Key Takeaways
AMD trades at 38.39X forward P/E versus the sector's 17.48X, despite shares surging 123% year to date.
AMD's Data Center revenues jumped 97% to $8.55 billion in Q3 2026, fueled by strong EPYC processor demand.
AMD expects over 80% revenue growth in 2027, driven by AI infrastructure demand.
Advanced Micro Devices (AMD - Free Report) shares are overvalued, as suggested by a Value Score of F. The AMD stock is trading at a forward 12-month price/earnings (P/E) of 38.39X compared with the broader Zacks Computer & Technology sector’s 17.48X. AMD shares are trading at a premium compared with peers, including NVIDIA (NVDA - Free Report) , Broadcom (AVGO - Free Report) and Intel (INTC - Free Report) . Shares of NVIDIA, Broadcom and Intel are trading at a P/E multiple of 12.12, 17.78 and 36.16, respectively.
AMD Stock’s Valuation
Image Source: Zacks Investment Research
Is AMD worth buying at current prices? Let’s dig deep to find out.
AMD Shares Outperform Sector & Peers
AMD shares have risen 123% year to date (YTD), outperforming the broader sector’s appreciation of 11.1%, Intel’s rise of 74% and Broadcom’s increase of 1.5%. YTD, shares of NVIDIA have dropped 7%.
AMD Stock’s YTD Price Performance
Image Source: Zacks Investment Research
The stock is expected to continue its rally due to expanding presence in the data center market. In the third quarter of 2026, Data Center revenues surged 97% year over year to $8.55 billion and accounted for approximately 64% of total revenues. Cloud and enterprise server sales more than doubled, reflecting increasing EPYC adoption across hyperscalers and enterprise customers. The launch of sixth-generation EPYC Venice processors offers additional growth opportunities, with OEM and ODM partners committing to more than 240 platforms, approximately 20% higher than Turin. AMD expects server revenues to double year over year in 2027, supported by expanding AI infrastructure investments and demand for agentic computing.
The rapid adoption of AMD’s Instinct MI450 Series GPUs and Helios rack-scale systems is expected to drive significant revenue growth. In the third quarter, AMD began volume shipments of MI455X GPUs, while customers including Anthropic, Meta, Microsoft, OpenAI and Oracle brought their first Helios racks online. The company expects Helios deployments to accelerate significantly in the fourth quarter as Dell, HPE, Lenovo and Super Micro Computer expand system availability. AMD anticipates that data center AI revenues will more than double in 2027, supported by increasing deployments across training and inference workloads.
AMD’s strengthening Embedded business and expanding software capabilities provide additional growth opportunities. In the third quarter of 2026, Embedded revenues increased 29% year over year to $1.11 billion, supported by strong demand across aerospace and defense, automotive, communications and industrial markets. AMD remains on track to secure more than $18 billion in embedded design wins during 2026. Meanwhile, ROCm 10 and ROCm.AI are improving developer productivity and AI workload optimization, potentially encouraging broader Instinct GPU adoption. The proposed acquisitions of Taalas and World Labs could further strengthen the company’s inference capabilities and position in emerging AI applications.
AMD’s improving revenue visibility strengthens its growth prospects. The company expects fourth-quarter 2026 revenues of approximately $17 billion, representing 66% year-over-year and 27% sequential growth at the midpoint. For 2027, AMD anticipates revenue growth exceeding 80%, driven primarily by accelerating data center demand. The Data Center segment is expected to contribute more than 80% of total revenues next year. The company also expects operating expenses to grow at less than half the rate of revenue growth in 2027, potentially supporting significant operating margin expansion and profitability improvement.
These factors are expected to offset gross margin pressure from higher sales volume of low-margin data center AI products, as well as inflationary pressure from high-bandwidth memory and other components.
The Zacks Consensus Estimate for fourth-quarter 2026 earnings is pegged at $2.90 per share, up 13.7% over the past 30 days and indicating 89.5% year-over-year growth. The consensus mark for fourth-quarter 2026 revenues is pegged at $17.06 billion, suggesting 66.1% growth from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for 2026 earnings is pegged at $8.04 per share, up 7.3% over the past 30 days, suggesting 92.8% growth from 2025’s reported figure. The consensus mark for 2026 revenues is pegged at $52.08 billion, suggesting 50.3% growth from 2025’s reported figure.
Conclusion
AMD’s strong position in the rapidly expanding AI infrastructure market, accelerating adoption of EPYC processors and Instinct GPUs, and growing demand for Helios rack-scale solutions position the company for sustained growth. The company’s robust data center momentum, expanding customer base and improving revenue visibility are expected to drive significant revenue and earnings growth in 2027. Although its premium valuation and near-term gross margin pressures remain concerns, the company’s strong growth trajectory and expanding AI opportunities help justify its elevated valuation.
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AMD is Trading at a Premium at 38.39X P/E: Is the Stock Still a Buy?
Key Takeaways
Advanced Micro Devices (AMD - Free Report) shares are overvalued, as suggested by a Value Score of F. The AMD stock is trading at a forward 12-month price/earnings (P/E) of 38.39X compared with the broader Zacks Computer & Technology sector’s 17.48X. AMD shares are trading at a premium compared with peers, including NVIDIA (NVDA - Free Report) , Broadcom (AVGO - Free Report) and Intel (INTC - Free Report) . Shares of NVIDIA, Broadcom and Intel are trading at a P/E multiple of 12.12, 17.78 and 36.16, respectively.
AMD Stock’s Valuation
Image Source: Zacks Investment Research
Is AMD worth buying at current prices? Let’s dig deep to find out.
AMD Shares Outperform Sector & Peers
AMD shares have risen 123% year to date (YTD), outperforming the broader sector’s appreciation of 11.1%, Intel’s rise of 74% and Broadcom’s increase of 1.5%. YTD, shares of NVIDIA have dropped 7%.
AMD Stock’s YTD Price Performance
Image Source: Zacks Investment Research
The stock is expected to continue its rally due to expanding presence in the data center market. In the third quarter of 2026, Data Center revenues surged 97% year over year to $8.55 billion and accounted for approximately 64% of total revenues. Cloud and enterprise server sales more than doubled, reflecting increasing EPYC adoption across hyperscalers and enterprise customers. The launch of sixth-generation EPYC Venice processors offers additional growth opportunities, with OEM and ODM partners committing to more than 240 platforms, approximately 20% higher than Turin. AMD expects server revenues to double year over year in 2027, supported by expanding AI infrastructure investments and demand for agentic computing.
The rapid adoption of AMD’s Instinct MI450 Series GPUs and Helios rack-scale systems is expected to drive significant revenue growth. In the third quarter, AMD began volume shipments of MI455X GPUs, while customers including Anthropic, Meta, Microsoft, OpenAI and Oracle brought their first Helios racks online. The company expects Helios deployments to accelerate significantly in the fourth quarter as Dell, HPE, Lenovo and Super Micro Computer expand system availability. AMD anticipates that data center AI revenues will more than double in 2027, supported by increasing deployments across training and inference workloads.
AMD’s strengthening Embedded business and expanding software capabilities provide additional growth opportunities. In the third quarter of 2026, Embedded revenues increased 29% year over year to $1.11 billion, supported by strong demand across aerospace and defense, automotive, communications and industrial markets. AMD remains on track to secure more than $18 billion in embedded design wins during 2026. Meanwhile, ROCm 10 and ROCm.AI are improving developer productivity and AI workload optimization, potentially encouraging broader Instinct GPU adoption. The proposed acquisitions of Taalas and World Labs could further strengthen the company’s inference capabilities and position in emerging AI applications.
AMD’s improving revenue visibility strengthens its growth prospects. The company expects fourth-quarter 2026 revenues of approximately $17 billion, representing 66% year-over-year and 27% sequential growth at the midpoint. For 2027, AMD anticipates revenue growth exceeding 80%, driven primarily by accelerating data center demand. The Data Center segment is expected to contribute more than 80% of total revenues next year. The company also expects operating expenses to grow at less than half the rate of revenue growth in 2027, potentially supporting significant operating margin expansion and profitability improvement.
These factors are expected to offset gross margin pressure from higher sales volume of low-margin data center AI products, as well as inflationary pressure from high-bandwidth memory and other components.
AMD’s Earnings Estimate Revision Shows Positive Trend
The Zacks Consensus Estimate for fourth-quarter 2026 earnings is pegged at $2.90 per share, up 13.7% over the past 30 days and indicating 89.5% year-over-year growth. The consensus mark for fourth-quarter 2026 revenues is pegged at $17.06 billion, suggesting 66.1% growth from the figure reported in the year-ago quarter.
Advanced Micro Devices, Inc. Price and Consensus
Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote
The Zacks Consensus Estimate for 2026 earnings is pegged at $8.04 per share, up 7.3% over the past 30 days, suggesting 92.8% growth from 2025’s reported figure. The consensus mark for 2026 revenues is pegged at $52.08 billion, suggesting 50.3% growth from 2025’s reported figure.
Conclusion
AMD’s strong position in the rapidly expanding AI infrastructure market, accelerating adoption of EPYC processors and Instinct GPUs, and growing demand for Helios rack-scale solutions position the company for sustained growth. The company’s robust data center momentum, expanding customer base and improving revenue visibility are expected to drive significant revenue and earnings growth in 2027. Although its premium valuation and near-term gross margin pressures remain concerns, the company’s strong growth trajectory and expanding AI opportunities help justify its elevated valuation.
AMD currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.