Key Points
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AMD has reported strong growth in both its client and gaming segments and its data center segment.
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The company has a big opportunity in front of it following its deal with OpenAI.
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The stock could have solid upside if AMD can capitalize on its growth opportunities.
Advanced Micro Devices (NASDAQ: AMD) saw its revenue accelerate in the third quarter, but the stock was unable to gain much traction after a strong run this fall.
With the stock trading down from recent highs, let’s take a closer look at AMD’s recently released results to see if now is a good time to buy the stock.
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Growth accelerates
While AMD’s data center segment has been the biggest focus for investors, it was the company’s client and gaming segment that was once again the star performer in Q3. Revenue surged 73% year over year to $4 billion, as sales of AMD’s desktop central processing units (CPUs) hit an all-time high and it saw strong sales in premium gaming and commercial PCs. Gaming revenue, meanwhile, surged 181% to $1.3 billion as its semi-custom revenue jumped, as both Sony and Microsoft prepare to ramp up sales for the holiday season.
Image source: Getty Images.
In AMD’s data center segment, revenue climbed 22% year over year due to strong demand for its EPYC CPUs and M350 series graphics processing units (GPUs). AMD said it had record CPU sales to cloud computing providers and other hyperscalers (companies that own large data centers) and that its GPU business continues to accelerate.
Looking ahead, AMD was bullish on its new MI400 series GPUs and Helios rack-scale solution, which it will launch next year. Meanwhile, it said OpenAI is scheduled to begin using its MI450 GPUs in the second half of 2026, and that the two companies will be working more closely in the future. It believes the deal could help it generate more than $100 billion in artificial intelligence data center revenue in the coming years.
AMD’s smaller embedded segment, meanwhile, saw an 8% decrease in revenue to $857 million. However, revenue and sell-through did increase sequentially, and the company is seeing strong demand in several verticals. It is also on track for a record number of design wins this year.
Overall, the company’s revenue jumped by 36% to $9.25 billion. That was above the $8.74 billion in sales analysts were expecting, as compiled by LSEG. Gross margin came in at 52%, up 200 basis points compared to a year ago, while adjusted gross margin was flat at 54%.
Adjusted earnings per share climbed by 30% to $1.20, coming in above the $1.16 consensus. Adjusted EBITDA jumped 29% to $2.43 billion. AMD also generated record free cash flow of $1.5 billion in the quarter.
Looking ahead, AMD guided for Q4 revenue to grow by 25% to $9.6 billion, plus or minus $300 million.
Should investors buy the stock?
AMD turned in a good quarter, led by strong growth in its client and gaming segment and solid growth in its data center business despite losing its China revenue earlier this year due to new export restrictions. Moving forward, the company has a big opportunity ahead with its OpenAI partnership, which should drive significant growth in the coming years.
Overall, the company looks well-positioned as the market starts to turn a bit more toward inference, where Nvidia‘s software advantage is less pronounced. Meanwhile, AMD’s acquisition of ZT Systems lets it now offer full-rack solutions, which could help it compete better.
Looking at valuation, AMD stock trades at a forward price-to-earnings (P/E) ratio of 39 times 2026 analyst estimates, but it only has a forward price/earnings-to-growth (PEG) ratio of 0.4. Stocks with a positive PEG ratio below 1 are usually considered undervalued.
If AMD can deliver on the strong growth opportunities in front of it, the stock should still have solid long-term upside from here.
Should you invest $1,000 in Advanced Micro Devices right now?
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.