Advanced Micro Devices (NASDAQ: AMD) is optimistic about its future, particularly regarding its data center and gaming businesses. The company, which has partnered with Microsoft and Sony to design semi-custom processors for their next-generation gaming consoles, is poised for significant growth in the coming years. Analysts expect that a resurgence in gaming console sales, coupled with robust expansion in AMD’s data center segment fueled by artificial intelligence (AI), could drive the company’s stock to new heights over the next five years.
Historically, AMD’s video game console business has been a crucial growth engine. The company gained a lifeline during the 2010s through strong sales of its PlayStation 4 processor, which contributed significantly to revenue during a challenging period. In 2013, even as AMD’s overall revenue dipped by 2%, its graphics and visual solutions business, which includes semi-custom processors, surged by 55% to $2.19 billion. This segment accounted for 30% of total revenue during the year’s last quarters, marking a critical turnaround for the company.
The launch of the next-generation PlayStation 5 and Xbox consoles in November 2020 further boosted AMD’s semi-custom business, contributing to a remarkable 65% increase in revenue for this segment, which grew to $3.33 billion. This growth trajectory continued, doubling the following year to $7.1 billion, as consumers upgraded to the latest consoles. Currently, AMD’s gaming business, which also encompasses its graphics cards, reported $3.9 billion in revenue last year, reflecting a 51% increase over the previous year.
Looking ahead, AMD is expected to benefit from upcoming console releases. Sources indicate that both Sony and Microsoft plan to unveil their next-generation consoles around the 2027 holiday season. This timing suggests a significant upgrade cycle, as the current models will be nearing seven years old. AMD has secured agreements with both companies to provide semi-custom processors for these new consoles, a factor that could substantially enhance its revenue streams.
On top of the gaming segment, AMD’s data center business is also on a promising trajectory. The company has established collaborations with major players like OpenAI and Meta Platforms, aiming to deploy several gigawatts of its AI data center chips. Management projects that this segment could see more than 60% annualized revenue growth over the next three to five years, opening a multibillion-dollar growth opportunity for AMD.
As AMD looks to the future, the company’s non-GAAP (adjusted) earnings came in at $4.17 per share in 2025. Management has expressed confidence that earnings per share could exceed $20 within the next three to five years, which would represent an annualized growth rate of nearly 37%. If AMD reaches this earnings target and trades at 33 times earnings—consistent with the tech-heavy Nasdaq-100 index—its stock could potentially soar to $660, more than double its current valuation.
However, prospective investors should take heed. The Motley Fool Stock Advisor analyst team has identified ten other stocks as their top recommendations, excluding AMD from this list. Their historical performance indicates that previous recommendations have led to significant returns for investors. Notably, investing in Netflix when it was first recommended would have turned $1,000 into a staggering $496,797, while Nvidia’s recommendation produced an impressive $1,282,815 over a similar timeframe.
As the technology landscape evolves, AMD finds itself at a crucial junction. With strong foundations in both the gaming and data center segments and the impending release of next-generation console hardware, the company appears well-positioned for sustained growth. Yet, as always in the volatile tech market, investors should remain vigilant and conduct thorough research before making investment decisions.
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