AMD: A 10x in The Making
A Fundamental and Technical Analysis.
So, today we’ll discuss whether AMD seems like a stock to keep an eye on or not.
Overview
Today, I’ll cover the following of AMD:
Fundamental Analysis
Technical Analysis
This is also the framework that I’ll be using when doing a Deep Dive into a company that might be ready to BUY.
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1. Fundamental Analysis
In the next section I’ll discuss the following things:
General Overview (Total Revenues, Net Income, EBITDA, Free Cash Flow)
KPI’s
Skin in the game
Gross Profit and Net Income Margin
ROIC
Goodwill
Capex (Maintenance/growth)
Stock Based Compensation
Buybacks
Forward P/E
Forward P/FCF
Forward EV/EBITDA
Earnings Growth Model
Reverse DCF
General Overview
In this first part, I’ll discuss the overall fundamentals of the business: Total Revenues, Net Income, EBITDA, Free Cash Flow.
Total Revenues
AMD’s total revenue has seen impressive growth over the past five years, increasing from $9.76 billion in 2020 to an estimated $25.79 billion in 2024. This represents a 164.11% total revenue increase with a 27.4% compound annual growth rate (CAGR).
Despite a slight dip in 2023, AMD rebounded in 2024, reflecting strong fundamentals and continued demand for its products. This steady growth highlights AMD's expanding market presence and ability to compete in the semiconductor industry.
Net Income
AMD's net income has experienced significant fluctuations in recent years. After peaking at $3.16 billion in 2021, earnings declined to $854 million in 2023. However, projections suggest a potential rebound to $1.64 billion in 2024.
Despite a total decline of 34.1% and a negative CAGR of -9.9%, AMD's financial performance indicates that the company is effectively navigating industry challenges while positioning itself for future growth.
The recent increase in net income is largely attributed to its focus on data center expansion and revenue growth within that segment.
EBITDA
AMD’s EBITDA growth has been impressive, rising from $1.68 billion in 2020 to a projected $5.15 billion in 2024, reflecting a CAGR of 32.2%. After reaching $5.44 billion in 2022, EBITDA saw a decline to $3.85 billion in 2023, likely due to macroeconomic challenges.
However, in 2024 we are already seeing a strong recovery, driven by AMD’s advancements in AI chips, data center expansion, and its competitive position against Intel and Nvidia. Despite short-term fluctuations, the long-term trajectory remains solid.
Free Cash Flow
AMD's free cash flow has seen significant growth, rising from $777 million in 2020 to a peak of $3.22 billion in 2021. The company maintained strong cash generation in 2022 with $3.12 billion, but free cash flow dropped sharply to $1.12 billion in 2023, reflecting weaker demand and increased investment.
Again here we are seeing that AMD’s Free Cash Flow is recovering, with projections reaching $2.41 billion. That same principle can be attributed to the Free Cash Flow. Despite short-term volatility, AMD's long-term free cash flow trajectory remains solid, supported by its expanding data center and AI-driven growth opportunities.
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KPI’s
AMD's latest revenue breakdown reveals a clear shift in the company's growth drivers.
From December 2023 to December 2024, data center revenue nearly doubled, jumping from $6.5 billion to $12.6 billion, reflecting an impressive 94% CAGR. This surge underscores AMD’s strong positioning in the booming AI and cloud computing markets.
Client revenue, driven largely by consumer CPUs, also saw solid growth of 51.8%, suggesting a healthy recovery in the PC space. On the flip side, gaming revenue declined sharply by over 58%, while embedded revenue fell by 33%, signaling weakness in more cyclical and specialized segments.
Despite those declines, total revenue still climbed from $22.7 billion to $25.8 billion, a 13.7% year-over-year increase.
The takeaway? AMD is evolving fast, and the next leg of its growth story is clearly being written in data centers and AI workloads.
Another important KPI, is the following one:
This metric shows where the revenue is generated from. It appears that most of AMD’s revenue comes from the U.S. then China and Japan, Europe.
It’s international expansion is accelerating, with China and Europe driving growth, up 82% and 63% respectively, while the U.S. remains stable. This geographic momentum powered a 13.7% overall revenue increase.
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Skin in the game
When it comes to investing, “skin in the game” is a powerful signal. It reflects the extent to which management is personally invested in the company’s success not just professionally, but financially. While it’s not the only factor that matters, it often says a lot about confidence and accountability.
In the case of Advanced Micro Devices (AMD), insider ownership stands at around 0.54%. That’s relatively low, especially when compared to the ideal benchmark of 10% or more, a level that tends to better align management’s incentives with those of shareholders. A higher ownership stake typically reinforces long-term thinking and responsible capital allocation.
However, it’s important to add context. AMD is a large-cap company with a market capitalization well over $100 billion, making even a small percentage of insider ownership represent a significant dollar amount.
Moreover, CEO Lisa Su has been at the helm since 2014 and played a pivotal role in AMD’s turnaround. Her long tenure alone reflects deep commitment to the company’s long-term growth and strategic direction.
So while insider ownership at AMD may not be high in percentage terms, it doesn’t automatically indicate a lack of conviction. For long-term investors, it’s worth considering the broader context — including leadership tenure and incentive structures — when evaluating alignment with shareholder interests.
Gross Profit and Net Income Margin
AMDs gross profit margin and net income margin are key indicators of the company's profitability and operational efficiency.
The Gross Profit Margin reflects how much revenue remains after accounting for the cost of goods sold (COGS). Over the past few years, AMD has seen significant expansion in its gross margin, driven by economies of scale, improved supply chain efficiencies, and a shift toward direct distribution. As the company continues to scale, its ability to maintain or expand its gross margin will be critical in assessing its long-term profitability.
The Net Income Margin, which measures the percentage of revenue that translates into actual profit after all expenses, has been more volatile. While AMD has experienced rapid revenue growth, high capital expenses, distribution costs, and investments in expansion have pressured its bottom line. However, as operating efficiencies improve and the company benefits from stronger innovated technology, there is still room left for further margin expansion.
A strong gross margin provides AMD with the flexibility to reinvest in growth, while an improving net income margin (after a decline from 20’ to 23’) would signal the company’s ability to translate revenue into sustainable profitability. I do believe that we this numbers really align with the shift in thier revenue segment we are seeing that they are turning their focus away from the gaming segment to the data center segment.
If you need some more information on AMDs Business Model and specifically in-depth information on where most of their revenue is coming from, go and check this article out:
AMDs 10x Potential: The Next Big AI & Cloud Computing Play
If you think Advanced Micro Devices (AMD) is just an Intel alternative, you're missing the bigger picture.
Return on Invested Capital (ROIC)
Over the past few years, AMDs Return on Invested Capital (ROIC) has declined significantly, indicating that the company is making bad investment decisions.
A 3% ROIC is not good, it suggests weak capital efficiency, allocation and profitability.
It's important to note that the Weighted Average Cost of Capital (WACC) is around 9%. Since ROIC is smaller than WACC, this means the company is generating a negative return on the capital that has been invested, creating destructive value for shareholders.
It’s important to notice here that even though their ROIC is really weak at this moment, we do expect this number to increase slightly higher in the coming years, because of the increasing revenue coming from data centers.
Goodwill
When analyzing Goodwill, I always like to get a clear overview of a company’s assets and liabilities. This helps determine whether goodwill meaningfully enhances the company's asset base or if it’s simply inflating the balance sheet. Currently, that doesn’t seem to be the case.
Another key point to highlight is the following:
As of April 2025, AMD's most recent acquisition is ZT Systems, a leading provider of AI infrastructure for hyperscale computing companies (Hyperscale = AMZN, GOOG, MSFT, …) . The acquisition, valued at $4.9 billion, was finalized in late March 2025.
This strategic move aims to enhance AMD's Data Center systems portfolio and strengthen its position in the AI and cloud computing sectors, enabling the company to offer comprehensive solutions for data centers and compete more effectively with industry rivals.
If we were to subtract goodwill from the current assets, AMDs assets-to-liabilities ratio would still be a 4x multiple. This means that the impact of goodwill on their assets is quite small.
Capex (Maintenance/growth)
When evaluating a company's financial health, comparing Capital Expenditures (Capex) to Free Cash Flow (FCF) provides valuable insights into its investment efficiency and liquidity.
Advanced Micro Devices (AMD) has demonstrated a strong balance between Capex and FCF in recent years:
2023: Capex totaled $546 million, while FCF reached $1.1 billion, resulting in an FCF margin of %.
2024: CAPEX increased to $636 million, with FCF significantly rising to $2.4 billion, leading to an FCF margin of %.
This trend indicates that AMD is effectively managing its capital investments, allowing for substantial Free Cash Flow to support ongoing operations, debt reduction, and potential shareholder returns.
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Stock Based Compensation
Stock-Based Compensation (SBC) is a non-cash expense which means that it affects financial statements but does not directly impact Free Cash Flow (FCF).
However, it does have indirect effects on a company’s financial health and valuation.
How SBC Affects Free Cash Flow
SBC is Added Back to Operating Cash Flow (OCF):
Since SBC is a non-cash expense, it is deducted from net income on the Income Statement but added back when calculating Operating Cash Flow under the indirect method of cash flow reporting.
This can make FCF appear higher, even though it does not actually generate cash.
Potential Dilution Impact:
While SBC increases FCF in the short term (since it's a non-cash expense), it leads to more outstanding shares over time, which can dilute earnings per share (EPS) and affect stock value.
Investors should be cautious when high SBC artificially boosts FCF while increasing share dilution.
Adjusted Free Cash Flow (Adj. FCF)
To account for SBC’s impact, some investors use an adjusted FCF metric:
Adjusted FCF = FCF − SBC
This adjustment gives a more conservative view of true cash generation by treating SBC as an actual cost to shareholders.
Let’s now take a look at AMDs Stock-Based Compensation:
AMD has been issuing Stock-Based Compensation, which boosts its reported operating cash flow and, consequently, Free Cash Flow.
However, SBC seems to stagnate, which is a good sign.
Additionally, the gap between FCF and SBC is increasing, indicating that SBC’s impact on FCF is gradually diminishing.
Buybacks
It appears that AMD does repurchase shares, it has been repurchasing shares since 2020. Last year, they bought back around 2.3 million shares out of a total of 235 million shares.
It doesn't seem like they currently have a formal share buyback program, or at least I couldn’t find any specific information on it.
As an investor, share buybacks are generally seen as a positive sign because they can increase the value of the shares you currently own. They often indicate management’s confidence in the company’s future and can help drive long-term shareholder value.
If I’m being honest, I’m not the biggest fan of buybacks. I believe companies could put that money to better use by investing in initiatives that genuinely strengthen the business. Rather than spending cash on buybacks, they could focus on areas that drive long-term growth and create real value. But hey, I’m just a simple investor, what do I know?
Forward P/E
This chart shows AMD’s forward price-to-earnings (P/E) ratio over the past several years, offering a snapshot of how the market has valued its future earnings.
The forward P/E has ranged from a high of 64.99 to a low of 17.93, with a median of 34.68.
As of now, AMD trades at a forward P/E of 22.04, significantly below its historical median. This suggests that investors are currently pricing the stock at a notable discount relative to its past valuation norms.
The total change in the multiple over the timeframe is -41.77%, with a compound annual decline of -10.3%, indicating a broader compression in valuation, possibly due to changing growth expectations, macroeconomic shifts (tariffs), or sector rotation.
When I look at the Forward P/E, I always compare it to the stock’s historical median to get a sense of whether it’s undervalued or overvalued. But it’s also key to remember that this ratio is based on earnings, so if earnings are going down, the multiple can be pretty misleading. A low P/E might look attractive, but it doesn’t mean much if the business is struggling underneath.
AMDs forward P/E is trading below its historical median, suggesting the stock may currently be undervalued based on this metric.
Forward P/FCF
AMD’s current forward Price-to-Free Cash Flow (P/FCF) stands at 24.57, notably below its historical median of 38.99, and not far from its all-time low of 18.67. This marks a steep 49.96% decline since 2020, reflecting a compound annual decrease of 12.9%.
The compression is likely driven by rising capital expenditures, ongoing AI-related investments, and cyclical softness in PC and gaming demand.
While short-term pressures remain, the valuation suggests the market is discounting future FCF growth potentially opening the door for upside if AMD successfully monetizes its data center and AI chips in 2025 and beyond.
When I look at the Forward P/FCF, I always compare it to the stock’s historical median to get a sense of whether it’s undervalued or overvalued. But it’s also key to remember that this ratio is based on free cash flows, so if free cash flows are going down, the multiple can be pretty misleading. A low P/FCF might look attractive, but it doesn’t mean much if the business is struggling underneath.
AMDs forward P/FCF is trading below its historical median, suggesting the stock may currently be undervalued based on this metric.
Forward EV/EBITDA
AMDs forward EV/EBITDA multiple over the past few years has seen huge swings. Currently, it's sitting around 20.56, which is well below its historical median of 30.43. This suggests the stock may be trading at a discount relative to its typical valuation.
However, just like with the P/E and P/FCF, the quality and trajectory of the underlying earnings (in this case, EBITDA) matter a lot, if those are weakening, the lower multiple could reflect justified concerns rather than an opportunity.
AMDs forward EV/EBITDA is trading below its historical median, suggesting the stock may currently be undervalued based on this metric.
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Earnings Growth Model
This model tells us the yearly expected return based on growth of the earnings and shareholder yield.
The formula looks like the following:
Expected return = EPS growth + dividend yield +/- multiple expansion (contraction)Here are the assumptions I use:
EPS Growth = 20% per year over the next 10 years
Dividend Yield = / (there is no dividend)
Forward PE to increase from 22x to 35x (median) over the next 10 years
Expected return = 20% + 0 - 0.1*((35-22)/22))= 14%So, this means that we should be happy with a return of 14% per year.
In case of a 15% EPS growth, we get the following:
Expected return = 15% + 0 - 0.1*((35-22)/22))= 9%With an estimated 15% EPS growth, we should expect a 9% return per year.
Reverse DCF
A reverse DCF is very easy to execute.
When looking at this model, you only need to know 3 main things:
The current stock price of the company
The number of shares outstanding
The Free Cash Flow in Year 1
Next to the following three things, you also need the following:
Perpetuity Growth rate: growth rate after year 10
Use 3% ( this the average growth of the global economy)
Discount rate: The % used to discount future cash flows to today, accounting for risk and time
Discount rate = a proxy for our expected return
10% (the expected return, it’s important to notice that if you adjust this the impact will be huge on the model)
A discount rate of 10%, you can expect a yearly return of 10% as an investor
Let’s use this model for AMD.
AMD
Let’s look into a Reverse DCF for AMD.
We need to know three things:
The current stock price of the company
The number of shares outstanding
The Free Cash Flow in Year 1
The current stock price as of the 6th of april is:
$85.76
The number of shares outstanding are:
1.6 million
The Free Cash Flow in Year 1
$6.780 million (expected FCF for 2025)
Two adjustments need to be made to AMDs FCF:
Subtract Stock-Based Compensation (cost for shareholders)
Add Growth CAPEX
Stock-Based Compensation
Stock-based compensation is a cost for shareholders.
As a result, we subtract it from AMDs FCF.
AMDs Stock-Based Compensation = $1.407 million
Adding Growth Capex
A distinction can be made between Maintenance Capex and Growth Capex:
Maintenance Capex: Investments made in existing assets
Growth Capex: Investments made in new assets in order to grow
When a company invests a lot in future growth, its growth capex is very high but these investments should create a lot of value in the long term.
As a rule of thumb, we state that the company’s maintenance capex equals Depreciation & Amortiziation.
Capex = Maintenance Capex + Growth Capex
Maintenance Capex = Depreciation & Amortiziation
Growth Capex = Total Capex - Depreciation & Amortiziation
Capex = $784 million
Depreciation & Amortization = $636 million
Now that we have the following numbers, we can calculate the Growth Capex:
Growth Capex = Total Capex - Depreciation & Amortization
Growth Capex = $784 million - $636 million
Growth Capex = $148 million
As we now the Free Cash Flow, Stock-Based Compensation and Growth CAPEX, we can now calculate the adjusted Free Cash Flow we use in our model:
Adjusted FCF = FCF - SBC + Growth Capex
Adjusted FCF = $6.780 million - $1.407 million + $148 million
Adjusted FCF = $5.521 million
Excel Spreadsheet
Now we go to our Excel spreadsheet and fill in all the information.
Our input looks as follows:
The only thing we still need to do is click the ‘Calculate Growth Rate’ button.
After you click it, you get the following:
But, what does this mean?
Look at the growth rate (year 1-10) in green.
This number shows you how much AMDs FCF should grow in the next 10 years to generate a return of 10% per year for you as a shareholder.
AMD needs to grow its FCF by 11.55% per year to generate an annualised return of 10%.
Is this realistic?
Let’s look at two things:
The historical FCF Growth of AMD
Analysts’ expectations
Historical FCF Growth
The evolution of AMDs FCF looks as follows:
As you can see in the chart above, AMD has grown its FCF by 32.6% per year over the past 5 years. (keep in mind that this number is only for the last 5 years and not the last 10)
Analysts’ expectations
Now we are going to look into what analysts expect from AMD in the years ahead.
EPS isn’t the same as FCF, but we use it as a proxy because FCF estimates aren’t available.
As you can see below, analysts expect AMD to grow its FCF (/EPS) by 28.9% per year.
Is AMD overvalued or undervalued?
Now, let’s determine whether AMD is overvalued or undervalued.
Expectations implied in the current stock price (Reverse DCF): 11.55%
→ AMD should grow its FCF by 11.55% per year to generate a return of 10% per year for you as an investor.
Is this realistic?
→ AMD has grown its FCF by 32.6% per year over the past 5 years
→ Analysts expect AMD to grow its FCF by 28.9% per year in the years ahead.
Based on the following numbers, we can imply that at the current price (today) AMD is strongly undervalued.
2. Technical Analysis
In this second section, I’ll cover a short Technical Analysis on AMD.
As shown in the chart, AMD’s price is currently trading near the support level around $73. I’ve identified a BUY zone between $73 and $94.
Based on the current price action, AMD appears to be in a favorable buying range.
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Disclaimer:
The content of this analysis is for informational purposes only and should not be considered financial or investment advice. The opinions expressed are my own and based on publicly available information at the time of writing. Before making any investment decisions, please conduct your own research or consult with a professional financial advisor to assess your individual situation. Investing in the stock market involves risk, and past performance is not indicative of future results.
Thanks for this super in-depth report. Question - prices being equal, would you choose AMD over NVIDIA, and why or why not. Thanks for any feedback.