AMD just delivered another quarter that shows it's gaining serious ground against Nvidia in the AI chip wars. The company beat Wall Street estimates with $9.25 billion in revenue, but the real story is a massive OpenAI partnership that could generate over $100 million in revenue and potentially give the AI startup a 10% stake in AMD.
AMD is making its boldest move yet against Nvidia's AI chip dominance, and the numbers from its latest quarter show the strategy is working. The chipmaker reported fiscal Q3 revenue of $9.25 billion, crushing Wall Street's $8.74 billion estimate, while adjusted earnings hit $1.20 per share versus the expected $1.16.
But investors weren't impressed, sending shares down nearly 5% in after-hours trading. The culprit? AMD's Q4 gross margin guidance of 54.5% merely met expectations rather than exceeding them - a sign that even beating estimates isn't enough in today's AI-driven market.
The real headline buried in AMD's results is a partnership with OpenAI that could reshape the AI infrastructure landscape. "We expect this partnership will significantly accelerate our data center AI business with the potential to generate well over $100 million in revenue over the next few years," CEO Lisa Su told analysts during the earnings call.
The OpenAI deal isn't just about revenue - it's about breaking Nvidia's stranglehold on AI training. For years, OpenAI and virtually every other AI company have relied exclusively on Nvidia's GPUs. Now OpenAI will deploy 6 gigawatts of AMD's Instinct processors over multiple years, starting with an initial 1-gigawatt rollout in the second half of 2026. The partnership could even see OpenAI take a 10% equity stake in AMD.
"The AI business is on a path toward generating tens of billions in annual revenue in 2027," Su declared - a target that would put AMD in direct competition with Nvidia's projected AI chip revenues.
AMD's data center business, which includes both traditional CPUs and AI-focused GPUs, generated $4.34 billion in Q3 revenue, up 22% and beating the $4.13 billion StreetAccount consensus. But it's the partnerships beyond OpenAI that show AMD's broader AI momentum. Oracle announced plans to deploy 50,000 AMD Instinct MI450 chips in its cloud starting next year.
The company's traditional businesses also delivered strong results. Client revenue hit $2.75 billion, up 46% and above the $2.61 billion consensus, while gaming revenue soared 181% to $1.30 billion as Microsoft and Sony ramped Xbox and PlayStation production ahead of the holidays.
AMD also got some regulatory relief on China exports. "We have received some licenses for MI308, so we're appreciative of the administration supporting some licenses for MI308," Su said, referring to chips that had been restricted from Chinese markets. The Q4 guidance excludes potential China revenue, suggesting upside if demand materializes.
Not all the news was positive. Amazon, a key cloud customer, disclosed in a Tuesday SEC filing that it sold all 822,234 of its AMD shares as of September 30, unwinding a position built in Q1.
AMD shares are up 107% year-to-date, vastly outpacing the Nasdaq's 21% gain, as investors bet the company can capture meaningful share in the AI chip market. The OpenAI partnership represents AMD's biggest validation yet that major AI companies are ready to diversify beyond Nvidia.
For Q4, AMD expects about $9.6 billion in revenue, implying 25% growth and beating the $9.15 billion consensus. With the OpenAI chips not shipping until late 2026, most of that partnership revenue lies ahead.
AMD's Q3 results showcase a company successfully executing its AI strategy, with the OpenAI partnership serving as a major validation of its technology against Nvidia's dominance. While investors focused on margin guidance meeting rather than beating expectations, the real story is AMD's positioning for the next phase of AI infrastructure growth. With tens of billions in AI revenue targeted by 2027 and major partnerships with OpenAI and Oracle already secured, AMD is building the foundation to become a legitimate alternative to Nvidia in the AI chip market.
