Even if the data-center business doubles in 2027 as management projects, 2028 earnings of about $10.60 a share at 38 times still leave the stock well below today’s close.
Key points
- $646 today needs about $13 of 2028 earnings at 50 times, more than I expect the company to earn.
- Data-center revenue of $6.7 billion in Q2 2026 was 58% of sales and more than doubled year over year.
- Management guided Q3 revenue to $13.0 billion ±$0.3 billion and said the data-center segment should more than double in 2027.
The call
The market is too optimistic. At $645.90 the shares imply roughly $13 of 2028 earnings if the multiple is 50 times, or $16 if it is 40 times. Trailing GAAP earnings of $6.4 billion support a 164-times multiple on last-twelve-month profit.
I expect 2027 sales of $81 billion if data center doubles from about $30 billion in 2026, then $106 billion in 2028, with GAAP operating margin rising to 20%. That produces $10.63 of 2028 earnings. Thirty-eight times that number is $404.
Revenue by year ($ billions)SEC filings through FY25; Q3 2026 guide and my estimates thereafter. As of Oct 8, 2026.
Valuation
| Item | Figure |
|---|
| FY26 revenue (Q3 guide plus Q4) | $49.5 billion |
| FY27 revenue (data center doubles) | $81.3 billion |
| FY28 revenue | $105.7 billion |
| FY28 GAAP operating margin | 20% |
| FY28 diluted EPS | $10.63 |
| Target (38 times FY28 EPS) | $404 |
Thirty-eight times is a rich multiple for a company still mixing lower-margin accelerators with CPUs. The rating is a strong sell because even a clean double of data center and margin expansion leaves more than 35% downside versus the close. Upside if I am wrong is that Helios ramps faster and the multiple holds near 50 times.
GAAP operating margin (%)SEC company facts through Q2 FY26; my FY26-FY28 averages. As of Oct 8, 2026.
Risks
- Helios and MI450 shipments in late 2026 and 2027 could exceed the doubling case if OpenAI, Meta and Anthropic pull volume earlier.
- Server CPU share could keep rising above 70% growth in 2027 and lift mix and margin.
- Warrant vesting for OpenAI and Meta could be slower than the 1.73 billion 2028 share count I used.
What would change my mind
A Q3 or Q4 print that shows Instinct at corporate gross margin and a 2027 data-center outlook well above a double.