Advanced Micro Devices, Inc.AMDNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $303.17 per share(market-calibrated)

+52.6%

Upside to Fair Value

Current

$198.62

Pure Model

$298.57

Fair Value

$303.17

Bull Case

$523.71

Bear Case

$158.02

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

5.64%

Calibrated Growth

4.41%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $298.57.

What's Driving This Ratingfor AMD

✓

CapEx already efficient

CapEx at 1.68% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 10.19% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $52.3B (20.15% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 35.84% revenue growth in Year 1, fading to 27.04% by Year 5 and 3.75% by Year 10. Revenue reaches $259.8B by Year 10 (vs $34.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $168.01/share (11.1x terminal FCF) while exit multiple gives $429.13/share (37.1x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $198.62, the market implies 5.64% perpetual growth — 189bps above the model's 3.75%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.46% indicates efficient cash generation. FCF reaches $55.9B by Year 10 (21.50% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.95

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)13.27%

Cost of Debt

Pre-tax Cost of Debt2.02%

Tax Rate21.00%

After-tax Cost of Debt1.59%

Equity Weight (E/V)98.63%

Debt Weight (D/V)1.37%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (98.63% × 13.27%) + (1.37% × 1.59%)

= 13.11%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$47.1B	$84.4B	$141.8B	$204.3B	$259.8B
EBIT	$4.8B	$8.6B	$14.5B	$31.7B	$52.3B
Tax	$1.0B	$1.8B	$3.0B	$6.7B	$11.0B
NOPAT	$3.8B	$6.8B	$11.4B	$25.1B	$41.4B
+ Depreciation	$3.9B	$7.0B	$11.8B	$17.1B	$21.7B
- Capex	$790M	$1.4B	$2.4B	$3.4B	$4.4B
- Δ NWC	$3.7B	$5.2B	$9.1B	$9.2B	$2.8B
Free Cash Flow	$3.2B	$7.2B	$11.8B	$29.4B	$55.9B
Discount Factor	0.884	0.691	0.540	0.422	0.292
Present Value	$2.8B	$5.0B	$6.4B	$12.4B	$16.3B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$55.9B

Terminal Growth Rate3.75%

WACC13.11%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$619.1B

PV of Terminal Value$180.6B

Exit Multiple Method

Year 10 EBITDA$74.0B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$2.1T

PV of Terminal Value$604.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$91.2B

PV of Terminal Value$180.6B

Enterprise Value$271.8B

(-) Net Debt-$1.1B

Equity Value$272.8B

Shares Outstanding1.6B

Price per Share$168.01

Exit Multiple Method

PV of Projected FCFs$91.2B

PV of Terminal Value$604.7B

Enterprise Value$695.8B

(-) Net Debt-$1.1B

Equity Value$696.9B

Shares Outstanding1.6B

Price per Share$429.13

Pure Model Fair Value

$298.57

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
11.11%	$360.62	$365.69	$371.45	$378.04	$385.68
12.11%	$324.08	$327.79	$331.94	$336.61	$341.92
13.11%	$292.72	$295.49	$298.57	$301.99	$305.82
14.11%	$265.46	$267.58	$269.91	$272.48	$275.32
15.11%	$241.54	$243.19	$244.99	$246.96	$249.11

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$158.02

-20.4% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 2.44

Base Case

$298.57

50.3% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.95

Bull Case

$523.71

163.7% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.66

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth35.84%

Year 3 Revenue Growth25.76%

Year 5 Revenue Growth27.04%

Year 7 Revenue Growth17.72%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin10.19%

Terminal EBIT Margin25.00%

Tax Rate21.00%

Historical Capex / Rev1.68%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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