Investment Rating - The report maintains a cautiously optimistic view on the company's medium to long-term profitability in AI infrastructure and corporate IT spending recovery [2][22]. Core Insights - The company achieved record high revenue and EPS in Q3 FY2026, driven by AI infrastructure demand and PC replacement cycles, with ISG showing double-digit growth for multiple quarters [2][12]. - Zscaler's Q3 FY2026 results showed strong performance with ARR reaching $3.2 billion, a 26% year-over-year increase, indicating sustained contract lock-in [2][25]. - The report highlights the need to monitor the pace of AI order fulfillment and the impact of rising storage costs on profit margins [2][22]. Summary by Sections AI Infrastructure and Server Demand - The company reported a revenue of $27 billion in Q3, a double-digit year-over-year growth, with ISG revenue increasing by 24% to $14.1 billion [12][17]. - AI server orders reached $12.3 billion in the quarter, with a backlog of $18.4 billion, indicating strong demand sustainability [17][22]. Zscaler Performance - Zscaler's revenue for Q3 was $788 million, reflecting a 26% year-over-year and 10% quarter-over-quarter growth, with a gross margin of 79.9% [25][27]. - The company anticipates FY2026 Q2 revenue between $797 million and $799 million, projecting a 23% year-over-year growth [26]. NAND and Storage Market Trends - NAND spot prices have stabilized, with demand remaining resilient despite high prices, indicating ongoing supply chain dynamics [23][24]. - The report notes a slight decline in storage business revenue but highlights the continued strong demand for proprietary storage solutions [18][22].

Group 1 - Advanced Micro Devices, Inc. (AMD) is recognized as a leading semiconductor stock with significant potential heading into 2026, particularly due to its advancements in AI technology [1][2] - Zyphra has achieved a milestone in large-scale AI model training with the ZAYA1 model, which demonstrates competitive performance against leading open models in reasoning, mathematics, and coding benchmarks, showcasing the efficiency of AMD's Instinct GPUs [2] - AMD anticipates a revenue compound annual growth rate (CAGR) of over 60% for its data center business and over 10% for its Embedded, Client, and Gaming businesses over the next 3 to 5 years [3] Group 2 - The company is strengthening its position in the Client and Gaming sectors, expecting to exceed 40% market share in client revenue while supporting over 1 billion AMD-based gaming devices and three generations of leading consoles [4] - The AMD Instinct™ MI350 Series GPUs are noted for being the fastest ramping product in the company's history, indicating strong demand and growth potential [3]

Core Insights - AMD has announced that Zyphra has achieved a significant milestone in large-scale AI model training with the development of ZAYA1, the first large-scale Mixture-of-Experts (MoE) foundation model trained using AMD technology [1][6] - The ZAYA1 model demonstrates competitive or superior performance compared to leading open models in reasoning, mathematics, and coding benchmarks, showcasing the efficiency of AMD Instinct GPUs for production-scale AI workloads [2][4] AMD's Technological Contributions - The AMD Instinct MI300X GPU features 192 GB of high-bandwidth memory, which facilitated efficient large-scale training and improved throughput while reducing complexity [4][6] - Zyphra reported over 10x faster model save times using AMD optimized distributed I/O, enhancing training reliability and efficiency [4][6] Collaboration and Future Prospects - Zyphra collaborated closely with AMD and IBM to design and deploy a large-scale training cluster, combining AMD Instinct MI300X GPUs with IBM Cloud's high-performance fabric and storage architecture [4][6] - The CEO of Zyphra emphasized the importance of co-designing model architectures with silicon and systems, indicating a commitment to deepen collaboration with AMD and IBM for future advanced multimodal foundation models [3][4]