AMD Reports Strong Q4 Earnings but Stock Plummets
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2d ago
0mins
Should l Buy AMD?
Source: Fool
- Data Center Inflection Point: AMD projects Q1 revenue to increase by 32% year-over-year to approximately $9.8 billion, despite a sequential decline of about 5% due to seasonality; however, the data center business is expected to grow briskly, with annual growth projected at over 60% in the next three to five years.
- Booming CPU Business: AMD's client segment revenue soared 34% year-over-year in Q4 to a record $3.1 billion, with record server CPU sales indicating strong demand driven by AI infrastructure spending from hyperscalers like Amazon and Microsoft.
- Valuation Reset: Following the recent stock plunge, AMD's shares trade at 38 times forward earnings, but this reset makes the chipmaker more attractive given its growth prospects, highlighted by a PEG ratio of 0.52 based on five-year earnings growth projections.
- Market Reaction Analysis: Despite the stock's more than 20% drop due to weaker-than-expected Q1 guidance, analysts believe concerns are overstated, presenting a significant buying opportunity for investors, especially given the strength in data center and CPU segments.
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Analyst Views on AMD
Wall Street analysts forecast AMD stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for AMD is 284.10 USD with a low forecast of 200.00 USD and a high forecast of 377.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
36 Analyst Rating
27 Buy
9 Hold
0 Sell
Strong Buy
Current: 192.500
Low
200.00
Averages
284.10
High
377.00
Current: 192.500
Low
200.00
Averages
284.10
High
377.00
About AMD
Advanced Micro Devices, Inc. is a global semiconductor company. The Company is focused on high-performance computing, graphics and visualization technologies. Its segments include Data Center, Client and Gaming, and Embedded. Data Center segment includes artificial intelligence (AI) accelerators, microprocessors (CPUs) for servers, graphics processing units (GPUs), accelerated processing units (APUs), data processing units (DPUs), Field Programmable Gate Arrays (FPGAs), smart network interface Cards (SmartNICs) and Adaptive system-on-Chip (SoC) products for data centers. Client and Gaming segment includes CPUs, APUs, chipsets for desktops and notebooks, discrete GPUs, and semi-custom SoC products and development services. Embedded segment includes embedded CPUs, GPUs, APUs, FPGAs, system on modules (SOMs), and Adaptive SoC products. It markets and sells its products under the AMD trademark. Its products include AMD EPYC, AMD Ryzen, AMD Ryzen PRO, Virtex UltraScale+, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Data Center Revenue Growth: AMD's data center revenue surged 39% year-over-year to $5.4 billion, driven by record CPU and GPU sales, highlighting strong demand in the AI sector, with eight of the ten largest AI companies now utilizing its GPUs.
- Client and Gaming Segment Performance: Revenue from the client and gaming segments rose 34% and 50% respectively, totaling $3.9 billion, although the company anticipates a meaningful decline in semi-custom revenue in 2026, which could impact future growth potential.
- Overall Financial Performance: AMD's total revenue for Q4 climbed 34% year-over-year to $10.27 billion, with gross margin increasing to 54%, and adjusted earnings per share rising 40% to $1.53, surpassing market expectations and demonstrating robust performance amid high investor expectations.
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- AI Chip Launch Plans: AMD is set to release its latest MI450 GPUs in 2026, expected to deliver 36 times the performance of previous generations, aiming to enhance its competitiveness in the AI market, but the fulfillment of subsequent orders by OpenAI remains uncertain.
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- Data Center Revenue Growth: AMD's data center revenue surged 39% year-over-year to $5.4 billion, driven by record CPU and GPU sales, highlighting strong demand in the AI sector, with eight of the ten largest AI companies now utilizing its GPUs.
- Client and Gaming Segment Performance: Revenue from the client and gaming segments rose 34% and 50% respectively, totaling $3.9 billion, although the company anticipates a meaningful decline in semi-custom revenue in 2026, which could impact future growth potential.
- Overall Financial Performance: AMD's total revenue for Q4 climbed 34% year-over-year to $10.27 billion, with gross margin increasing to 54%, and adjusted earnings per share rising 40% to $1.53, surpassing market expectations and demonstrating robust performance amid high investor expectations.
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- AMD Investment: After AMD's stock dropped 17% due to a first-quarter revenue forecast that disappointed investors, Wood quickly increased her stake in the company, which expects $9.8 billion in revenue for the quarter, highlighting its long-term potential in the AI market.
- CoreWeave Acquisition: Wood bought shares of CoreWeave as its stock fell about 50%, and despite the absence of recent earnings reports, the company's strong demand for AI workloads and triple-digit revenue growth indicate a positive outlook.
- Market Outlook: With the AI market projected to reach trillions of dollars, Wood's investment decisions reflect not only a keen insight into short-term fluctuations but also a strong confidence in the future of technological advancements.
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- Intensifying Market Competition: AMD is striving to catch up with Nvidia in the AI chip market for data centers, reporting total revenue of $34.6 billion in 2025, with the data center segment contributing $16.6 billion, a 32% increase; however, its stock plummeted 15% due to concerns over its deal with OpenAI.
- Customer Dependency Risk: AMD's partnership with OpenAI raises market concerns as OpenAI has committed to purchasing 6GW of GPU compute capacity by 2030, yet its annual revenue of $20 billion is insufficient to meet these obligations, potentially impacting AMD's future sales growth.
- Technological Advancement Outlook: AMD plans to launch the MI450 GPU in 2026, expected to deliver 36 times the performance of its previous generation; although initial deliveries are on schedule, uncertainty remains regarding OpenAI's fulfillment of subsequent orders, which could affect AMD's long-term revenue expectations.
- Valuation Pressure: Despite AMD's non-GAAP earnings of $4.17 per share and a P/E ratio of 49.9, slightly higher than Nvidia's 43.5, concerns over its high valuation are mounting, suggesting that the stock may face further downside pressure in the short term, prompting investors to consider their entry timing carefully.
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- Data Center Growth: AMD reported total revenue of $34.6 billion in 2025, with the data center segment contributing a record $16.6 billion, reflecting a 32% year-over-year increase, indicating strong demand for AI GPUs despite uncertainties surrounding OpenAI's future orders.
- AI Chip Launch Plans: AMD is set to release its latest MI450 GPUs in 2026, expected to deliver 36 times the performance of previous generations, aiming to enhance its competitiveness in the AI market, but the fulfillment of subsequent orders by OpenAI remains uncertain.
- OpenAI's Financial Pressure: OpenAI has committed to purchasing up to 6 gigawatts of compute capacity from AMD, valued at approximately $90 billion, but with annual revenue of only $20 billion, it faces challenges in raising funds, which could impact AMD's future sales.
- Investor Confidence Shaken: Despite AMD's stock maintaining a P/E ratio of 49.9 after a correction in 2025, concerns about its high valuation compared to Nvidia's 43.5 may lead to further downside risks in the short term, affecting investor sentiment.
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- Monthly Investment Potential: By investing $500 monthly, investors could grow their investment to $1 million in 25 years, even if the annual return reverts to a modest 12.2%, demonstrating the sustainability and appeal of long-term investing.
- Contributions from Industry Leaders: Micron, AMD, and Nvidia account for 23.6% of the ETF's portfolio weight, providing high-bandwidth memory and graphics processing units that have driven historical returns, underscoring their importance in the AI and cloud computing sectors.
- Future Growth Opportunities: Data center operators are projected to spend $4 trillion on AI infrastructure by 2030, further driving semiconductor demand, and even as AI build-out slows, emerging technologies like quantum computing and autonomous vehicles will maintain high demand.
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