Why AMD Shares Fell After Record Earnings

Despite the record financial performance, the publication of AMD’s quarterly and annual reports led to a noticeable decline in its stock prices. The day after the report’s release, the securities of the stock market map large player collectively sank by almost 10%, even though AMD completed the fourth quarter with the highest revenue and profit in its history, and its forecast for the current period proved more optimistic than analysts’ expectations.

AMD’s revenue in the fourth quarter grew 34% year over year to a record $10.27 billion. Non-GAAP net income increased by 42% to $2.5 billion, while GAAP net income jumped by 213% to $1.24 billion. The profit margin also improved to 57% and 54%, respectively. By the end of 2025, the company had increased revenue by the same 34% to $34.64 billion, and GAAP net income had increased by 164% to $4.34 billion. These figures exceeded the market’s consensus forecasts, but investors were apparently alarmed by the growth rates, which turned out to be below the most aggressive expectations.

The server business remains the key driver of growth. In the fourth quarter, AMD’s revenue in this segment reached a record $5.4 billion, up 39% year over year and exceeding analysts’ expectations. By the end of the year, the server business brought in $16.6 billion, 32% more than a year earlier. Lisa Su noted that both EPYC processors and Instinct accelerators are in high demand, and the company expects to increase server revenue by more than 60% this year.

At the same time, AMD deliberately excludes potential revenue from supplying Instinct MI308 accelerators to China from its forecasts due to uncertainty about export restrictions. Last quarter, these shipments brought the company about $309 million, although they were not initially included in the forecast. Over the longer term, AMD expects next year’s AI segment revenue to reach tens of billions of dollars, driven by expanded collaboration with OpenAI and rising demand for Helios rack-scale solutions and next-generation accelerators. As with a potential OpenAI IPO, heightened scrutiny and interest from investors and regulators are expected.

The customer and gaming segments, which AMD now combines in its reporting, also showed strong growth. In the fourth quarter, total revenue here amounted to $3.9 billion (+37% YoY), with the client area reaching a record $3.1 billion. The growth was driven not only by Ryzen processors but also by AMD’s strengthening of its position in higher-priced PC market segments. At the same time, Lisa Su explicitly acknowledged that the global PC market is likely to shrink this year, but AMD intends to compensate for this by focusing on premium and corporate niches that are less sensitive to rising memory prices.

AMD’s gaming business grew 1.5x last quarter, driven by both Radeon graphics cards and semi-custom console solutions. During the reporting conference, Lisa Su confirmed that the development of a key chip for the next-generation Microsoft game console is proceeding according to plan and will be announced in 2027. This is a multi-year partnership between AMD and Microsoft that covers not only classic and portable consoles but also the server infrastructure for Xbox Cloud Gaming. It is expected that the new Xbox will be closer in architecture to the PC and will receive expanded support for application ecosystems.

Separately, it is worth noting the embedded solutions segment inherited from Xilinx. In the fourth quarter, its revenue grew by only 3% to $950 million, and by the end of the year, it decreased by 3% to $3.5 billion, which AMD attributes to customer inventory corrections.

In the first quarter of this year, the company expects revenue in the range of $9.5 billion to $10.1 billion, which would represent an average year-on-year increase of 32% but a 5% decrease due to seasonal factors. Despite this, AMD’s management is not abandoning its strategic goal of increasing total revenue by more than 35% annually over the next five years. According to Lisa Su, 2025 has become a defining year for the company, and it is entering 2026 with the accelerating spread of EPYC, Ryzen, and AI server solutions, the demand for which is already outstripping supply opportunities.