Earnings Call Insights: Advanced Micro Devices (AMD) Q4 2025
Management View
- Lisa Su, Chair, President & CEO, opened by stating 2025 was “a defining year for AMD with record revenue, net income and free cash flow driven by broad-based demand for our high-performance computing and AI products.” She highlighted “record revenue, net income and free cash flow,” with particular strength across data center, PC, gaming, and embedded markets.
- Su reported, “Data Center segment revenue increased 39% year-over-year to a record $5.4 billion, led by accelerating Instinct MI350 Series GPU deployments and server share gains,” and noted EPYC CPU adoption broadened with record server CPU sales and market share gains in both cloud and enterprise.
- She emphasized momentum in Data Center AI, declaring, “8 of the top 10 AI companies use Instinct to power production workloads,” and described broadening Instinct MI350 Series adoption and the upcoming launch of the MI400 series and Helios platform as “a major inflection point for the business.”
- Su outlined partnerships and new launches: “We also announced a strategic partnership with Tata Consultancy Services to co-develop industry-specific AI solutions and help customers deploy AI across their operations.” She further described next-generation MI500 series development, targeting launch in 2027.
- In the Client and Gaming segment, Su stated desktop CPU sales set a record for the fourth consecutive quarter and described the upcoming launches of Ryzen AI 400 mobile processors and the Ryzen AI Halo platform.
- For Embedded, Su highlighted, “We closed $17 billion in design wins in 2025, up nearly 20% year-over-year as we’ve now won more than $50 billion of embedded designs since acquiring Xilinx.”
- Su projected, “We are well positioned to grow Data Center segment revenue by more than 60% annually over the next 3 to 5 years and scale our AI business to tens of billions in annual revenue in 2027.”
- Jean Hu, Executive VP, CFO & Treasurer, stated, “AMD executed very well in 2025, delivering record revenue of $34.6 billion, up 34% year-over-year, driven by 32% growth in our Data Center segment and 51% growth in our Client and Gaming segment. Gross margin was 52%, and we delivered record earnings per share of $4.17, up 26% year-over-year.”
- Hu added, “For the fourth quarter, diluted earnings per share was a record $1.53, an increase of 40% year-over-year, reflecting strong execution and operating leverage in our business model.”
Outlook
- Hu provided Q1 2026 guidance: “We expect revenue to be approximately $9.8 billion, plus or minus $300 million, including approximately $100 million of MI308 sales to China.” She stated, “At the midpoint of our guidance, revenue is expected to be up 32% year-over-year.”
- Sequentially, revenue is expected to decline approximately 5% due to seasonal factors in Client, Gaming, and Embedded, partially offset by growth in Data Center.
- Hu guided for “fourth quarter non-GAAP gross margin to be approximately 55%” and “non-GAAP operating expense to be approximately $3.05 billion.”
- Su reiterated long-term projections: “We see a clear path to achieve the ambitious targets we laid out at our Financial Analyst Day last November, including growing revenue at greater than 35% CAGR over the next 3 to 5 years, significantly expanding operating margins and generating annual EPS of more than $20 in the strategic time frame.”
Financial Results
- Hu reported, “For the fourth quarter of 2025, revenue was a record $10.3 billion, growing 34% year-over-year, driven by strong growth in the Data Center and Client and Gaming segment, including approximately $390 million in revenue from MI308 sales to China, which was not included in our fourth quarter guidance.”
- Gross margin was reported at 57%, “up 290 basis points year-over-year. We benefited from the release of $360 million in previously writing down MI308 inventory reserves. Excluding the inventory reserve release and MI308 revenue from China, gross margin would have been approximately 55%, up 80 basis points year-over-year.”
- Operating income was $2.9 billion (28% margin), free cash flow was $2.1 billion, and cash, cash equivalents and short-term investments were $10.6 billion at quarter end.
- Data Center segment operating income was $1.8 billion (33% of revenue). Client and Gaming segment operating income was $725 million (18% of revenue). Embedded segment operating income was $357 million (38% of revenue).
Q&A
- Aaron Rakers, Wells Fargo: Asked about the path to “tens of billions of dollars of data center AI revenue” in 2027 and customer engagement for MI455 and Helios. Su responded, “Customer engagements continue to proceed very well. We have obviously a very strong relationship with OpenAI, and we’re planning that ramp starting in the second half of the year going into 2027.”
- Timothy Arcuri, UBS: Asked for detail on Q1 guidance and the Data Center GPU ramp. Hu explained, “Sequentially, we guided a decline around 5%, but Data Center is actually going to be up…our CPU business seasonal actually in a regular seasonal pattern, it’s going to be down high single digit.”
- Vivek Arya, BofA: Sought clarification on China MI308 sales and potential for 60%+ Data Center growth in 2026. Su replied, “We are not forecasting any additional revenue from China just because it’s a very dynamic situation.” On Data Center growth, “the long-term target of, let’s call it, greater than 60% is certainly possible in 2026.”
- Christopher Muse, Cantor Fitzgerald: Inquired about server CPU supply and gross margin dynamics. Su assured, “We’ve been seeing the trend for the last couple of quarters. So we have increased our supply capacity capability for server CPUs.”
- Joseph Moore, Morgan Stanley: Asked about MI455 ramp and revenue recognition. Su said, “For 2026, I would say the vast majority of it is going to be Rack Scale solutions. And yes, we will take revenue when we ship to the rack builder.”
- Stacy Rasgon, Bernstein: Queried on OpEx trends and leverage. Su explained, “We’ve always said in our long-term model that OpEx should grow slower than revenue, and we would expect that in 2026 as well.”
- Joshua Buchalter, TD Cowen: Asked about client order patterns and Instinct competitive positioning. Su noted, “The way we are modeling the year is, let’s call it, second half a bit subseasonal to first half, just given everything that we see. Even in that environment with the PC market down, we believe we can grow our PC business.”
- Benjamin Reitzes, Melius Research: Sought update on OpenAI ramp and x86 vs. ARM dynamics. Su said, “The ramp is on schedule to start in the second half of the year. MI450 is doing great. Helios is doing well.”
- Thomas O’Malley, Barclays: Inquired about memory procurement and system architecture evolution. Su stated, “We’re working closely with our suppliers over a multiyear time frame in terms of what we see in demand, how we ramp, how we ensure that our development is very closely tied together.”
- Ross Seymore, Deutsche Bank: Asked about gross margin progression across GPU generations and gaming segment trajectory. Hu replied, “In the longer term, you should expect each generation should have a higher gross margin.”
- James Schneider, Goldman Sachs: Asked about supply constraints and OpEx investment areas. Su stated, “I do not believe that we will be supply limited in terms of the ramp that we put in place.”
Sentiment Analysis
- Analysts displayed a positive to slightly bullish tone, frequently referencing AMD’s strong Data Center growth outlook and probing for confirmation on major ramps and supply chain readiness. Questions focused on AI revenue visibility, margin progression, and competitive positioning, with some caution around China dynamics and OpEx discipline.
- Management maintained a confident tone throughout both prepared remarks and Q&A, using phrases like “we are very bullish on the year,” “we feel very good about that,” and “we are well positioned.” There was a consistent emphasis on execution and clarity on guidance. In the prior quarter, management’s tone was similarly positive, but the current quarter’s remarks reflected increased conviction in multi-year growth and AI opportunity.
Quarter-over-Quarter Comparison
- Guidance for Q1 2026 revenue is higher year-over-year and calls for continued Data Center growth, while the sequential decline reflects typical seasonality.
- The strategic focus has shifted further toward scaling AI and rack-scale solutions, with more concrete forecasts for Data Center segment growth (targeting >60% annual growth) and explicit multi-billion-dollar AI revenue ambitions by 2027.
- Analysts in the current quarter focused more on AI ramp milestones, gross margin sustainability, OpEx leverage, and competitive dynamics versus ARM and supply chain risks, compared to the previous quarter’s broader questions on product adoption and initial OpenAI partnership implications.
- Key metrics such as Data Center revenue and margin, EPS, and free cash flow were all reported at record highs, with the current quarter benefiting from inventory reserve releases and China MI308 sales not forecast in the previous guide.
- Management’s confidence and clarity around future launches, customer wins, and supply readiness appear stronger than in the prior quarter.
Risks and Concerns
- Management cautioned on China, stating, “We are not forecasting any additional revenue from China just because it’s a very dynamic situation.”
- Memory and component inflation were noted as potential headwinds in client and supply chain planning, with Su pointing to “inflationary pressures of the commodities pricing, including memory.”
- The gaming segment is expected to face a “significant double-digit percentage” decline in semi-custom SoC annual revenue in 2026 due to the mature console cycle.
- Analysts probed for risks in supply chain and ramp execution, with Su repeatedly stressing proactive supply planning and strong supplier partnerships.
- OpEx discipline was highlighted, with management promising leverage as AI revenues accelerate and stating that OpEx growth will trail revenue growth.
Final Takeaway
AMD’s Q4 2025 call underscored a year of record financial performance and set the stage for aggressive multi-year growth in Data Center AI, driven by the planned launches of the MI400 and Helios platforms. Management outlined a path to over 60% annual growth in the Data Center segment and scaling AI business to tens of billions in annual revenue by 2027, while maintaining a focus on operational leverage and margin expansion. Risks remain around China revenue, memory cost inflation, and gaming cycle headwinds, but management expressed strong confidence in execution, supply chain readiness, and customer demand across high-growth segments.