AMD Stock Drops Despite Beating Q4 Earnings Expectations

TLDR

• AMD reported Q4 adjusted earnings of $1.53 per share, beating Wall Street’s estimate of $1.32, with revenue of $10.3 billion versus expected $9.67 billion.
• The company forecast Q1 revenue of $9.8 billion at the midpoint, above analyst expectations of $9.42 billion, but some analysts anticipated stronger guidance given AI spending trends.
• AMD shares dropped up to 8% in after-hours trading despite the earnings beat, potentially due to profit-taking after a 13% year-to-date gain and guidance falling short of higher expectations.
• The data center segment grew 39% annually to $5.4 billion, driven by both central processors and AI GPUs, with CEO Lisa Su noting strong server CPU demand from hyperscalers and enterprises.
• AMD reported $390 million in China sales of its MI308 chips in Q4 but expects only $100 million in China revenue for Q1 due to U.S. export controls.

AMD delivered a solid earnings beat on Tuesday, but Wall Street wasn’t entirely impressed. The chipmaker’s stock fell as much as 8% in after-hours trading. The reaction suggests investors wanted more.

The company reported fourth-quarter adjusted earnings of $1.53 per share. That crushed the consensus estimate of $1.32. Revenue hit $10.3 billion, well above the $9.67 billion analysts predicted.

Net income jumped to $1.51 billion, or 92 cents per share. That’s a big leap from $482 million, or 29 cents per share, in the same quarter last year. Overall revenue climbed 34% year over year.

Advanced Micro Devices, Inc., AMD

The guidance looked decent on paper. AMD forecast first-quarter revenue of $9.8 billion at the midpoint, compared to analyst expectations of $9.42 billion. But here’s the catch: some analysts were hoping for even stronger numbers given the AI spending boom.

The stock had already rallied 13% year to date heading into the earnings release. Some investors likely saw the results as a chance to lock in gains.

Data Center Growth Powers Results

The data center segment was the star performer. Sales reached $5.4 billion in the quarter, up 39% from the prior year. Growth came from both central processors and AI graphics processors.

AMD recently landed some major customers for its AI chips. OpenAI and Oracle both signed on. The company plans to ship a new integrated server-scale AI system called Helios later this year.

Client Business Shows Strength

The client and gaming segment delivered solid growth too. Revenue rose 37% year over year to $3.9 billion. Demand for Ryzen processors in laptops and PCs drove the increase.

AMD has been taking market share from Intel in the PC processor market. The company’s chips have become popular choices for consumers and businesses alike.

The embedded segment grew at a slower pace. Revenue increased just 3% year over year to $950 million.

China Revenue Takes a Hit

Export controls are creating headwinds in China. AMD recorded $390 million in sales of its Instinct MI308 chips to China during the fourth quarter. But the company expects only $100 million in China revenue for the current quarter.

U.S. restrictions on shipping advanced AI chips to China have limited AMD’s ability to tap into that market. The sharp drop in expected China sales for Q1 reflects the impact of these controls.

HSBC analyst Frank Lee remains bullish on the stock. He reaffirmed his Buy rating on Friday and raised his price target to $335 from $300. Lee believes the rise of agentic AI will drive server CPU demand, benefiting AMD.

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