AMD Q4 Earnings Beat Estimates, Revenues Up Y/Y, Shares Fall

Core Insights - Advanced Micro Devices (AMD) reported Q4 2025 non-GAAP earnings of $1.53 per share, exceeding estimates by 16.18%, with a year-over-year increase of 40.4% and a sequential increase of 27.5% [1] - Revenues reached $10.27 billion, surpassing estimates by 6.24%, and increased 34.1% year-over-year and 11.1% sequentially [1] Revenue Breakdown - Data Center revenues grew 39.4% year-over-year to $5.38 billion, making up 52.4% of total revenues, with a sequential increase of 23.9% driven by demand for EPYC processors and MI350 GPUs [2] - The Client segment saw revenues rise 33.9% year-over-year to $3.09 billion, accounting for 30.2% of total revenues, with a sequential increase of 12.6% due to strong demand for Ryzen processors [4] - Gaming segment revenues surged 49.7% year-over-year to $843 million, representing 8.2% of total revenues, although sequentially they declined 35.1% [5] - Embedded segment revenues were $950 million, up 2.9% year-over-year and 10.9% sequentially, accounting for 9.3% of total revenues [6] Margin and Operating Income - Non-GAAP gross margin expanded 290 basis points year-over-year to 57%, significantly better than the previous quarter's 54% [7] - Adjusted EBITDA increased 38.7% year-over-year to $3.04 billion, with a margin expansion of 100 basis points year-over-year and 340 basis points sequentially [7] - Non-GAAP operating margin expanded 130 basis points year-over-year to 27.8%, higher than the previous quarter's 24.2% [9] - Data Center operating income was $1.75 billion, up from $1.15 billion year-over-year, with a sequential increase of 63.1% and a margin expansion of 540 basis points [10] Cash Flow and Shareholder Returns - As of December 27, 2025, AMD had cash and short-term investments of $10.55 billion, up from $7.24 billion in the previous quarter [12] - Operating cash flow was $2.30 billion in Q4 2025, compared to $1.79 billion in Q3 2025 [12] - Free cash flow was $2.08 billion in Q4 2025, with a free cash flow margin of 20%, up 300 basis points sequentially [13] - AMD returned $1.3 billion to shareholders through its share repurchase program, with $9.4 billion remaining under its current authorization [13] Guidance - AMD expects Q1 2026 revenues of approximately $9.8 billion, indicating strong year-over-year growth of about 32% but a sequential decline of approximately 5% [14]