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Advanced Micro Devices (AMD) is sharply lower despite beating Q4 expectations and issuing upside Q1 guidance last night. The company beat EPS expectations by its widest margin in over three years, while revenue increased 34.1% yr/yr to a record $10.27 bln. AMD expects Q1 revenue between $9.50-10.10, which includes about $100 mln of instinct sales to China.

• Growth remained broad-based, with demand accelerating into year-end across data center, PCs, gaming, and embedded, supporting continued server and PC processor share gains.
• Data center revenue increased 39% yr/yr, 24% sequentially, to a record $5.4 bln, driven by accelerating MI350 deployments and strong EPYC demand. 5th Gen EPYC Turin adoption accelerated further and accounted for more than half of total server revenue, with strength spanning both hyperscaler cloud deployments and enterprise adoption.
• Client and Gaming revenue increased 37% yr/yr to $3.9 bln, driven by Client revenue up 34% to a record $3.1 bln on strong Ryzen demand. Gaming revenue rose 50% to $843 mln, but declined sequentially as semi-custom console sales pulled back seasonally. AMD expects semi-custom SoC revenue to fall a significant double-digit percentage in FY26 as the console cycle matures.
• Non-GAAP gross margin increased 290 bps yr/yr to 57%, benefiting from an inventory reserve release and MI308 revenue to China. Excluding the reserve release and China revenue, gross margin was about 55% (+80 bps yr/yr), and AMD expects gross margin to remain around 55% in Q1.
• The MI450 + Helios ramp remains on schedule for 2H26, with MI450 revenue starting in Q3 and ramping to meaningful volume in Q4 into 2027. Management reiterated OpenAI is on schedule, while noting multiple other customers are in discussions for at-scale, multi-year Helios/MI450 deployments.
• The Q1 guidance reflects a seasonal step-down outside of Data Center, and assumes only limited MI308 revenue in Q1 and no contribution beyond that given the dynamic licensing backdrop.

Briefing.com Analyst Insight

AMD delivered yet another record quarter and comfortably beat expectations on results and guidance, yet shares are getting punished. Stepping back, the fundamentals remain strong as AMD continues to take share in server and client while Data Center growth accelerates. That said, some investors may view the beat as a bit less clean since Q4 included some China Instinct revenue that was not widely expected, while the Q1 outlook still points to a sequential decline even as Data Center is expected to grow. More notably, a lot of optimism is already embedded in the stock around the MI450 and Helios opportunity. With the biggest upside still tied to a back-half weighted ramp that depends on complex, large-scale system deployments, the market appears to be looking for more tangible proof points on cadence and execution rather than simply another beat and upside guide. That mix seems to be driving a sell-the-news reaction despite another fundamentally strong quarter.