AMD’s data center segment revenue increased 39% year-over-year to a record $5.4 billion, led by Instinct GPUs and EPYC CPUs. Of this, $390 million was from MI308 sales to China, which means the DC segment reported closer to $5.0 billion in revenue. That number is worrisome to the market because it would mean QoQ growth of 15% for Q4, down from 34% QoQ growth in Q3. This would also translate to YoY growth of 29% – which is not to grab the Street’s attention given Broadcom is in the 100% range on ASICs and Nvidia is reporting about 12X higher on a quarterly basis and 50X higher revenue on an annual basis.
The guide also implies a deceleration from $10.3 billion this quarter to $9.8 billion in the upcoming quarter. Although this beats the Street expectations of $9.37 billion, it’s not the beat/raise tempo being set from other AI stocks right now.
However, there were some bright spots on the call, primarily management stating to expect 60% growth in the data center over the next few years – including 2026. This hint is important as it communicates a strong acceleration into the second half of 2026 given we are starting out at data center growth of 39%, which is what we’ve been expecting.
Per my last earnings writeup: “AMD Q3: The Catalyst is Expected in H2 2026," which stated, “AMD is a stock where I’ve been intentional about managing expectations. The upside is compelling — as the second place in data center GPUs is wide open. Yet for those who have followed our coverage, the timing has always been key: meaningful execution in AI accelerators is not expected to materialize until the second half of 2026. In other words, the long-term opportunity is substantial, but patience remains part of the thesis.”
I could have simply republished last quarter’s write-up except for this one important update that offers 3-5 year visibility; rare for any management team but especially AMD.
Data Center to see 60%+ Growth for Next 3-5 Years
Buried in the call was a rather strong statement for this otherwise-conservative management team that AMD is “well positioned” to grow data center revenue by more than 60% annually over a 3-5 year time frame:
“With the launch of MI400 series and Helios representing a major inflection point for the business, as we deliver leadership performance and TCO at the chip compute tray and rack level. Based on the strength of our EPYC and Instinct road maps, 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.”
Given the strength of the comment, an analyst asked about the comment on the call and if the 60% applies to 2026 with management replying this is certainly possible:
“We're not obviously guiding specifically by segment, but the long-term target of, let's call it, greater than 60% is certainly possible in 2026.”
There have been rumors that AMD may be late in delivering the MI400s, however, that was dismissed today on the call as management reiterated, they are on time for H2:
Later, the CFO also confirmed margins would improve by Q4 based on the launch: “So all those tailwinds we're seeing, we continue to see in the next few quarters. And MI450 ramp, of course, in Q4, our gross margin will be driven largely by mix. And I think we'll give you more color when we get there. But overall, we feel really good about our gross margin progression this year.”
There was more color provided on timing by CEO Lisa Su:
“But as we get into the second half of the year, the MI450 is really an inflection point for us. So that revenue will start in the third quarter, but it will ramp significant volume in the fourth quarter as we get into 2027. So that gives you a little bit of sort of what the data center ramp looks like throughout the year.”
Later she reiterated this again when asked for specific timing: “And our expectation is that we will be on track for our second half launch.”
However, I do expect some analysts to be turned off by the company choosing to not breakout Instinct GPU revenue from EPYC revenue in the data center segment. That would imply GPU revenue is pretty low still. That is not too relevant to our thesis, yet if you see negative notes coming out, it’s due to lack of visibility in the current size of the AI accelerator business.
The only visibility provided was a mention of “tens of billions” in revenue in 2027.
Aaron Rakers Wells Fargo Securities
Lisa, at your Analyst Day back in November, you seem to kind of endorse the high $20 billion AI revenue expectation that was out there on the Street for 2027. I know today you're reaffirming the path to strong double-digit growth. So I guess my question is, can you talk a little bit about what you've seen as far as customer engagements, how those might have expanded? I think you've alluded to in the past multiple multi-gigawatt opportunities. Just any — just double-click on what you've seen from the MI455 and Helios platform from a demand shaping perspective as we look into the back half of the year?
Lisa Su Chair, President & CEO
Yes. Sure, Aaron. Thanks for the question. So first of all, I think the MI450 Series development is going extremely well. So we're very happy with the progress that we have. We're right on track for a second half launch and beginning of production. And as it relates to sort of the shape of the ramp and the customer engagement, I would say the 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. That is on track. We're also working closely with a number of other customers who are very interested in ramping MI450 quickly, just given the strength of the product, and we see that across both inference and training. And that is the opportunity that we see in front of us. So we feel very good about sort of the data center growth overall for us in 2026. And then certainly going into 2027, we've talked about tens of billions of dollars of data center AI revenue, and we feel very good about that.
Financials:
By Royston Roche
Q4 Revenue Grew by 34%
AMD’s Q4 revenue grew by 34.1% YoY and 11.1% QoQ to $10.27 billion, beating estimates by 6.2%. Revenue growth was primarily driven by continued growth in the Data Center segment from both server and data center AI business, as well as a return to YoY growth in the Embedded segment. However, the company’s revenue this quarter included approximately $390 million from MI308 sales to China and excluding this revenue since it was not included in the guidance would yield only a 2.2% beat, the smallest in the last four quarters.
Management guided Q1 revenue of $9.8 billion at the midpoint, implying a YoY growth of 31.8% YoY and down (4.6%) QoQ and the guidance includes about $100 million of MI308 chip sales to China. It is primarily driven by growth in the Data Center and Client and Gaming segments and modest growth in the Embedded segment. Although this beats the Street expectations of $9.37 billion, it’s not the beat/raise tempo being set from other AI stocks right now.
Full year 2025 revenue grew by 34.3% YoY to $34.6 billion. Looking ahead, analysts expect revenue to grow 33.2% YoY to $46.1 billion in 2026 and accelerate to 37.9% YoY to $63.6 billion in 2027.
Q4 Data Center Revenue Grew by 39% YoY
The company’s Data Center segment revenue grew by 39% YoY and 24% QoQ to a record $5.4 billion, led by accelerating Instinct MI350 Series GPU deployments and server share gains. In server, adoption of fifth gen EPYC CPUs accelerated in the quarter, accounting for more than half of the total server revenue. AMD had record server CPU sales to both cloud and enterprise customers in the quarter and exited the year with record share.
In cloud, hyperscaler demand was very strong as North American customers expanded deployments. EPYC-powered public cloud offerings grew significantly in the quarter with AWS, Google and others launching more than 230 new AMD instances. In the enterprise, AMD is witnessing a meaningful shift in EPYC adoption, driven by leadership performance, expanded platform availability, broad software enablement, and increased go-to-market programs. Looking ahead, management expects server CPU demand to be very strong as hyperscalers are expanding their infrastructure to meet growing demand for cloud services and AI while enterprises are modernizing their data centers.
The company delivered record Instinct GPU revenue in the fourth quarter, led by the ramp of MI 350 Series shipments. In addition to the partnership entered in October with OpenAI to deploy 6 gigawatts of Instinct GPUs, AMD is in active discussions with other customers on at-scale multiyear deployments starting with Helios and MI450 later this year. AMD expanded the ROCm ecosystem in the fourth quarter, enabling customers to deploy Instinct faster and with higher performance across a broader range of workloads. The company remains on track to launch its MI500 chips in 2027 and expects to deliver a major increase in AI performance.
Client and Gaming Segment revenue grew by 37%
Q4 client and gaming segment revenue grew by 37% YoY and down (3%) QoQ to $3.94 billion. Client segment revenue grew by 34% YoY and 13% QoQ to $3.1 billion. Management highlighted the strong demand for Ryzen processors for laptops and PCs, which have been gaining market share against Intel.
In gaming, revenue grew by 50% YoY and down (35%) QoQ to $843 million. Management said in the Q4 earnings call, “Semi-custom sales increased year-over-year and declined sequentially as expected. For 2026, we expect semi-custom SoC annual revenue to decline by a significant double-digit percentage as we enter the seventh year of what has been a very strong console cycle.”
Embedded revenue returned to growth in Q4. It grew by 3% YoY and up 11% QoQ to $950 million, up from the YoY decline of (8%) and up 4% QoQ in Q3 2025.
Margins
The company’s profits are growing. However, near term margins are negatively impacted by higher operating expenses to support strong future AI opportunities. Management expects margins to improve by the end of Q4 due to favorable product mix, particularly the ramp of MI450 chips.
- Q4 gross profits grew by 44% YoY and 17% QoQ to $5.58 billion. Adjusted gross profits grew by 41% YoY and 17% QoQ to $5.86 billion. Adjusted gross margin was 57%, and it benefitted from the $360 million previously written down MI308 inventory reserves. Excluding the inventory reserve release and MI308 revenue from China, gross margin would have been 55%, up 100 basis points YoY and QoQ, driven by favorable product mix. Management has guided 55% adjusted gross margin in Q1
- Q4 operating income grew by 101% YoY and 38% QoQ to $1.75 billion. Operating margin improved by 600 basis points YoY and 300 basis points QoQ to 17%. Adjusted operating income grew by 41% YoY and 28% QoQ to $2.85 billion. Adjusted operating margin improved by 200 basis points YoY and 400 basis points QoQ to 28%. Management has guided an adjusted operating margin of 24% in Q1. The company’s near-term margins are negatively impacted by higher operating expenses to support strong future AI opportunities.
- Net income was up 213% YoY to $1.5 billion or 15% of revenue, up 900 basis points YoY. Adjusted net income was up 42% YoY to $2.5 billion or 25% of revenue, up 200 basis points YoY.
Adjusted EPS grew by 40%
The company’s Q4 adjusted EPS grew by 40.4% YoY to $1.53 primarily driven by operating leverage, beating estimates by 16%.
Analysts expect Q1 adjusted EPS to grow 27.6% YoY to $1.22 and 185.8% YoY to $1.37 in Q2 2026.
Cash Flow and Balance Sheet
The company’s cash flows are growing primarily driven by higher revenue and profits.
- Q4 operating cash flow grew by 77% YoY to $2.3 billion with an operating cash flow margin of 22%, up 500 basis points YoY.
- Q4 free cash flow grew by 91% YoY to $2.1 billion with a free cash flow margin of 20%, up 600 basis points YoY.
- The company had cash and short-term investments of $10.5 billion, up from $7.24 billion in Q3. While debt remained the same at $3.22 billion.
- Inventories rose 8% QoQ to $7.92 billion to support the strong future AI demand.
Conclusion:
There was no big reveal in AMD’s earnings report, yet interesting enough, that has been the case for years and yet the stock is starting to see movement as AMD outpaced Nvidia’s returns last year by 3X. In my most recent Top 15 AI Stocks report, I highlighted how the element of surprise can work in AMD’s favor. Most importantly, AMD’s management team remains among the most conservative in the space, which makes it notable that we’re already hearing expectations for roughly 60% growth in the data center segment for 3-5 years. That’s a nice clue for what may be on the horizon.
Royston Roche, Equity Analyst at I/O Fund contributed to this analysis.
Please note: The I/O Fund conducts research and draws conclusions for the company’s portfolio. We then share that information with our readers and offer real-time trade notifications. This is not a guarantee of a stock’s performance and it is not financial advice. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis. Beth Kindig and the I/O Fund own shares in AMD at the time of writing and may own stocks pictured in the charts.
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