High Expectations Overshadow AMD’s Record Performance

Despite posting exceptionally strong operational results, Advanced Micro Devices (AMD) faced significant selling pressure this week. The market's reaction highlights a pivotal shift: in the current artificial intelligence boom, past achievements are less relevant than the trajectory of future growth, particularly within the data center segment.

The semiconductor designer reported fourth-quarter 2025 earnings on Tuesday that shattered previous records. Revenue climbed to $10.27 billion, comfortably surpassing the consensus analyst forecast of $9.67 billion. Profitability metrics also showed robust improvement, with non-GAAP gross margin reaching 57% and non-GAAP operating income hitting $2.9 billion.

These figures underscore a clear narrative: demand for data center and AI processors is providing substantial momentum, and AMD is successfully scaling its operations to meet it. For the full 2025 fiscal year, the company announced revenue of $34.6 billion and non-GAAP earnings per share of $4.17.

Key Financial Metrics (Q4 2025):
- Revenue: $10.27 billion (+34% year-over-year)
- Non-GAAP EPS: $1.53 (+40%)
- Non-GAAP Gross Margin: 57%
- Non-GAAP Operating Income: $2.9 billion (+41%)

The Crux of Investor Concern: Forward Outlook

The primary source of market disappointment emerged from the company's guidance. Management projected first-quarter 2026 revenue of approximately $9.8 billion (± $300 million). While this outlook exceeds analyst estimates of $9.38 billion, it implies a sequential decline of roughly 5% from the record-breaking fourth quarter.

Should investors sell immediately? Or is it worth buying AMD?

A specific detail within the forecast further tempered enthusiasm. AMD indicated that it includes about $100 million in anticipated sales of its Instinct MI308 accelerators to China. Market experts, including Susquehanna analyst Chris Rolland, noted that this China-related revenue had not been factored into prevailing "Street" expectations. When adjusted for this item, the company's guidance surprise appears considerably more modest. In an environment of "very high" expectations, such nuances frequently drive share price action.

Strategic Partnerships: A Dual-Edged Sword

AMD's growth strategy continues to hinge on major AI infrastructure partnerships. Two recent agreements are particularly noteworthy:

• OpenAI: An alliance announced in October 2025 could involve the deployment of up to 6 gigawatts of Instinct GPU capacity over several years, with an initial 1-gigawatt phase scheduled for the second half of 2026.
• Oracle: Also in October 2025, Oracle committed to implementing 50,000 AMD AI chips, explicitly positioning them as an alternative to solutions from Nvidia.

A critical question for the coming quarters is whether AMD can reliably convert these large-scale commitments into sustained revenue and margin growth, especially without potential export restrictions to China becoming a significant obstacle.

Share Price Reflects a High Bar

Following the earnings release, AMD's stock experienced a sharp decline. According to source data, shares fell 17% on Wednesday, marking one of the stock's most severe single-day drops in recent years. The broader trend is similarly negative, with the equity down 20.62% over the past seven trading days. This pattern is characteristic of the AI sector: following a powerful rally, even an outlook that is merely "not significantly better than hoped" can trigger rapid profit-taking.

The overarching theme remains intact. AMD is delivering record performance, but the market is pricing not the present records, but the next phase of expansion. The next concrete milestone will be the scheduled OpenAI rollout in the latter half of 2026, which must demonstrate how effectively these large AI deals translate into measurable shipment volumes.