AMD Shares Rebound Following Sharp Sell-Off

Advanced Micro Devices (AMD) presented a set of impressive record-breaking financial results, only to face a severe market punishment. The catalyst for the decline was not the quarterly performance itself, but rather a forward-looking guidance that failed to meet the market's heightened expectations for near-term artificial intelligence (AI) growth. This situation raises questions about the company's ability to reconcile a record quarter with a more cautious immediate outlook.

The share price experienced significant volatility following the earnings release. According to CNBC, the stock plummeted approximately 17% the day after the guidance was issued. However, a notable recovery ensued by week's end. The Motley Fool reported that shares climbed 8.28% on Friday to close at $208.44, suggesting the initial negative reaction may have been overdone.

Record Quarterly and Annual Performance

The company's fourth quarter for fiscal 2025 was exceptionally strong. Revenue reached $10.27 billion, representing a year-over-year increase of 34% and surpassing the LSEG consensus estimate of $9.67 billion. Non-GAAP earnings per share also set a record at $1.53, clearly exceeding the anticipated $1.32.

For the full 2025 fiscal year, AMD posted record figures across the board: $34.6 billion in revenue, a $6.8 billion non-GAAP net income, and diluted earnings per share of $4.17.

Data Center Segment Drives Growth

The primary engine for this expansion was the Data Center business unit. This segment's revenue grew by 39% during the quarter. Company leadership highlighted sustained demand for its EPYC server CPUs and Instinct GPUs from enterprise and hyperscale customers.

Guidance and the China Factor

Despite the robust results, investor attention quickly shifted to the forecast for the first quarter of 2026. AMD projected revenue of approximately $9.8 billion (±$300 million). While this figure was above the analyst consensus of $9.38 billion, the sequential decline from Q4's high watermark disappointed the market.

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

A specific detail within the report further fueled analyst scrutiny. AMD disclosed that roughly $390 million of its AI chip revenue in Q4 was linked to the Chinese market. Reuters analysis noted that excluding these China-related sales, the Data Center segment's performance would have fallen short of analyst expectations. This revelation brings competitive pressures in the AI accelerator market, particularly against Nvidia, back into sharp focus.

Long-Term AI Ambitions and Partnerships

During the earnings call, AMD outlined ambitious long-term objectives for its data center and AI businesses. The company aims to grow data center segment revenue by more than 60% annually over the next three to five years. Furthermore, it targets scaling its AI business to an annual revenue run-rate in the "tens of billions" by 2027.

To support these goals, AMD pointed to several key projects and partnerships:
- The Helios Rack-Scale AI Platform, which integrates 72 MI455X GPUs and delivers up to 2.9 exaFLOPS of FP4 and 1.4 exaFLOPS of FP8 performance.
- The upcoming MI400 series, including the MI455X accelerator.
- Plans by OpenAI to begin deploying 6 gigawatts of AMD Instinct GPUs starting in the second half of 2026.
- Oracle's announcement to deploy 50,000 AMD AI chips.

Mixed Analyst Revisions

Wall Street analysts issued a range of revised price targets in response to the earnings report and guidance, as covered by Yahoo Finance and TheStreet:
- Bank of America raised its target to $280 (from $260), maintaining a Buy rating.
- UBS adjusted its target down to $310 (from $330), while keeping a Buy recommendation.
- Mizuho reduced its target to $275 (from $285), sustaining an Outperform rating.
- Morgan Stanley lowered its target to $255 (from $260), continuing with an Equal Weight stance.

The Path Forward

The key questions for AMD in the current quarter are whether it can convincingly explain the anticipated sequential revenue dip and to what extent the underlying growth in its Data Center segment is sustainable without one-time contributions like the reported China-related AI chip sales. The market will be watching closely for signs that the company's long-term AI narrative is translating into consistent execution.