Advanced Micro Devices Inc Earnings - Q4 2025 Analysis & Highlights
AMD delivered record financial results in 2025 driven by strong demand across data center, client, and gaming segments, with significant momentum in AI infrastructure and server processors positioning the company for continued growth in 2026 and beyond.
Key Financial Results
Full year 2025 revenue reached $34.6 billion, representing 34% year-over-year growth, driven by broad-based demand for high-performance computing and AI products.
Q4 2025 revenue was a record $10.3 billion, growing 34% year-over-year, led by record EPYC, Ryzen, and Instinct processor sales.
Net income increased 42% to a record $2.5 billion in Q4, with full-year net income also reaching record levels.
Free cash flow nearly doubled year-over-year to a record $2.1 billion in Q4, and the company generated a record $2.3 billion in cash from continuing operations during the quarter.
Gross margin was 57% in Q4, up 290 basis points year-over-year, benefiting from favorable product mix and a $360 million inventory reserve release related to MI308 products.
Diluted earnings per share was a record $1.53 in Q4, an increase of 40% year-over-year, with full-year EPS of $4.17, up 26% year-over-year.
Operating income was a record $2.9 billion in Q4, representing a 28% operating margin.
Business Segment Results
Data Center segment revenue was a record $5.4 billion in Q4, up 39% year-over-year and 24% sequentially, driven by strong demand for EPYC processors and continued ramp of MI350 products.
Data Center segment operating income was $1.8 billion or 33% of revenue, compared to $1.2 billion or 30% a year ago.
Server CPU sales accelerated with 5th Gen EPYC Turin CPUs accounting for more than half of total server revenue, and the company exited the year with record server share.
Hyperscalers launched more than 500 AMD-based instances in 2025, increasing the number of EPYC cloud instances more than 50% year-over-year to nearly 1,600.
The number of large businesses deploying EPYC on-premises more than doubled in 2025, with the leading server providers offering more than 3,000 solutions powered by 4th and 5th Gen EPYC CPUs.
Instinct GPU revenue reached record levels in Q4, led by the ramp of MI350 Series shipments, with 8 of the top 10 AI companies now using Instinct to power production workloads.
Client and Gaming segment revenue was $3.9 billion in Q4, up 37% year-over-year, driven primarily by strong demand for AMD Ryzen processors.
Client business revenue was a record $3.1 billion in Q4, up 34% year-over-year and 13% sequentially, with desktop CPU sales setting a record for the fourth consecutive quarter.
Ryzen CPUs topped the bestseller list at major global retailers and e-tailers throughout the holiday period, with strong demand across all price points in every region.
Commercial PC Ryzen adoption accelerated with sell-through of Ryzen CPUs for commercial notebooks and desktops growing by more than 40% year-over-year in Q4.
Gaming segment revenue was $843 million in Q4, up 50% year-over-year, primarily driven by higher semi-custom revenue and strong demand for AMD Radeon GPUs.
Embedded segment revenue was $950 million in Q4, up 3% year-over-year and 11% sequentially, led by strength with test and measurement and aerospace customers.
Embedded segment operating income was $357 million or 38% of revenue, compared to $362 million or 39% a year ago.
The company closed $17 billion in design wins in 2025, up nearly 20% year-over-year, with more than $50 billion of embedded designs won since acquiring Xilinx.
Capital Allocation
The company repurchased 12.4 million shares and returned $1.3 billion to shareholders during 2025.
AMD ended the year with $9.4 billion authorization remaining under its share repurchase program.
Cash, cash equivalents, and short-term investments were $10.6 billion at the end of Q4.
Inventory increased sequentially by approximately $607 million to $7.9 billion to support strong data center demand.
Industry Trends and Dynamics
2025 marked the start of a multiyear demand super cycle for high-performance and AI computing, creating significant growth opportunities across all of AMD's businesses.
Hyperscaler demand was very strong as North American customers expanded deployments, with EPYC-powered public cloud offerings growing significantly in the quarter.
Server CPU demand remains very strong, with hyperscalers expanding infrastructure to meet growing demand for cloud services and AI, while enterprises modernize data centers for new AI workflows.
The overall server CPU TAM is expected to grow at strong double digits in 2026, driven by the relationship between CPU demand and overall AI ramp.
Instinct adoption broadened in Q4 with hyperscalers expanding MI350 Series availability and leading AI companies scaling deployments to support additional workloads.
Multiple NeoCloud providers launched MI350 Series offerings that deliver on-demand access to Instinct infrastructure in the cloud.
The PC market is expected to be down a bit in 2026 given inflationary pressures of commodity pricing, including memory.
Competitive Landscape
EPYC has become the processor of choice for the modern data center, delivering leadership performance, efficiency, and TCO.
AMD gained significant server and PC processor share throughout 2025, with record server sell-through and record desktop channel sell-out.
The company's Ryzen AI 400 mobile processors deliver significantly faster content creation and multitasking performance than the competition.
AMD's chiplet architecture provides significant ability to optimize across inference, training, and different stages of inference, allowing for workload-optimized products.
The company views the evolution of spatial architecture providers and SRAM-based solutions as part of the natural maturation of the AI market, with AMD positioned to address the full range of cloud, HPC, and enterprise AI workloads.
x86 processors have a particular edge in agentic workloads where AI agents spin off work to traditional CPU tasks, with the vast majority of such tasks running on x86 today.
Macroeconomic Environment
Inflationary pressures on commodity pricing, including memory costs, are expected to impact the PC market in 2026.
The company is working closely with suppliers over a multiyear timeframe to ensure supply chain capabilities are well-positioned despite current market conditions and supply chain tightness.
Growth Opportunities and Strategies
AMD is well positioned to capture growth in the multiyear demand super cycle with highly differentiated products, a proven execution engine, deep customer partnerships, and significant operational scale.
The company has the breadth of solutions and partnerships required for end-to-end leadership from Helios in the cloud for at-scale training and inference to an expanded Instinct portfolio for sovereign, supercomputing, and enterprise AI deployment.
Demand for EPYC CPUs is surging as agentic and emerging AI workloads require high-performance CPUs to power head nodes and run parallel tasks alongside GPUs.
At the edge and in PCs where AI adoption is just beginning, industry-leading Ryzen and Embedded processors are powering real-time on-device AI.
The company expanded the ROCm ecosystem in Q4, enabling customers to deploy Instinct faster and with higher performance across a broader range of workloads.
Millions of large language and multimodal models run out of the box on AMD, with leading models launching with day-zero support for Instinct GPUs.
AMD introduced its Enterprise AI Suite, a full stack software platform with enterprise-grade tools, inference microservices, and solutions blueprints designed to simplify and accelerate production deployments at scale.
The company announced a strategic partnership with Tata Consultancy Services to co-develop industry-specific AI solutions and help customers deploy AI across their operations.
Customer engagements for next-gen MI400 Series and Helios platform continue expanding, with active discussions on at-scale multiyear deployments starting with Helios and MI450 later in 2026.
Multiple OEMs publicly announced plans to launch Helios systems in 2026, with HPE announcing purpose-built Juniper Ethernet switches and optimized software, and Lenovo announcing plans to offer Helios racks.
MI430X adoption grew in Q4 with new exascale-class supercomputers announced by GENCI in France and HLRS in Germany.
Development of next-generation MI500 Series is well underway, powered by CDNA 6 architecture built on advanced 2-nanometer process technology with high-speed HBM4E memory.
AMD is on track to launch MI500 in 2027 and expects it to deliver another major leap in AI performance to power the next wave of large-scale multimodal models.
The company's next-generation Venice CPU extends leadership across performance, efficiency, and TCO metrics, with very high customer pull and engagements underway to support large-scale cloud deployments.
Valve is on track to begin shipping its AMD-powered Steam machine early in 2026, and development of Microsoft's next-gen Xbox featuring an AMD semi-custom SoC is progressing well to support a launch in 2027.
AMD launched FSR 4 Redstone in Q4, its most advanced AI-powered upscaling technology, delivering higher image quality and smoother frame rates for gamers.
The company began production of Versal AI Edge Gen 2 SoCs for low-latency inference workloads and started shipping highest-end Spartan UltraScale+ devices for cost-optimized applications.
New embedded CPUs were launched, including EPYC 2005 Series for network security and industrial edge applications, Ryzen P100 Series for in-vehicle infotainment and industrial systems, and Ryzen X100 Series for physical AI and autonomous platforms.
Financial Guidance and Outlook
Q1 2026 revenue is expected to be approximately $9.8 billion, plus or minus $300 million, including approximately $100 million of MI308 sales to China.
At the midpoint of Q1 guidance, revenue is expected to be up 32% year-over-year, driven by strong growth in Data Center and Client and Gaming segments and modest growth in Embedded segment.
Sequentially, Q1 revenue is expected to be down approximately 5%, driven by seasonal decline in Client, Gaming, and Embedded segments, partially offset by growth in Data Center segment.
Q1 non-GAAP gross margin is expected to be approximately 55%, non-GAAP operating expense approximately $3.05 billion, non-GAAP other net income approximately $35 million, and non-GAAP effective tax rate 13%.
Diluted share count is expected to be approximately 1.65 billion shares in Q1 2026.
AMD expects significant top line and bottom line growth in 2026, led by increased adoption of EPYC and Instinct, continued client share gains, and a return to growth in Embedded segment.
For 2026, the company expects semi-custom SoC annual revenue to decline by a significant double-digit percentage as it enters the seventh year of the console cycle.
The company is very bullish on 2026 data center growth, with strong growth drivers across server CPU and data center AI.
Server CPU is expected to grow from Q4 into Q1 in what is normally seasonally down, and this trend is expected to continue throughout the year.
MI350 is expected to continue ramping in the first half of 2026, while MI450 represents an inflection point with revenue starting in Q3 but ramping significant volume in Q4 as the company moves into 2027.
The company is not forecasting any additional revenue from China beyond the $100 million in Q1, given the dynamic situation with export licenses.
The long-term target of greater than 60% Data Center segment growth is considered possible in 2026.
AMD expects to be able to continue growing server CPU throughout 2026 despite supply chain tightness, having increased supply capacity capability for server CPUs.
The company expects gross margin progression throughout 2026, benefiting from favorable product mix across all businesses and the recovery of the Embedded business.
AMD expects OpEx to grow slower than revenue in 2026, especially as the company gets into the second half of the year and sees inflection in revenue.
The company sees a clear path to achieve ambitious targets laid out at its Financial Analyst Day, including growing revenue at greater than 35% CAGR over the next three to five years, significantly expanding operating margins, and generating annual EPS of more than $20 in the strategic timeframe.
AMD is well positioned to grow Data Center segment revenue by more than 60% annually over the next three to five years and scale its AI business to tens of billions in annual revenue in 2027.
The company does not believe it will be supply limited in terms of the data center AI ramp planned for the second half of 2026.
