Advanced Micro Devices (NASDAQ: AMD) suffered a sharp market backlash after issuing a cautious near-term outlook, overshadowing an otherwise strong quarterly earnings report.
Shares of the chipmaker plunged 17% on Wednesday, erasing more than $30 billion in market value and marking the stock’s worst single-day decline since 2017. This sell-off underscored how heavily investors are currently weighing forward guidance rather than backward-looking results.
Key Points
- AMD shares fell 17% in a single day, wiping out over $30 billion in market value.
- The company projected Q1 2026 revenue of $9.50–$10.10 billion, a sequential decline of about 5%.
- Q4 2025 adjusted earnings were $1.53 per share on $10.27 billion in revenue, beating analyst estimates.
- China AI revenue contributed $390 million from sales of Instinct MI308 accelerators.
- Data center revenue reached a record $5.4 billion, up 39% year-over-year.
- The embedded segment grew modestly, reporting $950 million in revenue, a 3% increase from the prior year.
Guidance Becomes the Market’s Central Focus
The downturn occurred following AMD’s projection of sequential revenue contraction in the current quarter. The company forecast first-quarter 2026 revenue between $9.50 billion and $10.10 billion, which represents a quarter-over-quarter drop of about 5%.
Although the midpoint of the range exceeded the Street’s consensus estimate of $9.37 billion, the outlook failed to reassure investors. The guidance landed amid a broader rotation away from technology stocks, amplifying concerns about near-term growth momentum across the sector.
Earnings Beat Fails to Shift Sentiment
That caution stood in contrast to AMD’s fourth-quarter performance. For Q4 2025, the company reported adjusted earnings of $1.53 per share on revenue of $10.27 billion, comfortably ahead of analysts’ expectations for $1.32 per share on $9.64 billion in revenue.
Despite the clear earnings beat, markets showed little appetite for celebrating past performance. Instead, investor focus remained firmly on how demand and growth might evolve over the coming quarters.
China AI Revenue Complicates the Narrative
Adding nuance to the reaction, Bernstein analysts noted that expectations had been elevated heading into the report. In a note led by analyst Stacy Rasgon, the firm highlighted $390 million in quarterly revenue from China, tied to sales of AMD’s Instinct MI308 AI accelerators.
Stripping out that contribution, Bernstein suggested overall performance was closer to consensus forecasts. Consequently, the China-related upside did little to offset broader unease about sustainability and visibility of AI demand elsewhere.
AI Trade Volatility Weighs on the Stock
AMD’s results arrived amid renewed volatility across the artificial intelligence trade. Investors have begun reassessing lofty valuations and the pace of capital spending among major technology companies.
In this context, guidance that does not point to exceptional growth has struggled to gain traction. For AMD, that backdrop left little margin for error, even with solid fundamentals and strong execution.
Segment Performance Shows Mixed Signals
Operationally, Advanced Micro Devices (NASDAQ: AMD) delivered divergent results across its business lines. The data center segment posted record fourth-quarter revenue of $5.4 billion, up 39% year over year, supported by continued demand for EPYC processors and Instinct GPUs in cloud and AI workloads.
The client and gaming segment generated $3.9 billion in revenue, a 37% annual increase, driven by strength in Ryzen processors and Radeon graphics products across consumer and enterprise markets.
By contrast, the embedded segment reported revenue of $950 million, reflecting a more modest 3% year-over-year increase.
Analysts Highlight Risks Beneath the Surface
While acknowledging strong server demand and ongoing gains in client share, Bernstein analysts highlighted several potential risks. They cautioned that AI revenue growth outside China has yet to show clear acceleration and raised questions about the timing of large-scale AI deployments.
Additionally, the firm warned of possible client-side headwinds emerging in the second half of the year, while also pointing to persistent weakness in gaming consoles as an additional drag.
Valuation Magnifies Disappointment
Commenting on the broader market reaction, Steve Sosnick, chief strategist at Interactive Brokers, noted that stocks trading at triple-digit price-to-earnings multiples are priced for near-perfect execution.
Under these conditions, even fundamentally sound guidance can trigger sharp sell-offs if it does not materially surpass expectations. This dynamic materialized in AMD’s latest trading session.
Management Emphasizes Long-Term Trajectory
Despite the short-term volatility, AMD’s management struck a confident tone. Chief Executive Lisa Su said the company is entering 2026 with strong momentum, citing the accelerating adoption of EPYC and Ryzen processors and continued expansion in data center AI.
While investor sentiment has shifted in the near term, AMD remains a central player in the U.S. semiconductor landscape. The stock continues to trade closely in correlation with Nvidia (NASDAQ: NVDA), even as it lags the industry leader in overall scale and sales.
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