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It has been about a month since the last earnings report for Advanced Micro Devices (AMD). Shares have added about 0.9% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Advanced Micro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.
Advanced Micro Devices reported fourth-quarter 2025 non-GAAP earnings of $1.53 per share, which beat the Zacks Consensus Estimate by 16.18%. The figure jumped 40.4% year over year and 27.5% sequentially.
Revenues of $10.27 billion beat the Zacks Consensus Estimate by 6.24%. The topline increased 34.1% year over year and 11.1% sequentially.
Data Center revenues increased 39.4% year over year to $5.38 billion and accounted for 52.4% of total revenues. Sequentially, revenues climbed 23.9% year over year. Strong demand for fifth-gen EPYC processors and Instinct MI350 series GPUs drove top-line growth.
Hyperscalers launched more than 230 EPYC-powered instances in the reported quarter, including new Turin offerings from Google, Microsoft Azure, Alibaba and others. More than 1,600 public EPYC cloud instances are now available globally, up roughly 50% year over year.
The Client segment’s revenues soared 33.9% year over year to $3.09 billion and accounted for 30.2% of total revenues. Sequentially, revenues increased 12.6%. Strong demand for Ryzen processors and a richer product mix drove top-line growth.
The Gaming segment’s revenues surged 49.7% year over year to $843 million and accounted for 8.2% of total revenues. Sequentially, revenues declined 35.1%. Higher semi-custom revenues and strong demand for Radeon gaming GPUs drove results.
On a consolidated basis, Client and Gaming revenues accounted for 38.4% of AMD’s total revenues in the fourth quarter of 2025. The segment’s top-line figure increased 37% year over year but declined 2.7% sequentially.
The Embedded segment revenues were $950 million, up 2.9% year over year and 10.9% sequentially. The segment accounted for 9.3% of total revenues.
Non-GAAP gross margin expanded 290 basis points (bps) on a year-over-year basis to 57%. The gross margin figure for the quarter was significantly better than 54% reported in the previous quarter.
Adjusted EBITDA increased 38.7% year over year to $3.04 billion and jumped 25.4% sequentially. Adjusted EBITDA margin expanded 100 bps year over year and 340 bps on a sequential basis.
Non-GAAP operating expenses jumped 42% year over year and sequentially 9% to $3 billion.
Non-GAAP operating margin expanded 130 bps year over year to 27.8%. The quarter’s operating margin figure was higher than 24.2% reported in the previous quarter.
Segment-wise, Client and Gaming operating income surged 46.2% year over year but declined 16.4% sequentially to $725 million. Segment operating margin expanded 60 bps year over year but declined 230 bps sequentially.
Data Center operating income was $1.75 billion compared with the year-ago quarter’s operating income of $1.15 billion. Sequentially, operating income climbed 63.1%, and operating margin expanded 540 bps.
Embedded operating income declined 1.4% year over year but increased 26.1% sequentially. However, operating margin contracted 130 bps year over year but expanded 40 bps sequentially.
As of Dec. 27, 2025, AMD had cash, cash equivalents, and short-term investments of $10.55 billion compared with $7.24 billion as of Sept. 27, 2025.
As of Dec. 27, 2025, total debt was $3.22 billion, which remained unchanged from the previous quarter.
Operating cash flow was $2.30 billion in the fourth quarter of 2025 compared with $1.79 billion in the third quarter of 2025.
Free cash flow was $2.08 billion in the fourth quarter of 2025 compared with $1.53 billion in the third quarter of 2025. In the third quarter, free cash flow margin was 20%, up 300 bps sequentially.
In the fourth quarter of 2025, AMD returned $1.3 billion to shareholders through its share repurchase program. The company has $9.4 billion remaining under its current authorization.
AMD expects first-quarter 2026 revenues of $9.8 billion (+/-$300 million). At the mid-point of the revenue range, this represents year-over-year growth of approximately 32% and a sequential decline of approximately 5%.
Since the earnings release, investors have witnessed a upward trend in estimates review.
At this time, Advanced Micro has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock has a score of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Advanced Micro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
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