Experienced traders know that stocks often face irrational levels of negativity in the face of slightly disappointing news. This was the case of Advanced Microdevices (NASDAQ:AMD) following its fourth quarter report. After management gave slightly lower revenue guidance than some in the market expected, the stock fell 17% on February 4, the day after the announcement, and continued its decline in the February 5 trading session.
Fortunately, these sales can also attract the interest of bargain hunters. The chip stock has already recovered somewhat from that drop, and once more investors take the time to put AMD’s earnings report into perspective, it could more than rebound.
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Objectively speaking, AMD’s numbers for Q4 and 2025 were solid. For the year, revenue rose 34% to $34.6 billion. This growth came primarily from its data center and client and gaming segments; its integrated business expanded at a more modest pace.
Furthermore, its costs and expenses grew more slowly than revenues, and AMD also received an income tax benefit. Its investment performance helped boost its net income to $4.3 billion, well above the $1.6 billion earned in 2024.
Despite those improvements, AMD expects first-quarter revenue to range between $9.5 billion and $10.1 billion. But some analysts had been predicting even stronger results, and that may have sparked the selloff. Additionally, valuations appear high, as the P/E ratio is 76 despite recent sales.
However, the chipmaker’s forward P/E ratio of around 32 is quite close to the average for the S&P 500 (SNPINDEX: ^GSPC)and its growth is not on track to slow significantly. In fact, if it hits the midpoint of its $9.8 billion guidance, that would equate to a 32% increase.
Additionally, analysts predict revenue growth of 34% in 2026 and 37% in 2027, suggesting that any potential slowdown in the first quarter would be an anomaly. Additionally, in November, AMD management forecast that revenue would grow at a compound annual rate of more than 35% over the next three years, and the company appears to be on track to meet that projection.
Additionally, industry experts are optimistic about the prospects of its MI450 AI accelerator. Many expect it to match, and in some ways surpass, the performance of NVIDIAThe architecture of Vera Rubin. Assuming it lives up to those expectations, investors shouldn’t expect a slowdown in AMD’s growth anytime soon.