Advanced Micro Devices (AMD) expects its first-quarter 2026 gross margin to decline by 200 basis points to 55%, compared to a benefit from a $360 million inventory reserve release in Q4 2025. The company reported Q4 2025 revenues of approximately $390 million from its MI308 product in China, which it projects will decrease to about $100 million in Q1 2026. The decline is attributed to a forecasted 5% sequential revenue drop, primarily affecting client and gaming segments.
AMD anticipates Q1 2026 revenues to range around $9.8 billion, representing a year-over-year growth of approximately 32%. The growth is credited to the Data Center, Client, and Gaming segments. However, operating expenses are expected to rise to $3.05 billion, a 42% increase from Q4 2025, where operating income hit a record of $2.9 billion, reflecting a 28% operating margin.
Despite strong performance, AMD faces intense competition from NVIDIA and Broadcom in the AI-driven data center market. As of the latest reports, AMD stock has risen by 32.8% year to date, surpassing the broader sector’s growth of 5.4%. The Zacks Consensus Estimate for Q1 2026 earnings is set at $1.28 per share, suggesting a 33.3% increase from the previous year.
