Why Is AMD Stock Down Premarket? Earnings Beat Not Enough

Advanced Micro Devices, Inc. (AMD) shares are tumbling in premarket trading on Wednesday, February 4, 2026, despite reporting fourth-quarter 2025 earnings that exceeded Wall Street expectations. The semiconductor giant posted earnings per share of $1.53 on revenue of $10.27 billion, beating consensus estimates of $1.32 EPS and $9.67 billion in revenue.

However, the company’s first-quarter guidance, while above Street expectations, fell short of what some analysts anticipated as AI infrastructure spending accelerates across the industry. AMD stock is down 7.12% in premarket trading at $224.88 as of 5:41 AM EST, extending losses from the previous session when shares closed down 1.69% at $242.11.

Q4 Earnings Beat Overshadowed by High Investor Expectations

AMD delivered impressive fourth-quarter results with revenue climbing 34% year-over-year to $10.27 billion, significantly surpassing the $9.67 billion consensus estimate. Net income surged to $1.51 billion, or 92 cents per share, compared to just $482 million, or 29 cents per share, in the same period last year.

The company’s data center segment was a particular bright spot, generating $5.4 billion in sales, up 39% annually and topping expectations of $4.97 billion, driven by strong demand for EPYC server CPUs and AI GPUs.

For the first quarter of 2026, AMD guided to revenue of $9.8 billion, plus or minus $300 million, which exceeded the Street’s estimate of $9.38 billion. However, some analysts had been anticipating even stronger guidance given the intense AI infrastructure buildout among major cloud providers like Microsoft, Meta, and Google.

This disconnect between solid guidance and elevated expectations appears to be the primary driver behind the stock’s decline. CEO Lisa Su noted the company is in “active discussions” for additional Helios rack-scale AI system sales and MI450 chip orders, but investors seem to want more concrete numbers.

The company also provided an update on China sales, reporting $390 million in revenue from Instinct MI308 chips during Q4, with expectations of $100 million in the current quarter due to U.S. export controls.

AMD’s client and gaming segment rose 37% year-over-year to $3.9 billion, benefiting from market share gains against Intel in the PC processor market, while the embedded segment grew a more modest 3% to $950 million.

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Market Reaction Reflects High Valuation and AI Competition

As of premarket trading at 5:41 AM EST, AMD shares are down $17.23 (-7.12%) to $224.88, following Tuesday’s regular session close at $242.11. The stock has experienced remarkable performance over the past year, climbing 111.88% compared to the S&P 500’s 15.40% gain over the same period.

Year-to-date, AMD has gained 13.05%, significantly outpacing the broader market’s 1.06% return. The company’s market capitalization stands at approximately $394.165 billion, with a trailing P/E ratio of 92.76 and a forward P/E of 38.17.

Analyst sentiment remains largely positive despite today’s decline, with an average price target of $289.23, suggesting potential upside from current premarket levels. Wells Fargo recently reiterated its Overweight rating on January 30, 2026, maintaining a price target of $345.

The stock’s 52-week range spans from $76.48 to $267.08, highlighting the significant volatility and growth trajectory AMD has experienced. The PEG ratio of 0.52 suggests the stock may still be reasonably valued relative to its growth prospects.

AMD faces intensifying competition not only from dominant AI chip maker Nvidia but also from its own customers, as hyperscalers like Google, Amazon, and Microsoft develop proprietary chips for their data centers.

The company recently unveiled its Helios rack-scale server at CES 2026, positioning it as the “world’s best AI rack” in direct competition with Nvidia’s Vera Rubin-powered NVL72 system. With the AI data center market projected to reach $1 trillion by 2030, AMD’s ability to capture meaningful share will be critical for justifying its premium valuation.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.