Awaiting OpenAI's Lifeline: How Will AMD Weather This Six-Month 'Lull'?

Author | Eric

Global semiconductor giant $Advanced Micro Devices (AMD.US)$ Will announce Q4 earnings after the market closes on February 3rd Eastern Time. Previously, the market was speculating on a narrative of server CPU shortages, and AMD's stock price rose along with $Intel (INTC.US)$ , but the rally was briefly interrupted by Intel's disappointing earnings report. Recently, rumors have surfaced that AMD's key growth driver for this year, the mass production of MI455 cabinets, has been delayed. Additionally, AMD is considered overly reliant on $Oracle (ORCL.US)$ / OpenAI orders, and management’s response to these issues will need close attention.

Consensus estimates of core financial data

- Revenue consensus estimateUSD 9.65 billion, growing by26%, representing a 4% increase quarter-over-quarter, with prior guidance at USD 9.6 billion.

– Consensus GAAP gross margin53.1%, increasing 2.4 percentage points year-over-year and 1.4 percentage points quarter-over-quarter; consensus Non-GAAP gross margin54.5%, up 0.4 percentage points year-over-year and 0.5 percentage points quarter-over-quarter, with previous guidance at 54.5%.

– GAAP operating profitUSD 1.65 billion, growing by89%, up 30% from the previous quarter; Non-GAAP operating profitUSD 2.47 billion, growing by22%, up 10% from the previous quarter.

- GAAP net profitUSD 1.34 billion, growing by178%, up 8% from the previous quarter; Non-GAAP net profitUSD 2.18 billion, growing by23%, up 11% from the previous quarter, compared to prior guidance of USD 2.15 billion.

Three key highlights of the earnings report:

Surging demand for server CPUs—can it drive overall Q1 revenue to break through seasonal weakness?

In our previous article analyzing the reasons behind Intel's stock price surge《Server CPUs: The next big shortage and price hike after storage?》It was previously noted that the market has started to focus on the surge in demand for CPUs driven by the AI inference era, which could lead to server CPU shortages similar to those seen in memory storage. This trend also garnered attention from Wall Street. Intel’s strong demand for server CPUs, reflected in its Q4 earnings report, drove a 15% quarter-over-quarter revenue growth in its DCAI business, with profit margins improving consecutively for six quarters. However, the issue lies in production capacity.

In theory, fully outsourcing to $Taiwan Semiconductor (TSM.US)$ foundry services, AMD’s server CPU production capacity issues are relatively minor, leading the market to hold high expectations for AMD. Market consensus expects AMD's Q4 data center business revenue to reach USD 4.97 billion, growing by29%, up 15% quarter-over-quarter,with potential to surpass Intel’s data center business for two consecutive quarters.Operating profit reached USD 1.48 billion, an increase of 28%Operating profit margin29.7% with an operating margin of

, higher than Intel's 26.4%. Notably, Intel’s management did not mention implementing memory-style price hikes for CPU ASPs, unlike the steep price increases more commonly seen in the memory sector (characterized by oligopolistic supply and spot/contract price linkages). Intel’s guidance for Q1 data center revenue indicates a high single-digit decline quarter-over-quarter. Meanwhile, AMD’s Q1 data center business performance breaking seasonal sluggishness deserves attention as it drives overall business revenue.

Will the management provide AI revenue guidance for 2026? Focus on the smooth transition of revenue before the shipment of MI455 in the second half of the year.

AMD’s current AI chip roadmap indicates shipments of the MI400 series in 2026, with the MI455 series chips shipping in the second half of 2026. OpenAI’s 6GW order for AMD starts with the MI455 series, meaning this order will only contribute to revenue in the second half of 2026. The question remains whether AMD's data center GPU business can achieve a smooth transition during the gap period between now and the second half of 2026. The market is eager for management to provide AI revenue guidance for 2026.

However, last quarter, the management only provided vague guidance forecasting hundreds of billions of dollars in annual revenue for the data center by 2027, without giving specific AI revenue guidance for 2025 or 2026. At last year’s Analyst Day event, AMD presented its performance growth targets for the next 3-5 years, which still seems too far out.

What impact will rising memory prices have on PC and gaming console businesses in 2026?

Consensus Q4 revenue expectations for AMD’s Client business, mainly PC CPUs,USD 2.89 billion, growing by25%, accounting for a significant portion of AMD's total revenue,30%, making it AMD's second-largest business. Consensus Q4 revenue expectations for the Gaming business, primarily PS/Xbox consoles and PC GPUs,USD 860 million, growing by52%, accounting for a portion of AMD's total revenue.9%, together contributing to AMD's revenue39%, which are crucial for AMD.

However, considering Intel's recent earnings report mentioning the suppression of consumer electronics demand due to rising memory prices, the growth potential of AMD's business in this area by 2026 is uncertain, especially given Intel's guidance indicating a double-digit sequential decline in Q1 Client business revenue.

Summary

Overall, the market has high expectations for $Advanced Micro Devices (AMD.US)$ 's performance this quarter and is looking forward to management delivering an impressive data center result that exceeds expectations. AMD's forward price-to-earnings (PE) ratio is now significantly higher than its competitor $NVIDIA (NVDA.US)$ and $Broadcom (AVGO.US)$ . This is particularly concerning given the doubts surrounding whether AMD’s key customer $Oracle (ORCL.US)$ /OpenAI will fulfill its orders.

Reviewing the closing performance on earnings days over the past nine quarters, there were four instances of gains.

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