AMD closed 2025 with a record fourth quarter, delivering revenue of $10.3 billion, up 34% year-over-year and 11% sequentially, led by record EPYC, Ryzen, and Instinct sales. The data center segment set a record at $5.4 billion (up 39%) as the MI350/MI355 series ramped and 5th-gen EPYC Turin drove more than half of server revenue, while the client business hit a record $3.1 billion (up 34%) and gaming rose 50% to $843 million; embedded grew a modest 3% to $950 million. Profitability was strong, with 57% gross margin (up 290 bps, roughly 55% excluding a $360 million MI308 reserve release and ~$390 million of MI308 China revenue), record operating income of $2.9 billion at a 28% margin, record diluted EPS of $1.53 (up 40%), net income up 42% to $2.5 billion, and free cash flow nearly doubling to a record $2.1 billion. For the full year, AMD posted record revenue of $34.6 billion (up 34%) and record EPS of $4.17 (up 26%). Management guided Q1 2026 revenue to about $9.8 billion (down ~5% sequentially, up ~32% year-over-year) at roughly 55% gross margin, with OpEx of about $3.05 billion, only ~$100 million of China MI308 revenue assumed, and semi-custom expected to decline significant double-digits in 2026 amid a seventh-year console cycle and a slightly softer PC TAM. The dominant strategic message was that MI400/MI450 series and the Helios rack, launching in the second half, represent a major inflection point, with the OpenAI 6 GW partnership on schedule to start ramping in 2H26 into 2027 alongside a broadening set of at-scale customers. AMD reaffirmed its long-term target of growing data center revenue more than 60% annually, called that pace possible even in 2026, and reiterated scaling AI to tens of billions of dollars by 2027, backed by supply planned at the component level, the ZT Systems capabilities (with manufacturing sold to Sanmina), and expected operating leverage as OpEx grows slower than revenue.
Thank you, and welcome to AMD's Fourth Quarter and 2025 Full Year Financial Results Conference Call. By now, you should have had the opportunity to review a copy of our earnings press release and accompanying slides. If you have not had the opportunity to review these materials, they can be found on the investor relations page of amd.com. Today, we will refer primarily to non-GAAP financial measures on the call. The full non-GAAP-to-GAAP reconciliations are available in today's press release and in the slides posted on our website. Participants in today's conference call are Dr. Lisa Su, our Chair and CEO, and Jean Hu, our Executive Vice President, CFO, and Treasurer. This is a live call and will be replayed via webcast on our website.
Before we begin, I would like to note that Mark Papermaster, Executive Vice President and CTO, will present at Morgan Stanley's TMT conference on Tuesday, March 3rd. Today's discussions contain forward-looking statements based on our current beliefs, assumptions, and expectations, speak only as of today, and as such involve risks and uncertainties that could cause actual results to differ materially from our current expectations. Please refer to the cautionary statement in our press release for more information on factors that could cause actual results to differ materially. With that, I will hand the call to Lisa.
Thank you, Matt, and good afternoon to all those listening today. 2025 was a defining year for AMD, with record revenue, net income, and free cash flow driven by broad-based demand for high-performance computing and AI products. We ended the year with significant momentum, with every part of our business performing very well. We saw demand accelerate across the data center, PC, gaming, and embedded markets, launched the broadest set of leadership products in our history, gained significant server and PC processor share, and rapidly scaled our data center AI business as Instinct and ROCm adoption increased with cloud, enterprise, and AI customers. Looking at our fourth quarter, fourth quarter revenue grew 34% year-over-year to $10.3 billion, led by record EPYC, Ryzen, and Instinct processor sales.
Net income increased 42% to a record $2.5 billion, and free cash flow nearly doubled year-over-year to a record $2.1 billion. For the full year, revenue grew 34% to $34.6 billion, and we added more than $7.6 billion of data center segment and client revenue. Turning to our fourth quarter segment results, data center segment revenue increased 39% year-over-year to a record $5.4 billion, led by accelerating Instinct MI350 series GPU deployments and server share gains. In server, adoption of 5th-gen EPYC Turin CPUs accelerated in the quarter, accounting for more than half of the total server revenue. 4th-gen EPYC sales were also robust, as our prior generation CPUs continued to deliver superior performance and TCO compared to competitive offerings across a wide range of workloads.
As a result, we had record server CPU sales to both cloud and enterprise customers in the quarter and exited the year with record share. In cloud, hyperscaler demand was very strong as North American customers expanded deployments. EPYC-powered public cloud offerings grew significantly in the quarter, with AWS, Google, and others launching more than 230 new AMD instances. Hyperscalers launched more than 500 AMD-based instances in 2025, increasing the number of EPYC cloud instances more than 50% year over year to nearly 1,600. In the enterprise, we are seeing a meaningful shift in EPYC adoption driven by our leadership performance, expanded platform availability, broad software enablement, and increased go-to-market programs. The leading server providers now offer more than 3,000 solutions powered by fourth- and fifth-gen EPYC CPUs that are optimized for all major enterprise workloads.
As a result, the number of large businesses deploying EPYC on-prem more than doubled in 2025, and we exited the year with record server sell-through. Looking ahead, server CPU demand remains very strong. Hyperscalers are expanding their infrastructure to meet growing demand for cloud services and AI, while enterprises are modernizing their data centers to ensure they have the right compute required to enable new AI workflows. Against this backdrop, EPYC has become the processor of choice for the modern data center, delivering leadership performance, efficiency, and TCO. Our next-generation Venice CPU extends our leadership across each of these metrics. Customer pull for Venice is very high, with engagements underway to support large-scale cloud deployments and broad OEM platform availability when Venice launches later this year.
Turning to our data center AI business, we delivered record Instinct GPU revenue in the fourth quarter, led by the ramp of MI350 series shipments. We also had some revenue from MI308 sales to customers in China. Instinct adoption broadened in the quarter. Today, 8 of the top 10 AI companies use Instinct to power production workloads across a growing range of use cases. With the MI350 series, we are entering the next phase of Instinct adoption, expanding our footprint with existing partners and adding new customers. In the fourth quarter, hyperscalers expanded MI350 series availability, leading AI companies scale their deployments to support additional workloads, and multiple neocloud providers launched MI350 series offerings that deliver on-demand access to Instinct infrastructure in the cloud.
Turning to our AI software stack, we expanded the ROCm ecosystem in the fourth quarter, enabling customers to deploy Instinct faster and with higher performance across a broader range of workloads. Millions of large language and multimodal models run out of the box on AMD, with the leading models launching with day zero support for Instinct GPUs. This capability highlights our rapidly expanding open-source community enablement, including new upstream integration of AMD GPUs in vLLM, one of the most widely used inference engines. To drive Instinct adoption with industry-specific use cases, we're also adding support for domain-specific models in key verticals. As one example, in healthcare, we added ROCm support for the leading medical imaging framework to enable developers to train and deploy highly performant deep learning models on Instinct GPUs.
For large businesses, we introduced our Enterprise AI Suite, a full-stack software platform with enterprise-grade tools, inference microservices, and solutions blueprints designed to simplify and accelerate production deployments at scale. We also announced a strategic partnership with Tata Consultancy Services to co-develop industry-specific AI solutions and help customers deploy AI across their operations. Looking ahead, customer engagements for our next-gen MI400 series and Helios platform continue expanding. In addition to our multi-generation partnership with OpenAI to deploy 6 GW of Instinct GPUs, we are in active discussions with other customers on at-scale multi-year deployments starting with Helios and MI450 later this year. With the MI400 series, we are also expanding our portfolio to address the full range of cloud, HPC, and enterprise AI workloads.
This includes MI455X and Helios for AI superclusters, MI430X for HPC and sovereign AI, and MI440X servers for enterprise customers requiring leadership training and inference performance in a compact 8-GPU solution that integrates easily into existing infrastructure. Multiple OEMs publicly announced plans to launch Helios systems in 2026, with deep engineering engagement underway to support smooth production ramps. In December, HPE announced that they will offer Helios racks with purpose-built HPE Juniper Ethernet switches and optimized software for high-bandwidth scale-up networking. And in January, Lenovo announced plans to offer Helios racks. MI430X adoption also grew in the quarter, with new Exascale-class supercomputers announced by GENCI in France and HLRS in Germany. Looking further ahead, development of our next-generation MI500 series is well underway. MI500 is powered by our CDNA six architecture, built on advanced 2-nanometer process technology, and features high-speed HBM4e memory.
We are on track to launch MI500 in 2027 and expect MI500 to deliver another major leap in AI performance to power the next wave of large-scale multimodal models. In summary, our AI business is accelerating, with the launch of MI400 series and Helios representing a major inflection point for the business as we deliver leadership performance and TCO at the chip, compute tray, and rack level. Based on the strength of our EPYC and Instinct roadmaps, we are well positioned to grow data center segment revenue by more than 60% annually over the next three to five years and scale our AI business to tens of billions in annual revenue in 2027. Turning to client and gaming, segment revenue increased 37% year-over-year to $3.9 billion. In client, our PC processor business performed exceptionally well.
Revenue increased 34% year-over-year to a record $3.1 billion, driven by increased demand for multiple generations of Ryzen desktop and mobile CPUs. Desktop CPU sales set a record for the fourth consecutive quarter. Ryzen CPUs topped the bestseller lists at major global retailers and e-tailers throughout the holiday period, with strong demand across all price points in every region driving record desktop channel sellout. In mobile, strong demand for AMD-powered notebooks drove record Ryzen PC sell-through in the quarter. That momentum extended into commercial PCs, where Ryzen adoption accelerated as we established a new long-term growth engine for our client business. Sell-through of Ryzen CPUs for commercial notebooks and desktops grew by more than 40% year-over-year in the fourth quarter, and we closed large wins with major telecom, financial services, aerospace, automotive, energy, and technology customers.
At CES, we expanded our Ryzen portfolio with CPUs that further extend our performance leadership. Our new Ryzen AI 400 mobile processors deliver significantly faster content creation and multitasking performance than the competition. Notebooks powered by Ryzen AI 400 are already available, with the broadest lineup of AMD-based consumer and commercial AI PCs set to launch throughout the year. We also introduced our Ryzen AI Halo platform, the world's smallest AI development system, featuring our highest-end Ryzen AI Max processor with 128 GB of unified memory that can run models with up to 200 billion parameters locally. In gaming, revenue increased 50% year-over-year to $843 million. Semi-custom sales increased year-over-year and declined sequentially, as expected. For 2026, we expect semi-custom SoC annual revenue to decline by a significant double-digit percentage as we enter the seventh year of what has been a very strong console cycle.
From a product standpoint, Valve is on track to begin shipping its AMD-powered Steam Machine early this year, and development of Microsoft's next-gen Xbox featuring an AMD semi-custom SoC is progressing well to support a launch in 2027. Gaming GPU revenue also increased year-over-year, with higher channel sellout driven by demand throughout the holiday sales period for our latest generation Radeon RX 9000 Series GPUs. We also launched FSR 4 Redstone in the quarter, our most advanced AI-powered upscaling technology, delivering higher image quality and smoother frame rates for gamers. Turning to our embedded segment, revenue increased 3% year-over-year to $950 million, led by strength with test and measurement and aerospace customers and growing adoption of our embedded x86 CPUs. Channel sell-through accelerated in the quarter as end-customer demand improved across several end markets, led by test, measurement, and emulation.
Thank you, Lisa, and good afternoon, everyone. I'll start with a review of our financial results and then provide our current outlook for the first quarter of fiscal 2026. AMD executed very well in 2025, delivering record revenue of $34.6 billion, up 34% year-over-year, driven by 32% growth in our data center segment and 51% growth in our client and gaming segment. Gross margin was 52%, and we delivered record earnings per share of $4.17, up 26% year-over-year while continuing to invest aggressively in AI and the data center to support our long-term growth. For the fourth quarter of 2025, revenue was a record $10.3 billion, growing 34% year-over-year, driven by strong growth in the data center and client gaming segments, including approximately $390 million in revenue from MI308 sales to China, which was not included in our fourth quarter guidance.
Revenue was up 11% sequentially, primarily driven by continued strong growth in data center from both server and data center AI businesses, as well as a return to year-over-year growth in the embedded segment. Gross margin was 57%, up 290 basis points year-over-year. We benefited from the release of $360 million in previously written-down MI308 inventory reserves. Excluding the inventory reserve release and the MI308 revenue from China, gross margin would have been approximately 55%, up 80 basis points year-over-year, driven by favorable product mix. Operating expenses were $3 billion, an increase of 42% year-over-year as we continue to invest in R&D go-to-market activities to support our AI roadmap and long-term growth opportunities, as well as higher employee performance-based incentives.
Operating income was a record $2.9 billion, representing a 28% operating margin, tax increase, and other, resulting in a net expense of approximately $335 million. For the fourth quarter, diluted earnings per share was a record $1.53, an increase of 40% year-over-year, reflecting strong execution and operating leverage in our business model. Now turning to our reportable segment. Starting with the data center segment, revenue was a record $5.4 billion, up 39% year-over-year and 24% sequentially, driven by strong demand for EPYC processors and the continued ramp of MI350 products. Data center segment operating income was $1.8 billion, or 33% of revenue, compared to $1.2 billion, or 30% a year ago, reflecting higher revenue and the inventory reserve release, partially offset by continued investment to support our AI hardware and software roadmaps.
Client gaming segment revenue was $3.9 billion, up 37% year-over-year, driven primarily by strong demand for our leadership AMD Ryzen processors. On a sequential basis, revenue was down 3% due to lower semi-customer revenue. The client business revenue was a record $3.1 billion, up 34% year-over-year and 13% sequentially, led by strong demand from both the channel and the PC OEMs and continued market share gains. The gaming business revenue was $843 million, up 50% year-over-year, primarily driven by higher semi-customer revenue and strong demand for AMD Radeon GPUs. Sequentially, gaming revenue was down 35% due to lower semi-customer sales. Client gaming segment operating income was $725 million, or 18% of revenue, compared to $496 million, or 17% a year ago. Embedded segment revenue was $950 million, up 3% year-over-year and 11% sequentially as demand strengthened across several end markets.
Embedded segment operating income was $357 million, or 38% of revenue, compared to $362 million, or 39% a year ago. Before I reveal the balance sheet and the cash flow, as a reminder, we closed the sale of ZT Systems manufacturing business to Sanmina in late October. The fourth quarter financial results of the ZT manufacturing business are reported separately in our financial statement as discontinued operations and are excluded from our non-GAAP financials. Turning to the balance sheet and the cash flow. During the quarter, we generated a record $2.3 billion in cash from continuing operations and a record of $2.1 billion in free cash flow. Inventory increased sequentially by approximately $607 million-$7.9 billion to support strong data center demand. At the end of the quarter, cash, cash equivalents, and short-term investment were $10.6 billion.
For the year, we repurchased 12.4 million shares and returned $1.3 billion to shareholders. We ended the year with $9.4 billion authorization remaining and our share repurchase program. Now turning to our first quarter 2026 outlook. We expect revenue to be approximately $9.8 billion, plus or minus $300 million, including approximately $100 million of MI308 sales to China. At the middle point of our guidance, revenue is expected to be up 32% year-over-year, driven by strong growth in our data center and client gaming segments and modest growth in our embedded segment. Sequentially, we expect revenue to be down approximately 5%, driven by seasonal decline in our client gaming and embedded segment, partially offset by growth in our data center segment.
In addition, we expect fourth quarter non-GAAP gross margin to be approximately 55%, non-GAAP operating expense to be approximately $3.05 billion, non-GAAP other net income to be approximately $35 million, non-GAAP effective tax rate to be 13%, and diluted share count is expected to be approximately 1.65 billion shares. In closing, 2025 was an outstanding year for AMD, reflecting disciplined execution across the business to deliver strong revenue growth, increase profitability, and cash generation while investing aggressively in AI and innovation to support our long-term growth strategy. Looking ahead, we are very well positioned for continued strong top-line revenue growth and earnings expansion in 2026 with a focus on driving data center AI growth, operating leverage, and delivering long-term value to shareholders. With that, I'll turn it back to Matt for the Q&A session.
Yes. Thank you very much, Jean. Operator, please go ahead and open the Q&A session. Thank you.