AMD's Gaming Revenues Set to Decelerate: What's the Path Ahead?

Advanced Micro Devices’ AMD Gaming revenues jumped 50% year over year to $843 million in the fourth quarter due to higher semi-custom sales. Gaming GPU revenues increased due to strong demand for the company’s latest Radeon RX 9000 series GPUs. However, revenues on a sequential basis plunged 35% due to lower semi customer sales. AMD now expects semi-custom SoC annual revenues to decline by a significant double-digit percentage in 2026, thereby hurting gaming revenues.

AMD expects first-quarter 2026 total revenues to decline 5% sequentially due to a seasonal decline in the Client and Gaming and Embedded segments. Year over year, total revenues are expected to jump 32%, driven by strong growth in the Data Center and Client and Gaming segments and modest growth in the Embedded segment. The Zacks Consensus Estimate for first-quarter 2026 revenues is pegged at $9.84 billion, suggesting 32.3% growth from the figure reported in the year-ago quarter. The consensus mark for 2026 revenues is pegged at $45.37 billion, indicating 31% growth over 2025.

AMD’s expanding portfolio with the launch of the new Ryzen 7 9850X3D, the fastest gaming processor, powered by the Zen 5 architecture and AMD 3D V-Cache technology. Launch of FSR “Redstone” for AMD Radeon graphics cards is the company’s most advanced AI-powered upscaling technology, delivering higher image quality and smoother frame rates for gamers. Meanwhile, Valve’s launch of AMD-powered Steam Machine bodes well for the company’s gaming business in 2026. Moreover, AMD’s gaming business is expected to improve in 2027 with the much-anticipated launch of Microsoft’s next-generation Xbox featuring an AMD semi-custom SoC.

AMD’s expanding AI Ryzen portfolio, with the new Ryzen AI 400 Series and Ryzen AI PRO 400 Series desktop processors, is expected to boost the Client and Gaming business prospects. The latest Ryzen AI 400 Series processors will help OEMs, including HP and Lenovo, offer next-gen AI PCs across high-performance desktops, laptops and mobile workstations.

Tough Competition Hurts AMD’s Prospects

AMD’s prospects suffer from stiff competition. NVIDIA NVDA and Intel INTC are major competitors in the gaming space.

NVIDIA’s Graphics segment includes GeForce GPUs for gaming and personal computers, the GeForce NOW game-streaming service and related infrastructure. In the fourth quarter of fiscal 2026, NVIDIA’s Gaming revenues increased 47% year over year to $3.73 billion, accounting for 5.5% of the total revenues. The year-over-year jump reflects strong demand from gamers, creators and AI enthusiasts. Increased demand for Blackwell products also aided the segment’s sales growth during the reported quarter.

Intel’s launch of Intel Core Ultra Series 3 processors is noteworthy. Intel Series 3 chips are AI-first platforms that can rapidly accelerate AI adoption. The Intel Core Ultra X9 and X7 processors within the new processor lineup come with the highest performing Intel Arc Graphics. The chips can deliver 60% better multithread performance, 77% faster gaming performance and up to 27 hours of battery life. Intel’s Panther Lake is designed to power a broad spectrum of consumer and commercial AI PCs, gaming devices and edge solutions.

AMD’s Share Price Performance, Valuation & Estimates

AMD shares have dropped 8.4% year to date, outperforming the broader Zacks Computer and Technology sector’s fall of 10.5%.

AMD Stock’s Price Performance

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AMD stock is overvalued, with a forward 12-month price/sales of 6.52X compared with the broader sector’s 5.56X. AMD has a Value Score of D.

AMD Valuation

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The Zacks Consensus Estimate for 2026 earnings is pegged at $6.61 per share, unchanged over the past 30 days, suggesting 58.5% growth from 2025.

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote

AMD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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