Advanced Micro Devices, Inc.

Greetings, and welcome to the Advanced Microdevices Second Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laura Graves. Please go ahead.

Thank you, and welcome to AMD's Second Quarter 2019 Conference Call. By now, you should have had the opportunity to review a copy of our earnings release and slides. If you have not reviewed these documents, they can be found on the Investor Relations page of AMD's website, amd.com. Participants on today's conference call are Dr. Lisa Su, our President and Chief Executive Officer, and Devinder Kumar, our Senior Vice President, Chief Financial Officer, and Treasurer. This is a live call and will be replayed via webcast on our website. Before we begin, I would like to highlight some important dates for you. AMD will officially launch our second-generation EPYC Data Center CPU on Wednesday, August 7. On Tuesday, August 27, Forrest Norod, Senior Vice President and General Manager of our Data Center and Embedded Solutions Group, will present at the Jefferies 2019 Semiconductor, Hardware, and Communications Infrastructure Summit in Chicago. On Tuesday, September 10th, Devinder Kumar, Senior Vice President, Chief Financial Officer and Treasurer, will present at the Deutsche Bank Technology Conference in Las Vegas. And on Friday, September 13th, 2019, our third quarter quiet time is expected to begin at the close of business. Today's discussion contains forward-looking statements based on the environment as we currently see it. Those statements are based on current beliefs, assumptions and expectations, speak only as of the current date, and as such involve risks and uncertainties that could cause actual results to differ materially from our current expectations. We will refer primarily to non-GAAP financial measures during this call, except for revenue and segment operational results, which are on a GAAP basis. The non-GAAP financial measures referenced today are reconciled to their most directly comparable GAAP financial measure in today's press release, which is posted on our website. Please refer to the cautionary statements in our press release for more information. You will also find detailed discussions about our risk factors in our filings with the SEC, and in particular, AMD's quarterly report on Form 10-Q for the quarter ended March 30th, 2019. Now with that, I'd like to hand the call over to Lisa.

Thank you, Laura, and good afternoon to all those listening in today. We made history in the second quarter, both as the first company to simultaneously launch high-performance CPUs and GPUs, and the first to ramp 7-nanometer high-performance processors across PCs, gaming, and the data center. I am extremely pleased with our execution in the quarter, as we ramped production on Ryzen 3000 CPUs, Radeon 5700 GPUs, and early volumes of our second generation EPYC processors in advance of their third quarter launch. Looking at the second quarter, revenue of $1.53 billion increased 20% sequentially, driven by growth across both of our business segments. Revenue declined 13% year over year, in line with our expectations, as client and server processor revenue increases were offset by lower graphics channel and semi-custom revenue. Turning to our computing and graphics segment, revenue declined 13% year-over-year as significantly higher client processor sales were offset by lower graphics channel sales. Mobile client processor revenue increased by a double-digit percentage year-over-year and sequentially, driven by our highest quarterly unit shipments in five years. In desktop, we launched our industry-leading Ryzen 3000 processors featuring our new Zen 2 core to overwhelmingly positive customer response. Numerous third-party reviews highlighted the superior performance of our 7 nanometer Ryzen CPUs in both multi-threaded and single-threaded applications while consuming less power than competitive offerings. Ryzen 3000 processor customer demand has been very strong with sales at global e-tailers and retailers outpacing our previous generations of Ryzen by more than three times at the same point following their respective launches. Based on the market response to our latest mobile and desktop processors and the growing number of AMD-powered commercial and consumer PCs, we expect to gain share in the high-volume back-to-school and holiday periods. In graphics, revenue decreased year over year, driven largely by lower channel sales, partially offset by a significant increase in data center GPU sales. GPU revenue increased by a double-digit percentage sequentially, driven by increased channel sales of our RX 500 series GPUs and the launch of our Radeon 5700 family. The Radeon 5700 series with our new RDNA architecture delivers up to 1.5 times more performance per watt compared to our previous generation. Initial demand for our new GPUs has been strong as third party reviewers have highlighted our leadership gaming performance at relevant price points. We are well positioned for growth in the second half of the year as we continue to ramp our Radeon 5000 GPU family. We had another quarter of strong year-over-year data center GPU sales growth, driven largely by HPC and cloud wins. We continue making progress expanding this margin-accretive part of our business based on our strategy to focus on working closely with marquee customers. We also announced a strategic partnership in the quarter with Samsung to bring Radeon graphics to their future smartphone and mobile SOCs. The partnership showcases our strategy to engage with industry leaders across the ecosystem to drive Radeon everywhere. We now have deep partnerships across the PC, game console, cloud, and mobile markets that contribute to a growing developer ecosystem and installed base for our Radeon graphics architecture. Turning to our enterprise embedded and semi-custom segment, revenue decreased 12% from a year ago, due to lower semi-custom revenue. In semi-custom, we have extended our game console leadership as both Microsoft and Sony have now both announced they will use custom AMD SoCs to power their next generation game consoles. We are very proud to power back-to-back generations of the world's highest performing game consoles. As we look into the second half of the year, we are seeing additional softness in game console demand, which is now reflected in our full-year guidance. In server, CPU revenue grew significantly year over year and sequentially, driven by initial shipments of our next-generation Roam processors to lead cloud and OEM customers. First-generation EPYC processor-based cloud deployments continued to increase in the quarter. Amazon expanded availability of its epic processor-powered instances to more than 15 regions and dozens of new configurations. And Microsoft launched general availability of its Azure HB supercomputing virtual machines that, for the first time ever, enable customers to run demanding HPC workloads in the cloud. Turning to our next generation Roam server processor, Roam is on time and exceeding expectations, delivering leadership performance and TCO across a significantly expanded number of cloud and enterprise workloads. Customer excitement continues to grow. Compared to our first generation EPYC processors, we have more than twice the number of platforms in development with a larger set of partners. We also have four times more enterprise and cloud customers actively engaged on deployments prior to launch. As a result, Roam is on track to ramp significantly faster than our first-generation Epic processor. We are seeing particular strength in HPC, where we offer leadership compute density and I.O., We had multiple supercomputing wins in the quarter, including public announcements from Indiana University and Norway's National Research Network. Our supercomputing momentum was highlighted by the U.S. Department of Energy and Oak Ridge National Laboratory, selecting both Epic CPUs and Radeon Instinct GPUs to power their next-generation frontier exascale supercomputer built by Cray. Frontier is expected to be the world's fastest computer when it launches in 2021. We look forward to providing more details on Roam at our launch event on August 7th. In summary, as we complete the first half of 2019, we have reached a significant inflection point for the company as we enter our next phase of growth with the most competitive product portfolio in our history. We have seen some uncertainties across our supply chain driven by tariffs, trade concerns, and the U.S. entities list. In the second quarter, we stopped shipping to customers added to the U.S. entities list. While we remain cautious given the fluidity of the situation, the impact to date has been limited and offset by growing momentum in other parts of our business. We are executing well to our plans and see a path to significant market share gains for our product portfolio across the PC, gaming, and data center markets in the coming quarters. Now, I'd like to turn the call over to Devinder to provide some additional color on our second quarter financial performance.