Advanced Micro Devices, Inc.

Hello, and welcome to the AMD second quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Laura Graves, Corporate Vice President of Investor Relations. Laura, please go ahead.

Thank you and welcome to AMD's second quarter 2021 financial results conference call. By now, we hope you have had the opportunity to review a copy of our earnings press release and slides. If you have not reviewed these documents yet, they can be found on the investor relations page of AMD.com. Participants on today's conference call are Dr. Lisa Su, our President and Chief Executive Officer, and Devinder Kumar, our Executive 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 note that Saeed Mushkilani, Senior Vice President and General Manager of our Client Business, and Ruth Cotter, Senior Vice President of Worldwide Marketing, Human Resources, Investor Relations, and Strategy, will attend the Jeffries Semiconductor and Hardware Summit on Tuesday, August 31st. Devinder Kumar will attend the Deutsche Bank Technology Conference on Friday, September 10th. And our third quarter 2021 quiet time is expected to begin at the close of business on Friday, September 10th. Today's discussion contains forward-looking statements based on 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. We refer to the cautionary statement in our press release for more information on factors that could cause actual results to differ. We will refer primarily to non-GAAP financial measures during this call. The full non-GAAP to GAAP reconciliations are available in today's press release and slides posted on our website. With that, I will hand the call over to Lisa. Lisa?

Thank you, Laura, and good afternoon to all those listening in today. Our business performed exceptionally well in the second quarter, as strong execution and growing customer preference for our high-performance products generated significant market and financial momentum. We saw very strong demand across all of our businesses, which resulted in second quarter revenue growing 99% year over year to 3.85 billion. We expanded our gross margins by four percentage points, doubled operating margin, and more than tripled profitability year over year. We also delivered record revenue for the fourth straight quarter and generated record free cash flow in the quarter. Turning to our computing and graphics segment, Second quarter revenue increased 65% year over year to $2.25 billion, driven by significant growth in both Ryzen and Radeon processor sales. In client computing, we had another record quarter of processor revenue. Both desktop and notebook revenue increased by a strong double-digit percentage year over year, and we believe we gained revenue share for the fifth straight quarter. In desktop, Robust demand for our highest-end Ryzen processors drove a richer mix in the quarter, as Ryzen 9 processor unit shipments more than doubled year-over-year. In notebooks, unit shipments and ASP increased sequentially and year-over-year. We delivered our seventh straight quarter of record mobile CPU revenue, led by the steep ramp of our latest generation Ryzen 5000 mobile processors. In the enterprise, Ryzen Pro mobile processor unit shipments nearly doubled year-over-year as we won multiple high-volume deployments in the quarter with Fortune 500 financial services, automotive, and pharmaceutical companies. In graphics, revenue doubled year-over-year, led by demand for Radeon 6000 series desktop graphics cards in the channel and adoption of our data center GPUs, RDNA2 GPU shipments grew by a double-digit percentage sequentially as the first notebooks powered by our Radeon RX 6000M series GPUs launched, including the first AMD Advantage notebooks that combine high-performance Ryzen CPUs, Radeon GPUs, and AMD software with premium design features to deliver best-in-class gaming experiences. ASUS, HP, MSI, and Lenovo announced plans to bring AMD Advantage Notebooks to market over the coming months as we further expand our presence in the gaming notebook market. Data center graphics revenue more than doubled year-over-year, driven by new deployments of our AMD Instinct accelerators, including initial shipments of our next-generation data center GPUs featuring our CDNA2 architecture. GDNA2 represents a major step forward in our multi-year data center GPU strategy, delivering more than twice the performance of our current generation and significantly higher performance than competitive offerings in HPC workloads. We expect data center GPU revenue to grow in the second half of the year as we ramp production of our next generation AMD Instinct accelerators and open-source Rackham software to support multiple leading-edge supercomputer wins, including Frontier, Lumi, and Posi. Turning to our enterprise-embedded and semi-custom segment, revenue increased 183% year-over-year to $1.6 billion, driven by strong growth in both semi-custom and epic processor sales. Semi-custom revenue grew sequentially and year-over-year, and we expect game console demand to remain strong throughout the year. We announced a new semi-custom win earlier this month as Valve chose AMD to power their Steam Deck handheld game console, planned to launch this December. In Embedded, we are making good progress expanding our presence across key verticals, including automotive, networking, and storage. We ramped production shipments in the quarter of AMD Ryzen embedded CPUs and Radeon RDNA2 GPUs to power the in-dash infotainment systems in Tesla's latest Model S and Model X vehicles. Now turning to server, we delivered our fifth straight quarter of record server processor revenue. Sales grew by a significant double-digit percentage sequentially, driven by higher unit shipments and ASP. We are seeing very strong demand across our full server portfolio with second gen EPIC processor revenue growing sequentially and third gen EPIC processor sales more than doubling quarter over quarter. Third gen EPIC processor revenue is ramping faster than the prior generation as customers and multiple third party reviewers recognize the absolute performance and price performance leadership of our latest server processors. Cloud demand further accelerated in the quarter, led by growing internal workload adoption and nearly 50 new AMD-powered instances by AWS, Microsoft Azure, Google, Tencent, and Alibaba. Google announced it chose AMD EPYC processors to exclusively power the first offering in its new TAO VM family that delivers industry-leading performance and value for scale-out workloads versus other competitive x86 and ARM offerings. In enterprise, we see demand accelerating as more than 100 third-gen EPYC processor platforms are now in production from Dell HPE, Lenovo, Supermicro, Cisco, and others. In addition, we are seeing a rapid expansion in the number of AMD-powered solutions and appliances from our OEM and ecosystem partners targeting hyper-converged and virtual desktop infrastructures as well as workloads demanding the highest per-core performance, such as EDA and computational fluid dynamics. We secured multiple HPC wins in the quarter, including newly announced deployments by the National Supercomputing Center in Singapore and the French Atomic Energy Commission. Our substantial momentum in HPC was highlighted by the fact that the number of AMD-based systems on the latest top 500 list of the world's fastest supercomputers increased by almost 5x in the last year, and that EPIC processors power half of the 58 newly listed systems. Looking at our overall data center business, revenue nearly doubled year over year and increased sequentially from a high teens percentage of overall revenue in the first quarter to greater than 20% in the second quarter. We expect data center revenue to continue growing faster than overall revenue based on the strength of our EPIC processors and instinct accelerators and the significantly expanded engagements we have built with the leading OEMs and largest MDCs. Turning to our Xilinx acquisition, we passed additional milestones in the quarter and received unconditional regulatory approval in multiple jurisdictions, including in the EU and the United Kingdom. We remain on track to close this strategic transaction by the end of the year and are excited about the opportunities ahead. In closing, I'm extremely pleased with our execution as our business accelerated considerably in the first half of the year. Based on growing customer preference for our products and strong supply chain execution, we now expect annual revenue to grow by approximately 60% year-over-year. up from approximately 37% growth we guided at the beginning of the year. Our engineering teams are aggressively driving our product and technology roadmaps to continue setting the pace of innovation for high-performance computing. We remain on track to launch next-generation products in 2022, including our Zen 4 processors built with industry-leading 5-nanometer process technology and our RDNA 3 GPUs. We also recently demonstrated the next major advance in our chiplet strategy with our differentiated 3D die stacking technology that enables significantly denser and more efficient connections between stacked chips. Based on the strength of our long-term roadmap and the deep partnerships we have established, we expect to continue growing significantly faster than the market. In summary, we are making great progress towards our ambitious goal of establishing AMD as a high-performance computing leader and a best-in-class growth franchise. Now I'd like to turn the call over to Devinder to provide some additional color on our second quarter financial performance. Devinder?