Advanced Micro Devices, Inc.

Hello, and welcome to the AMD third quarter 2022 earnings 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 Ruth Cotter. Please go ahead, Ruth.

Thank you and welcome to AMD's third quarter 2022 financial results conference call. By now, you should have had the opportunity to review a copy of our earnings press release and accompanying slideware. If you have not received these documents, they can be found on the investor relations page of AMD.com. We will refer primarily to non-GAAP financial measures during this call. The full non-gap-to-gap reconciliations are available in today's press release and slides, which are posted on amd.com, as mentioned. Participants on today's conference call are Dr. Lisa Su, our Chair and Chief Executive Officer, and Devinder Kumar, our Executive Vice President and Chief Financial Officer and Treasurer. This is a live call and will be replayed via webcast on our website. Before we begin today, I would like to note that Mark Papermaster, Chief Technology Officer and Executive Vice President, Technology and Engineering, will attend the Wells Fargo Technology, Media and Telecommunications Summit on Wednesday, November 30th. And our fourth quarter, Quiet Time, is expected to begin at the close of business on Friday, December 16th. 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. Please refer to the cautionary statement in our press release for more information on the factors that could cause actual results to differ materially. Now with that, I'd like to hand the call over to Lisa. Lisa?

Thank you, Ruth, and good afternoon to all those listening in today. Our third quarter revenue in gross margin came in below our expectations due to softening PC demand and substantial inventory reduction actions across the PC supply chain. Despite the macro backdrop, overall revenue grew 29% year-over-year to $5.6 billion as our data center, gaming, and embedded segments each delivered significant year-over-year growth and performed in line with our expectations. We also expanded gross margin and grew net income year-over-year, highlighting the strength of our business. Turning to the business results, starting with our data center segment, revenue increased 45% year-over-year and 8% sequentially to $1.6 billion. We delivered our 10th straight quarter of record server processor sales, driven by strong demand for third-gen EPYC processors and initial shipments of our next-generation Genoa CPU to select customers. Cloud revenue more than doubled year over year and increased sequentially as multiple hyperscalers expanded deployments of EPIC processors to power their internal properties and more than 70 new AMD instances were launched by Microsoft Azure, Amazon, Tencent, Baidu and others in the quarter. In enterprise, OEM revenue was down sequentially as server OEMs continued working through match set issues and some businesses slowed the pace or scale of their purchases based on the macro uncertainties. Looking at the broader competitive landscape, our third gen EPYC CPUs in market today are the highest performance and most energy efficient x86 server CPUs available. And we expect to further extend that lead with our next generation 5 nanometer Genoa processors, which deliver significant performance, energy efficiency, and TCO advantages for both hyperscale and enterprise workloads. We will publicly launch Gen 1 next week and are ramping production to support initial cloud deployments and the introduction of fourth gen epic processor platforms by HP Enterprise, Dell, Lenovo, Supermicro, and others. Looking at our broader data center portfolio, as expected, data center GPU sales were down significantly from a year ago when we had substantial shipments supporting the build out of the Frontier Exascale supercomputer. We made good progress with our data center GPU software enablement work in the quarter, including announcing our role as a founding member of the PyTorch Foundation. We look forward to working closely with the largest cloud providers as we drive a standards-based approach to the development of popular PyTorch deep learning software framework. Demand from data center customers for our Adaptive, SmartNIC, and DPU products was strong during the quarter. We had record sales of our Xilinx FPGA and networking data center products, led by demand from cloud and financial customers. Sales of our Pensando DPUs also ramped significantly from the prior quarter, driven by cloud adoption. The addition of Pensando DPUs to our product portfolio has been very well received by customers, highlighted by our enterprise customer pipeline doubling in the few months since the acquisition closed. We were excited to support VMware's launch of its next generation cloud virtualization platform in the quarter. Our Pensando DPUs will be included in the first validated server and HCI solutions, supporting the new VMware virtualization offerings from Dell, HPE, and others that will make it much easier for enterprise customers to build more performance and secure data centers powered by our industry-leading DPUs. Taking a step back, we have built significant momentum in our data center business as we have consistently executed our server CPU roadmap and expanded our solutions capabilities with the addition of the Xilinx and Pensando products to our portfolio. We remain on track to further expand our product portfolio in 2023 with the launches of our Edge and Telco optimized Sienna and Cloud optimized Bergamo processors. With 128 cores and 256 threads per socket, We expect Bergamo will further extend our performance and energy efficiency leadership in cloud workloads. Customer response has been very strong based on the performance, features, and software compatibility Bergamo delivers. We believe our broad family of leadership CPUs, GPUs, FPGAs, adaptive SOCs, and DPUs position us well for long-term growth and share gains in the data center. Now turning to our client segment, Revenue declined 40% year-over-year to $1 billion. Our client processor shipments were below PC consumption in the third quarter, as we worked closely with our customers to reduce downstream inventory. Desktop channel sell-through increased from the prior quarter, driven by increased demand for our Ryzen 5000 series CPUs and the launch of our Ryzen 7000 series processors and AM5 platform in September. We launched our 5 nanometer Ryzen 7000 series processors to strong reviews based on delivering leadership performance in gaming, productivity, and content creation applications. We expect Ryzen 7000 CPU sales to ramp this quarter aligned with the launches of a broader range of mainstream enthusiast AM5 motherboards. Now turning to our gaming segment. Revenue increased 14% year-over-year to $1.6 billion as strong semi-custom sales offset a decline in gaming graphics. We delivered our sixth straight quarter of record semi-custom SOC sales as demand for the latest game consoles remained strong and Sony and Microsoft prepared for the holiday season. Gaming graphics revenue declined in the quarter based on soft consumer demand and our focus on reducing downstream GPU inventory. We will launch our next generation RDNA3 GPUs later this week that combine our most advanced gaming graphics architecture with 5 nanometer chiplet design. Our high-end RDNA3 GPUs will deliver strong increases in performance and performance per watt compared to our current products and include new features supporting high resolution, high frame rate gaming. We look forward to sharing more details later this week. Looking at our embedded segment, Revenue increased significantly year over year to a record $1.3 billion driven by growth from aerospace and defense, industrial, and communications customers. Demand across our core markets remained very strong. We had record sales to aerospace and defense and automotive customers who are increasingly using our FPGA and adaptive SOC products to enable differentiated capabilities and features in their products. Record communications market revenue was driven by growth from both wired and wireless customers. We saw particular strength in North America led by new 5G wireless installations and expanded wired infrastructure deployments. Overall demand for our Xilinx products remained strong as we continued to leverage AMD's scale to secure additional supply to address this demand. Longer term, we're very excited about the growth opportunities in our embedded business. We closed multiple high revenue design wins in the quarter with automotive, networking, emulation and prototyping, communications, and aerospace and defense customers. We're also seeing new design win opportunities and deeper engagements with many of our embedded customers based on the expanded breadth of our adaptive SOC, FPGA, CPU, GPU, and DPU product portfolio. In summary, we're well positioned to navigate the current market dynamics based on our leadership product portfolio, strong balance sheet, and growth in our data center and embedded segments. We have three clear priorities guiding us. First and foremost, we're focused on executing our roadmaps and delivering our next generation of leadership products. Second, we're building even deeper relationships with our customers as we make AMD a fundamental enabler of their success. And lastly, we remain very disciplined in how we manage the business. We will continue to invest in our strategic priorities around the data center, embedded, and commercial markets, while tightening expenses across the rest of the business and aligning our supply chain with the current demand outlook. The secular trends driving increased demand for high performance and adaptive computing in the cloud, at the edge, and across intelligent end devices remain unchanged and provide a strong backdrop for long-term growth. Now I'd like to turn the call over to Devinder to provide some additional color on our third quarter financial performance. Devinder?