Advanced Micro Devices, Inc.

Hello and welcome to the AMD fiscal fourth quarter in full year 2022 financial results conference call and webcast. 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 fourth quarter and fiscal year-end 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've not reviewed 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-GAAP to GAAP reconciliations are available in today's press release and slides posted on our website. Participants in today's conference call are Dr. Lisa Su, our Chair and Chief Executive Officer, Jean Hu, our Executive Vice President, Chief Financial Officer and Treasurer, and Devinder Kumar, our Executive Vice President. 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, Chief Technology Officer and Executive Vice President of Technology and Engineering, will attend the Morgan Stanley Technology, Media, and Telecom Conference on Monday, March 6th, and our first quarter 2023 quiet time is expected to begin at the close of business on Friday, March 17th. 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 actually cause 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. And with that, I'll hand the call over to Lisa. Lisa?

Thank you, Ruth, and good afternoon to all those listening in today. Before discussing our financial results, I wanted to make a few comments about our CFO transition. I'd like to start by thanking Devinder for all of his contributions to AMD over the last 39 years. During his tenure as CFO, we built a strong financial foundation that has enabled AMD's significant growth and success. On a personal note, his partnership and expertise have been invaluable to me. I know I speak for all of AMD when I say we appreciate all he has done for the company and wish him the best in his upcoming retirement. I also want to welcome our new EVP and CFO, Jean Hu, to our first AMD earnings call since joining us earlier this month. Jean's more than 14 years of public company CFO experience and proven track record of financial leadership make her an excellent addition to our team. I look forward to working closely with her as we continue to transform and scale our business. Now turning to the business results, 2022 was a strong year for AMD as we navigated the challenging macro environment to deliver best-in-class growth and record profitability driven by our embedded and data center segments. We also transformed the company. We accelerated our data center business and closed our strategic acquisitions of Xilinx and Pensando, significantly diversifying our business and strengthening our financial model as our data center embedded product sales grew from $3.9 billion in 2021 to $10.6 billion in 2022. Looking at our financial results, fourth quarter revenue increased 16% year over year to $5.6 billion, driven by significant growth in our embedded and data center segments, which accounted for more than 50% of overall revenue in the quarter. On a full year basis, we grew annual revenue 44% to $23.6 billion. We set annual records for revenue, gross margin, and profitability driven largely by a 64% increase in our data center segment revenue and the strong performance of our embedded segment following our Xilinx acquisition. Turning to the fourth quarter business results, starting with our data center segment, revenue increased 42% year over year to 1.7 billion, led by increased adoption of our Epic processors by cloud providers. In cloud, sales to North American hyperscalers more than doubled year over year as hyperscale customers continued moving more of their internal workloads and external instances to Epic processors. Epic processors now power more than 600 publicly available instances globally following the launches of new AMD-based instances from AWS, Microsoft, and others in the quarter. In enterprise, revenue declined year over year as demand slowed based on the macro environment. Against this backdrop, we continue expanding our pipeline and close a number of new wins in the fourth quarter with Fortune 500 financial services, automotive, technology, energy, and aerospace companies. In HPC, growing EPIC processor adoption was highlighted by the number of AMD-powered supercomputers on the latest top 500 list, increasing by 38% year over year. AMD now powers more than 100 of the world's fastest supercomputers and 15 of the top 20 most energy efficient supercomputers in the world. To build our data center leadership, we launched our fourth gen EPYC processors this past November that deliver up to two times faster performance in cloud, enterprise, and HPC applications and are up to 80% more energy efficient than the competition's most recently announced offerings. We are seeing very strong customer pull for fourth-gen Epic CPUs, which complement our third-gen offerings with additional performance and capabilities. Initial cloud deployments are going very well, and we expect to ramp both internal workloads and public instances throughout 2023. For enterprise, there are more than 140 fourth-gen Epic platforms in development from HPE, Dell, Lenovo, Supermicro, and others. an increase of 40% compared to the prior generation. Now looking at our broader data center portfolio, we had record sales of our Xilinx data center and networking products in the quarter, led by strong demand from financial services companies for our newly launched Alveo X3 series boards, optimized for low latency trading. Sales of our Pensando DPUs also ramped significantly from the prior quarter, driven by supply chain improvements and continued demand. We are very pleased with the customer reception of the Pensando technology with good long-term growth opportunities as DPUs become a standard component in the next generation of cloud and enterprise data centers. Data center GPU sales were down significantly from a year ago when we had shipments supporting the build out of multiple instinct MI250 accelerator supercomputer wins. In January, we previewed our next generation MI300 accelerator that will be used for large model AI applications in cloud data centers and has been selected to power the 2-plus exaflop El Capitan exascale supercomputer at Lawrence Livermore National Laboratories. MI300 will be the industry's first data center chip that combines a CPU, GPU, and memory into a single integrated design, delivering eight times more performance and five times better efficiency for HPC and AI workloads compared to our MI250 accelerator currently powering the world's fastest supercomputer. MI300 is on track to begin sampling to lead customers later this quarter and launch in the second half of 2023. Turning to our client segment, revenue declined 51% year-over-year to $903 million. We continued to shift below PC consumption in the fourth quarter as we focused on further reducing downstream inventory. While overall PC demand remains soft, desktop channel sell-through increased sequentially during the holiday season. We launched our latest generation Ryzen 7000 series notebook processors earlier in January, including our Ryzen 7040 CPU series that deliver leadership performance and battery life and are our first processors to feature Ryzen AI, the industry's only dedicated on-chip AI inference engine in an x86 processor. Ryzen AI is powered by the highly scalable XDNA architecture, which is the first integration of AMD and Xilinx IP, less than a year after closing the acquisition. We also launched our Ryzen 7045 series CPUs, our first mobile processors based on a triplet design that delivers significantly higher performance than the competition in gaming and content creation applications. We have more than 250 ultra-thin gaming and commercial notebook design wins spanning our full family of Ryzen 7000 series processors on track to launch this year. An increase of 25% year-over-year with the first notebooks planned to go on sale in February. Now turning to our gaming segment. Revenue declined 7% year-over-year to $1.6 billion as lower gaming graphics sales more than offset higher semi-custom revenue. Semi-custom SOC revenue grew year-over-year as demand for game consoles remained strong during the holidays. Gaming graphics revenue declined year-over-year as we further reduced desktop GPU downstream channel inventory. Channel sell-through of our Radeon RX GPUs increased sequentially, and we launched our high-end Radeon 7900 series GPUs to strong demand based on the performance of our new RDNA3 architecture and 5nm chiplet design. In January, we announced our first RDNA3 mobile GPUs that have been selected to power new gaming notebooks from Dell Alienware, Asus, and others that are on track to begin shipping in the first half of 2023. Looking at our embedded segment, revenue increased significantly year over year to a record $1.4 billion. We had record sales across a number of our embedded markets, including communications, automotive, industrial and healthcare, aerospace and defense, and test and emulation. In communications, we saw particular strength with expanded 5G wireless installations in India and ongoing wired infrastructure deployments with Tier 1 communications providers. Automotive growth was driven by the ramps of new forward camera, 4D radar, and infotainment wins across multiple customers. We recently announced multiple new wins for our automotive-grade Zinc UltraScale Plus platforms with some of the largest vehicle equipment suppliers, including ASIN's next-generation automated parking assist system and DENSO's next-generation LiDAR platform that can improve the resolution required for autonomous driving and other industrial machine vision applications by 20X. We also continue to see strong growth with industrial and healthcare, aerospace and defense, and test and emulation customers in the quarter, driven by SAM expansion for our leadership adaptive SOCs, new design wind ramps, and increased supply across multiple nodes. Taking a step back, as we approach the one-year anniversary of the closing of our Xilinx acquisition next month, the integration has gone extremely well, and our embedded business has become a major growth driver for AMD, strengthening our financial model and significantly diversifying our business. In addition, we are seeing substantial new revenue synergy opportunities as we combine Xilinx's industry-leading adaptive products and 6,000-plus customers with AMD's expanded breadth of compute products and scale. In summary, overall, 2022 was a strong year for AMD despite the weak PC market. We significantly grew our data center, embedded, and gaming businesses and executed well across our product portfolio. As we enter 2023, we expect the overall demand environment to remain mixed, with the second half stronger than the first half. In the PC market, we are planning for the PC TAM to be down approximately 10% for 2023. We expect to continue to ship below consumption in the first quarter to reduce downstream inventory, which is reflected in our guidance. In our embedded and data center segments, we believe we are well positioned to grow revenue and gain share in 2023 based on the strength of our competitive positioning and leadership high performance and adaptive product portfolio. We do see elevated levels of inventory with some cloud customers, which will lead to a softer first half and a stronger second half of the year. We continue working very closely with our customers to navigate the dynamic market conditions while also making the right strategic investments to exit the current cycle with an even stronger and more differentiated set of products to drive future growth. Over the next several years, one of our largest growth opportunities is in AI, which is in the early stages of transforming virtually every industry, service, and product. We expect AI adoption will accelerate significantly over the coming years and are incredibly excited about leveraging our broad portfolio of CPUs, GPUs, and adaptive accelerators in combination with our software expertise to deliver differentiated solutions that can address the full spectrum of AI needs in training and inference across cloud, edge, and client. Now I'd like to turn the call over to Jean to provide some additional color on our fourth quarter and full year financial results.