Advanced Micro Devices, Inc.

Greetings and welcome to the AMD fourth quarter and full year 2023 conference call. At this time, all participants are in a listen-only mode. A brief 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. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Mitch Hawes, Vice President, Investor Relations. Thank you, Mitch. You may begin.

Thank you, John, and welcome to AMD's fourth quarter and full year 2023 financial results conference call. By now, you should have had the opportunity to review a copy of our earnings press release and the accompanying slides. If you have not had the chance to review these materials, they can be found on the investor relations page of AMD.com. We will refer primarily to non-GAAP financial measures during today's call. The full non-GAAP to GAAP reconciliations are available in today's press release and the slides posted on our website. Participants on today's call are Dr. Lisa Su, our Chair and Chief Executive Officer, and Jean Hu, 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 Mark Papermaster, Executive Vice President and Chief Technology Officer, will attend the Bernstein Tech, Media, Telecom, and Consumer One-on-One Forum on Tuesday, February 28th. And Jean Hu, Executive Vice President, Chief Financial Officer, and Treasurer, will attend the Wolf Research Semiconductor Conference on Tuesday, February 15th, and the Morgan Stanley Technology, Media, and Telecom Conference on March 5th. Today's discussion contains forward-looking statements based on current beliefs, assumptions, and expectations. We 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 on our press release for more information on factors that could cause actual results to differ materially. With that, I'll hand the call over to Lisa.

Thank you, Mitch, and good afternoon to all those listening in today. We finished 2023 strong as data center sales accelerated significantly throughout the year despite the mixed demand environment. As a result, we delivered record data center segment annual revenue and strong top-line and bottom-line growth in the fourth quarter, driven by the ramp of instinct AI accelerators and robust demand for epic server CPUs across cloud, enterprise, and AI customers. Looking at our financial results, fourth quarter revenue increased 10% year over year to $6.2 billion, driven by significant double-digit percentage growth in our data center and client segments. On a full year basis, annual revenue declined 4% to $22.7 billion, as record data center and embedded segment annual revenue was offset by lower client and gaming segment revenue. Importantly, data center and embedded segment annual revenue grew by 1.2 billion and accounted for more than 50% of revenue in 2023 as we gained server share, launched our next generation instinct AI accelerators, and maintained our position as the industry's largest provider of adaptive computing solutions. Turning to the fourth quarter business results, data center segment revenue grew 38% year over year and 43% sequentially to a record $2.3 billion. Server CPU and data center GPU sales both set quarterly and annual revenue records as sales of our data center products accelerated throughout the year. We gained server CPU revenue share in the quarter driven by significant double digit percentage growth in fourth gen epic processor revenue and demand for our third gen epic processor portfolio. In cloud, while the overall demand environment remains soft, server CPU revenue increased year over year and sequentially as North American hyperscalers expanded fourth gen epic processor deployments to power their internal workloads and public instances. Amazon, Alibaba, Google, Microsoft, and Oracle brought more than 55 AMD-powered AI, HPC, and general-purpose cloud instances into preview or general availability in the fourth quarter. Exiting 2023, there were more than 800 Epic CPU-based public cloud instances available. We expect this number to grow in 2024 based on the leadership performance, efficiency, and features of our Epic CPU portfolio. In enterprise, sales accelerated by a significant double-digit percentage in the quarter as we built momentum with Forbes 2000 customers. We closed multiple wins with large financial, energy, automotive, retail, technology, and pharmaceutical companies, positioning us well for continued growth based on expanded production deployments planned for 2024. A growing number of customers are adopting EPYC CPUs for inferencing workloads, where our leadership throughput performance delivers significant advantages on smaller models like LAMA7B, as well as to power head nodes in large training and inference clusters. Looking ahead, customer excitement for our upcoming Turin family of EPYC processors is very strong. Turin is a drop-in replacement for existing fourth-gen EPYC platforms that extends our performance, efficiency, and TCO leadership with the addition of our next-gen Zen5 core, new memory expansion capabilities, and higher core counts. Internal and end-customer validation work is progressing to plan, with Turin on track to deliver overall performance leadership as well as leadership on a per-core or per-watt basis across a wide range of workloads when it launches later this year. Turning to our broader data center portfolio, our data center GPU business accelerated significantly in the quarter, with revenue exceeding our 400 million expectation, driven by a faster ramp for MI300x with AI customers. We launched our MI300 accelerator family in December, with strong partner and ecosystem support from multiple large cloud providers, all the major OEMs, and many leading AI developers. MI300x GPUs deliver leadership generative AI performance by combining our high-performance cDNA3 architecture with industry-leading memory bandwidth and capacity. Customer response to MI300 has been overwhelmingly positive, and we are aggressively ramping production to support the dozens of cloud, enterprise, and supercomputing customers deploying Instinct accelerators. In cloud, we are working closely with Microsoft, Oracle, Meta, and other large cloud customers on instinct GPU deployments, powering both their internal AI workloads and external offerings. For enterprise customers, HPE, Dell, Lenovo, Supermicro, and other server vendors are on track to launch differentiated MI300 platforms later this quarter with strong demand from multiple enterprise customers. In HPC supercomputing, we shipped the majority of AMD Instinct MI300A accelerators for the El Capitan supercomputer in the fourth quarter and expect to complete shipments this quarter for what is expected to be the world's fastest supercomputer when it comes online later this year. We also closed new Instinct GPU wins in the quarter, including the flagship system at the German High Performance Computing Center, HLRS, as well as what is expected to be one of the world's most powerful enterprise supercomputers for energy company ENI. On AI software development, we made significant progress expanding the ecosystem of AI developers working on AMD platforms with the release of our Rackham 6 software suite. The Rackham 6 stack significantly increases performance in key generative AI workloads, adds expanded support and optimizations for additional frameworks and libraries, and simplifies the overall developer experience. The additional functionality and optimizations of Rackham 6 and the growing volume of contributions from the open source AI software community are enabling multiple large hyperscale and enterprise customers to rapidly bring up their most advanced large language models on AMD instinct accelerators. For example, we are very pleased to see how quickly Microsoft was able to bring up GPT-4 on MI300x in their production environment and roll out Azure private previews of new MI300 instances aligned with the MI300x launch. At the same time, our partnership with Hugging Face, the leading open platform for the AI community, now enables hundreds of thousands of AI models to run out of the box on AMD GPUs, and we are extending that collaboration to our other platforms. Looking ahead, our prior guidance was for data center GPU revenue to be flattish from Q4 to Q1 and exceed $2 billion for 2024. Based on the strong customer pull and expanded engagements, We now expect data center GPU revenue to grow sequentially in the first quarter and exceed $3.5 billion in 2024. We have also made significant progress with our supply chain partners and have secured additional capacity to support upside demand. Turning to our client segment, revenue was $1.5 billion, an increase of 62% year-over-year and flat sequentially. We launched our latest generation Ryzen 8000 series notebooks and desktop processors in January, including our Ryzen 8040 mobile series that combine leadership compute performance and energy efficiency with an updated MPU that delivers up to 60% more AI performance compared to our prior generation that was already industry leading. Acer, Asus, HP, Lenovo, MSI, and other large PC OEMs will all offer notebooks powered by our Ryzen 8000 series processors, with the first systems expected to go on sale in February. To further our leadership in AI PCs, we launched our Ryzen 8000G series processors earlier this month, which are the industry's first desktop CPUs with an integrated AI engine. Millions of AI PCs powered by Ryzen processors have shipped to date, and Ryzen CPUs power more than 90% of AI-enabled PCs currently in market. Our work with Microsoft and our PC ecosystem partners to enable the next generation of AI PCs expanded significantly in the quarter. We are aggressively driving our Ryzen AI CPU roadmap to extend our AI leadership, including our next-gen Strix processors that are expected to deliver more than 3x the AI performance of our Ryzen 7040 series processors. Strix combines our next-gen Zen 5 core with enhanced RDNA graphics and an updated Ryzen AI engine to significantly increase the performance, energy efficiency, and AI capabilities of PCs. Customer momentum for Strix is strong, with the first notebooks on track to launch later this year. Looking at 2024, we are planning for the PC TAM to grow modestly year on year, weighted towards the second half as AI PCs ramp. We continue to see strong growth opportunities for our client business as we ramp our current products, extend our AI PC leadership, and launch our next wave of Zen 5 CPUs. Now turning to our gaming segment, revenue declined 17% year-over-year and 9% sequentially to $1.4 billion, as lower semi-custom revenue was partially offset by increased sales of Radeon GPUs. Semi-custom SOC sales declined in line with our projections in the quarter. Going forward, we now expect annual revenue to decline by a significant double-digit percentage year over year, as supply caught up with demand in 2023, and we enter the fifth year of what has been a very strong console cycle. In gaming graphics, revenue grew both year over year and sequentially, driven by strong demand in the channel for both our Radeon 6000 and Radeon 7000 series GPUs. We expanded our Radeon 7000 GPU series with the launch of new RX 7600 XT series enthusiast desktop GPUs earlier this month that offer leadership price performance for 1080p gaming. We also launched new open source FidelityFX Super Resolution 3 software that can deliver significantly higher gaming frame rates on both GPUs and APUs. Turning to our embedded segment, Revenue decreased 24% year-over-year and 15% sequentially to $1.1 billion as customers focused on reducing their inventory levels. We expanded our embedded portfolio in the quarter with new leadership solutions for key markets. We launched new Versal Prime Adaptive SOCs for the aerospace, test and measurement, healthcare, and communications markets that deliver industry-first support for DDR5 memory and increased DSP capability compared to our prior generations. In automotive, we launched new Versal SOC solutions that bring industry-leading AI compute capabilities and advanced safety and security features to next-generation vehicles. We also launched Ryzen embedded processors with unmatched performance and features for industrial automation, machine vision, robotics, and edge server applications. Looking at 2024, we expect overall embedded demand will remain soft through the first half of the year as customers continue to focus on normalizing their inventory levels. Longer term, we're very confident in the growth trajectory of our embedded business as our expanded product portfolio drove more than 10 billion of design wins in 2023, an increase of more than 25% compared to 2022. In summary, I'm very pleased with our fourth quarter and full year results. For 2024, we expect the demand environment to remain mixed, with strong growth in our data center and client segments offset by declines in our embedded and gaming segments. Against this backdrop, we believe we will deliver strong annual revenue growth and expand gross margin driven by the strength of our Instinct, Epic, and Ryzen product portfolios. Taking a step back, we believe AI is a once-in-a-generation transition that will reshape virtually every portion of the computing market, starting in the data center and then expanding into PCs and across multiple embedded markets. We have built excellent customer traction based on the strength of our multi-year AI hardware and software roadmaps, and we see clear opportunities to drive our next wave of growth as we deliver leadership AI solutions across our portfolio. In the data center, we see 2024 as a start of a multi-year AI adoption cycle, with the market for data center AI accelerators growing to approximately 400 billion in 2027. Customer deployment of our instinct GPUs continues accelerating, with MI300 now tracking to be the fastest revenue ramp of any product in our history and positioning us well to capture significant share over the coming years based on the strength of our multi-generation Instinct GPU roadmap and open-source Rackham software strategy. In PCs, we're focused on delivering our long-term roadmaps with leadership Ryzen AI NPU capabilities to enable differentiated experiences as Microsoft and our other software partners bring new AI capabilities to PCs starting later this year. At the same time, we are rapidly driving leadership AI compute capabilities across the full breadth of our embedded product portfolio. This is an incredibly exciting time for the industry and an even more exciting time for AMD as our leadership IP, broad product portfolio, and deep customer relationships position us well to deliver significant revenue growth and earnings expansion over the next several years. 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. Jean?