Advanced Micro Devices, Inc.

Greetings and welcome to the AMD first quarter 2024 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mitch Haas, Vice President, Investor Relations. Thank you, Mitch. You may begin.

Thank you and welcome to AMD's first quarter 2024 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. And 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 Hsu, 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 TD Cowan Technology, Media, and Telecom Conference on May 29th. And Jean Hu, Executive Vice President, Chief Financial Officer, and Treasurer, will attend the JPMorgan Global Media and Communications Conference on Tuesday, May 21st, the Bank of America Global Technology Conference on Wednesday, June 5th, and the Jefferies Nasdaq Investor Conference on Tuesday, June 11th. 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 on our press release for more information on the 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 today. This is an incredibly exciting time for the industry as the widespread deployment of AI is driving demand for significantly more compute across a broad range of markets. Under this backdrop, we are executing very well as we ramp our data center business and enable AI capabilities across our product portfolio. Looking at the first quarter, revenue increased to 5.5 billion. We expanded gross margin by more than two percentage points and increased profitability as data center and client segment sales each grew by more than 80% year over year. Data center segment revenue grew 80% year-over-year and 2% sequentially to a record $2.3 billion. The substantial year-over-year growth was driven by the strong ramp of AMD Instinct MI300X GPU shipments and a double-digit percentage increase in server CPU sales. We believe we gained server CPU revenue share in the seasonally down first quarter, led by growth in enterprise adoption and expanded cloud deployments. In cloud, while the overall demand environment remained mixed, hyperscalers continued adopting fourth-gen EPIC processors to power more of their internal workloads and public instances. There are now nearly 900 AMD-powered public instances available globally, as Amazon, Microsoft, and Google all increased their fourth-gen EPIC processor offerings with new instances and regional deployments. In the enterprise, we have seen signs of improving demand as CIOs need to add more general purpose and AI compute capacity while maintaining the physical footprint and power needs of their current infrastructure. This scenario aligns perfectly with the value proposition of our EPIC processors. Given our high core count and energy efficiency, we can deliver the same amount of compute with 45% fewer servers compared to the competition, cutting initial capex by up to half and lowering annual OPEX by more than 40%. As a result, enterprise adoption of Epic CPUs is accelerating, highlighted by deployments with large enterprises including American Airlines, DBS, Emirates Bank, Shell, and STMicro. We're also building momentum with AMD-powered solutions powering the most popular ERP and database applications. As one example, the latest generation of Oracle Exadata, the leading database solution used by 76 of the Fortune 100, is now powered exclusively by fourth-gen EPYC processors. Looking ahead, we're very excited about our next-gen Turin family of EPYC processors featuring our Zen 5 core. We're widely sampling Turin, and the silicon is looking great. In the cloud, the significant performance and efficiency increases of Turin position us well to capture an even larger share of both first and third party workloads. In addition, there are 30% more Turin platforms in development from our server partners compared to fourth gen Epic platforms, increasing our enterprise SAM with new solutions optimized for additional workloads. Turin remains on track to launch later this year. Turning to our broader data center portfolio, we delivered our second straight quarter of record data center GPU revenue as MI300 became the fastest ramping product in AMD history, passing a billion dollars in total sales in less than two quarters. In cloud, MI300x production deployments expanded at Microsoft, Meta, and Oracle to power generative AI training and inferencing for both internal workloads and a broad set of public offerings. For the enterprise, we're working very closely with Dell, HPE, Lenovo, Supermicro, and others as multiple MI300x platforms enter volume production this quarter. In addition, we have more than 100 enterprise and AI customers actively developing or deploying MI300x. On the AI software front, we made excellent progress adding upstream support for AMD hardware in the OpenAI Triton compiler, making it even easier to develop highly performant AI software for AMD platforms. We also released a major update to our Rackham software stack that expands support for open source libraries, including VLLM and frameworks including JAX. adds new features like video decode, and significantly increases generative AI performance by integrating advanced attention algorithm support for sparsity and FP8. Our partners are seeing very strong performance in their AI workloads. As we jointly optimize for their models, MI300x GPUs are delivering leadership inferencing performance and substantial TCO advantages compared to H100. For instance, several of our partners are seeing significant increases in tokens per second when running their flagship LLMs on MI300x compared to H100. We're also continuing to enable the broad ecosystem required to power the next generation of AI systems, including as a founding member of the Ultra Ethernet Consortium, working to optimize the widely adopted Ethernet protocol to run AI workloads at data center scale. MI300 demand continues to strengthen, and based on our expanding customer engagements, we now expect data center GPU revenue to exceed $4 billion in 2024, up from the $3.5 billion we guided in January. Longer term, we are increasingly working closer with our cloud and enterprise customers as we expand and accelerate our AI hardware and software roadmaps and grow our data center GPU footprint. Turning to our client segment, revenue was 1.4 billion, an increase of 85% year-over-year, driven by strong demand for our latest generation Ryzen mobile and desktop processors with OEMs and in the channel. Client segment revenue declined 6% sequentially. We saw strong demand for our latest generation Ryzen processors in the first quarter. Ryzen desktop CPU sales grew by a strong double-digit percentage year-over-year, and Ryzen mobile CPU sales nearly doubled year-over-year, as new Ryzen 8040 notebook designs from Acer, Asus, HP, Lenovo, and others ramped. We expanded our portfolio of leadership enterprise PC offerings with the launch of our Ryzen Pro 8000 processors earlier this month. Ryzen Pro 8040 mobile CPUs deliver industry-leading performance and battery life for commercial notebooks. and our Ryzen Pro 8000 series desktop CPUs are the first processor to offer dedicated on-chip AI accelerators in commercial desktop PCs. We see clear opportunities to gain additional commercial PC share based on the performance and efficiency advantages of our Ryzen Pro portfolio and an expanded set of AMD-powered commercial PCs from our OEM partners. Looking forward, we believe the market is on track to return to annual growth in 2024, driven by the start of an enterprise refresh cycle and AI PC adoption. We see AI as the biggest inflection point in PCs since the internet, with the ability to deliver unprecedented productivity and usability gains. We're working very closely with Microsoft and a broad ecosystem of partners to enable the next generation of AI experiences powered by Ryzen processors with more than 150 ISVs on track to be developing for AMD AI PCs by the end of the year. We will also take the next major step in our AI PC roadmap later this year with the launch of our next generation Ryzen mobile processors, codenamed Strix. Customer interest in Strix is very high based on the significant performance and energy efficiency uplifts we are delivering. DesignWin Momentum for premium notebooks is outpacing prior generations as Strix enables next-generation AI experiences in laptops that are thinner, lighter, and faster than ever before. We're excited about the growth opportunities for the PC market, and based on the strength of our Ryzen CPU portfolio, we expect to grow revenue share this year. Now turning to our gaming segment, Revenue declined 48% year-over-year and 33% sequentially to $922 million. First quarter semi-custom SOC sales declined in line with our projections as we are now in the fifth year of the console cycle. In gaming graphics, revenue declined year-over-year and sequentially. We expanded our Radeon 7000 series family with the global launch of our Radeon RX 7900 GRE and also introduced our driver-based AMD fluid motion frames technology that can provide large performance increases in thousands of games. Turning to our embedded segment, revenue decreased 46% year-over-year and 20% sequentially to $846 million as customers remain focused on normalizing their inventory levels. We launched our Spartan Ultra Scale Plus FPGA family with high IO counts, power efficiency, and state-of-the-art security features, and we're seeing a strong pipeline of growth for our cost-optimized embedded portfolio across multiple markets. Given the current embedded market conditions, we're now expecting second quarter embedded segment revenue to be flat sequentially with a gradual recovery in the second half of the year. Longer term, we see AI at the edge as a large growth opportunity that will drive increased demand for compute across a wide range of devices. To address this demand, we announced our second generation of versatile adaptive SOCs that deliver a 3x increase in AI tops per watt and a 10x greater scalar compute performance compared to our prior generation of industry-leading adaptive SOCs. Versal Gen2 Adaptive SoCs are the only solution that combine multiple compute engines to handle AI pre-processing, inferencing, and post-processing on a single chip, enabling customers to rapidly add highly performant and efficient AI capabilities to a broad range of products. We were pleased to be joined at our launch by Subaru, who announced they adopted Versal AI Edge Series Gen2 devices to power the next generation of their EyeSight ADAS system. Embedded design wind momentum remains very strong as customers adopt our full portfolio of FPGAs, CPUs, GPUs, and adaptive SOCs to address a larger portion of their compute needs. In summary, we executed well in the first quarter, setting us up to deliver strong annual revenue growth and expanded gross margin driven by growing adoption of our Instinct, Epic, and Ryzen product portfolios. Our priorities for 2024 are very clear. Accelerate our data center growth by ramping instinct GPU production and gaining share with our epic processors. Launch our next generation Zen 5 PC and server processors that extend our leadership performance and expand our adaptive computing portfolio with differentiated solutions. Looking further ahead, AI represents an unprecedented opportunity for AMD. While there has been significant growth in AI infrastructure build-outs, We are still in the very early stages of what we believe is going to be a period of sustained growth driven by an insatiable demand for both high performance AI and general purpose compute. We have expanded our investments across the company to capture this large growth opportunity. From rapidly expanding our AI software stack to accelerating our AI hardware roadmaps, increasing our go-to-market activities, and partnering closely with the largest AI companies to co-optimize solutions for their most important workloads. We are very excited about the trajectory of the business and the significant growth opportunities ahead. Now I'd like to turn the call over to Jean to provide some additional color on our first quarter results. Jean?