Q1 2022 Advanced Micro Devices Inc Earnings Call

May 3, 2022

Hello, and welcome to the AMD first quarter 2022 earnings call. At this time, all participants are in a listen only mode.

Question and answer session will follow the formal presentation.

If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

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 first 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 slides. If you have not reviewed these documents. They can be found on the investor relations page of AMD Dot com.

Today, we will discuss AMD first quarter results, including partial quarter contributions from the acquisition of Xilinx, which closed on February 14th 2022.

We will also discuss AMD results on a standalone basis for the first quarter of 2022.

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 in the slides posted on our website.

Participants on today's conference call are Dr. Lisa Su, our chair and Chief Executive Officer, and <unk> Kumar, Our executive Vice President Chief Financial Officer and Treasurer.

Victor Peng President of Amd's adaptive and embedded computing group will also join us for Q&A.

Is a live call and will be replayed via webcast on our website.

Before we begin I would like to note AMD will host its 2022 financial analyst day on Thursday June 9th and our second quarter quiet time is expected to begin at the close of business on Friday June 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 cause actual 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 with that I would like to turn the call over to Lisa Lisa.

Yeah.

Thank you Laura and good afternoon to all those listening in today.

For the last several years, we have been on a journey to both scale and transform a M D.

We have consistently executed our strategy expanded our portfolio of leadership products and diversified our business all while driving best in class growth.

We reached a significant inflection point in our journey during the first few months of 2022 as we took several major steps that fundamentally reshape our business.

In addition to delivering record financial results, we closed our strategic acquisition of Xilinx and announced our plans to acquire <unk>.

The strategic importance of the Xilinx acquisition to our long term goals cannot be overstated.

As the industry's number one provider of FPGA and adaptive computing solutions xilinx significantly expands our technology and product portfolio.

Silence also adds multiple high margin long term revenue streams spanning a new set of markets and customers further strengthening and diversifying our business model.

Importantly, xilinx has successfully executed its own growth strategy in recent years with the increased adoption of adaptive silicon across datacenter communications automotive and other large embedded markets.

With <unk>, we will further expand our datacenter solutions capabilities.

And some that will add a proven team that has developed an industry, leading GPU and software stack already deployed with key customers, including IBM HPE, Microsoft Oracle and Goldman Sachs.

Pin Sandoz differentiated technology further expands our product portfolio and will enable AMD to innovate at the silicon and software and platform levels to deliver leadership solutions for our cloud enterprise and edge customers.

Now turning to our first quarter financial performance, we started the year very strong with record quarterly revenue and net income.

First quarter revenue, including the contribution is from six weeks of Xilinx grew 71% year over year to a record $5 9 billion.

We expanded gross margin seven percentage points to 53% and more than doubled both operating and net income year over year.

Excluding xilinx revenue grew 55% year over year to a record $5 3 billion gross margin expanded five percentage points to 51% and operating income more than doubled to a record $1 6 billion.

Turning to our computing and graphics segment revenue increased 33% year over year to $2 8 billion driven primarily by the ramp of our latest ryzen and radeon products.

Client compute revenue grew by a strong double digit percentage year over year based on higher ryzen mobile and desktop processor sales.

As a result, we believe we gained client processor revenue share for the eighth straight quarter.

In desktop we expanded our processor portfolio with the introduction of seven new Ryzen Cpus, including the rising 5800 X three D CPU, which is the industry's fastest gaming CPU and first desktop processor featuring three destock triplets.

And notebooks record mobile processor revenue was driven by the launch of our Rembrandt rising 6000 mobile processors that extend the leadership compute gaming and battery life capabilities of our mobile processors.

Yeah.

In commercial we recently introduced our latest Ryzen 6000 pro processors with leadership performance and battery life and modern security and Manageability features.

We are well positioned to accelerate our growth in commercial notebooks in 2022 based on the expanded number of design wins on track to launch.

Although the PC market is experiencing some softness coming off multiple quarters of near record unit shipments our focus remains on the premium gaming and commercial portions of the market, where we see strong growth opportunities and we expect to continue gaining overall client revenue share.

In graphics revenue grew by a strong double digit percentage year over year with record desktop graphics channel sales.

Desktop GPU sales nearly doubled year over year as sales of our Radeon 6000 series graphics cards were strong.

In mobile the first notebooks, featuring our latest Radeon 6000, mobile Gpus launched in the quarter and we expect sales to ramp over the coming quarters.

Data Center graphics revenue was flat year over year, as we launched our instinct to 10 accelerators.

We expanded our engagements with large cloud customers in the quarter and launched our <unk> five software suite targeting extra scale class H P C and AI applications.

Turning to our enterprise embedded and semi custom segment revenue increased 88% year over year to two and a half billion driven by record server semi custom and embedded processor sales.

Semi custom sales grew by a significant double digit percentage year over year based on strong demand for Sony and Microsoft consoles as well as valves new steam deck.

Sales for this game console generation continued to outpace all prior generations, and we expect 2022 to be a record year for our semi custom business.

Turning to our embedded business revenue more than doubled year over year led by growth in automotive.

We also secured multiple design wins in next generation security and firewall devices from tier one networking providers.

Okay.

Turning to server, we had another record quarter as revenue more than doubled year over year and increased by a double digit percentage sequentially.

We have more than doubled server processor revenue year over year in eight of the last 10 quarters, highlighting the growing demand for epic processors with cloud enterprise and <unk> customers.

Cloud revenue more than doubled year over year as hyper scalar has expanded their internal infrastructure deployments and 70, new AMD powered instances launch from Alibaba, Amazon Baidu cloud, Microsoft Azure, Google and others.

There are now more than 460, AMD based cloud instances available from the largest hyperscale or with additional instances on track to launch in the coming quarters.

In enterprise revenue more than doubled year over year with strong growth in key verticals, including it infrastructure financial services and database applications.

Our sales pipeline continues to be very strong and we saw our win rate grow in the first quarter across a broad set of enterprise and customers.

We launched our first epic processors with <unk> stacked chip lives in the quarter.

This technology extends our performance leadership and technical computing workloads by up to 66% compared to our prior generation.

I chose Cisco Dell HPE, Lenovo and supermicro, all large servers, featuring the new Cpus in the quarter.

Yeah.

Excitement for our next generation Genoa server processors continues to grow as we expanded customer and partnering sampling in the quarter.

We expect general it will be the industry's highest performance general purpose server CPU further extending the performance energy efficiency and Tcl advantages of our epic processors.

We remain on track to launch general in the second half of the year and expect to continue our share gain trajectory based on expanded cloud enterprise and HBC customer adoption.

In addition development of our higher core count Bergamo processors optimized for high throughput cloud workloads continues to progress well with shipments on track to begin in the first half of 2023.

Turning to the Xilinx business for the six weeks following acquisition close Xilinx revenue was $559 million.

On a pro forma basis for the full quarter Xilinx delivered its fourth straight quarter of greater than 20% year over year revenue growth in the second straight quarter of greater than 1 billion of revenue.

In data center first quarter demand was led by expanded FPGA as a service and smart Nic deployments at tier one hyperscale.

As well as low latency networking solutions with Fintech companies.

We saw strength in communications led by wire demand and access and optical transport.

And wireless virtual based fiber deployments continue ramping in multiple regions and we secured a strategic design win with a tier one communications equipment provider to power. Their next Gen baseband solutions with a virtual <unk> solution.

We saw strong demand across the xilinx embedded markets led by record pro forma full quarter revenue in automotive industrial vision in health care and consumer.

Looking forward, we see very strong demand across all of the Xilinx end markets and are focused on increasing supply.

Okay.

Turning to our integration work in the first few months since close we have seen tremendous excitement from our customers partners and employees and we expect to see significant product and revenue synergies.

We now have the best portfolio of high performance and adaptive computing engines in the industry and we see multiple opportunities to leverage our expanded technology portfolio to deliver even stronger products.

As one example, we're integrating xilinx is differentiated AI engine across our CPU product portfolio to enable industry, leading inference capabilities with the first products expected in 2023.

We have also identified significant additional revenue synergy opportunities with some of our largest customers as we can now address a larger portion of their compute needs with our expanded product portfolio.

In summary, the start of 2022 is a significant inflection point for AMD marked by record top and bottom line financial results driven by our leadership product portfolio and strong execution and the close of our Xilinx acquisition.

We have now delivered greater than 45% year over year revenue growth for seven straight quarters and increased net income by more than 60% year over year for the last 10 quarters.

Based on higher AMD organic growth as well as the addition of xilinx with strong demand across multiple end markets. We now expect annual revenue to grow by approximately 60% year over year up from approximately 31% growth we guided at the beginning of the year.

Longer term I'm incredibly excited about our additional growth opportunities as we add the xilinx and <unk> teams.

We now see a significantly larger tam opportunity for AMD across a diverse set of end markets based on our broader portfolio of leadership compute engines and expanded solutions capabilities.

I look forward to sharing more about the products and technologies that will enable the next stage of our growth journey at financial Analyst day in June .

Now I'd like to turn the call over to da vendor to provide some additional color on our first quarter financial performance the vendor.

Thank you Lisa and good afternoon, everyone.

The first quarter was an excellent start to the year with strong demand for our leadership products, resulting in record quarterly revenue continued gross margin expansion record profitability and record.

Cash flow generation.

In addition, we are very pleased to have closed the xilinx transaction and announced our intention to acquire <unk>.

First quarter consolidated revenue was $5 9 billion up 71% from a year ago, driven by significant growth across all businesses and the inclusion of signings revenue for the partial period.

Excluding the Xilinx contribution AMD revenue was $5 3 billion up 55% from a year ago with data center revenue doubling year over year gross margin was 53% up 660 basis points from a year ago, driven by higher silver cross sell revenue and <unk>.

High margin Xilinx revenue gross margin for AMD, excluding xilinx was 51% up 480 basis points year over year, primarily driven by higher silver cross sell revenue operating expenses were $1 3 billion compared to 830.

30 million a year ago, as we increase investments in our long term product road maps to support the future growth of our business operating income more than doubled from a year ago to a record $1 8 billion up $1 1 billion, primarily driven by significant revenue growth.

And higher gross margin operating margin was 31% up from 22% a year ago. Net income was a record $1 6 billion up $947 million from a year ago diluted earnings per share was $1 13 per share compared to 52.

Per share a year ago.

Now turning to first quarter business segment results computing and graphics segment revenue was $2 8 billion up 33% year over year, driven by higher client and graphics processor revenue computing and graphics segment operating income was $723 million or two.

86% of revenue compared to $485 million or 23% of revenue a year ago. The increase in operating income was driven primarily by higher revenue, partially offset by higher operating expenses.

Enterprise embedded and semi custom segment revenue was $2 5 billion up 88% from $1 3 billion in the prior year. The strong revenue increase was driven by higher silver semi custom and embedded revenue.

<unk>.

Segment operating income grew significantly to $881 million or 35% of revenue compared to $277 million or 21% of revenue a year ago. The higher operating income and margin were driven by increased revenue richer product mix and.

$83 million licensing gain.

<unk> revenue for the partial quarter was 559 million with operating income of $233 million or 42% of revenue on a pro forma basis for the full quarter <unk> generated over 1 billion of revenue up 22% compared to a year ago.

With gross growth across all <unk>.

Xilinx major.

End market categories.

We are on track to achieve our cost synergy goals for the acquisition and expect the addition of xilinx to be accretive to non-GAAP earnings per share for 2022.

Turning to the balance sheet cash cash equivalents and short term investments were $6 5 billion at the end of the first quarter, we deployed $1 9 billion to repurchase common stock in the first quarter to date, we have utilized $3 7 billion of our initial 4 billion stock repurchase program.

We also announced a new $8 billion share repurchase program during the quarter in total we had $8 3 billion in remaining authorization at the end of the first quarter.

Quarterly free cash flow was a record $924 million compared to $832 million in the same quarter last year and $736 million in the prior quarter.

We successfully executed a five year 3 billion sustainability linked credit facility to replace our existing 500 million facility. This further demonstrates our commitment to our corporate ESG goals.

Inventory was $2 4 billion up $476 million from the prior quarter due to the addition of Xilinx inventory.

Before I turn to our financial outlook, let me cover our financial segment reporting beginning with the second quarter of fiscal 2022, we plan to change our segment reporting to the following four segments data center client gaming and embedded which will align our financial reporting.

With our strategic end markets I look forward to sharing further details with you at our financial Analyst day.

Today's outlook is based on current expectations and contemplates the current global supply environment and customer demand signals.

For the second quarter of 2022, we expect revenue to be approximately $6 5 billion, plus or minus $200 million, an increase of approximately 69% year over year and approximately 10% quarter over quarter.

The year over year increase is expected to be driven by the addition of xilinx revenue plus higher server semi custom and client revenue the quarter over quarter increase is expected to be primarily driven by xilinx revenue plus higher silver revenue. In addition for Q2 2022, we expect.

non-GAAP gross margin to be approximately 54% non-GAAP operating expenses to be approximately $1, five 6 billion or 24% of revenue.

non-GAAP interest expense taxes, and other could be approximately $270 million based on the 13% effective tax rate.

And the diluted share count to be approximately $1 six 4 billion shares.

For the full year 2020, we now expect revenue to be approximately $26 3 billion an increase of approximately 60%.

Driven by Xilinx, and higher silver and semi custom revenue, we expect non-GAAP gross margin to be approximately 54% non-GAAP operating expenses to be approximately 24% of revenue non-GAAP effective tax rate to be 13% and <unk>.

non-GAAP cash tax rate to be approximately 10% due primarily to U S tax requirement to capitalize R&D and full utilization of our U S. Net operating losses and tax credits in 2022 fiscal year 2022 will be a 53 week year.

And include an additional week in the fourth quarter.

In closing we had an excellent start to 2022 with strong revenue growth across all businesses. We are pleased to have completed the xilinx acquisition, which strengthens our business model with revenue diversification accretive gross margin and increase cash generation.

We're very delighted to welcome to Xilinx team to AMD looking ahead, AMG is very well positioned for long term growth margin expansion and cash generation driven by our leadership products and Roadmaps with that I will turn the call back over to Laura to begin the Q&A portion of our.

Recall Laura.

Thank you very much to vendor operator, we're ready to go ahead and begin our first question.

Thank you as a reminder, if you'd like to be placed in the question queue. Please press star one on your telephone keypad. We ask you. Please ask one question one follow up then return to the queue. Our first question today is coming from Matt Ramsay from Cowen. Your line is now live.

Thank you very much everybody. Good afternoon, congratulations Lisa on obviously getting xilinx close in on the strong results.

I guess.

There's a lot going on from a macro perspective.

The markets that you serve and in the supply chain for Lisa. So I mean, the first half of the year I think youre doing I don't know 50, 455% organic growth in the first quarter.

Maybe you could talk me through the puts and takes in the quarter I think there's a perception that.

You have additional supply coming online theres, obviously supply constraints and Lockdowns in China.

Your server business doing extraordinarily well in the numbers that you just printed.

And then maybe some perception of a softening in the PC market. So there's a lot going on in and kind of love you to walk me through the puts and takes of the quarter. If you could thank you.

Yeah, absolutely Matt. Thanks for the question. So we did have a very strong first quarter. There is a lot going on without a doubt in the business I would say if you look at the strength in our business in the first quarter. It was really broad based so very very strong server results. We continue to gain share we continue to bring more supply on.

They're also a very strong results in our semi customer game console business as well as in the client and graphics businesses.

There is some softness in the PC market, but we had for the last number of quarters actually been shifting our mix to the higher end or the more premium segments of the <unk>.

PC market and so that's where more of our exposure is and we actually saw a significant growth in our PC business sequentially. As we started ramping our rising 6000 notebooks and that resulted in strong strong ASP growth as well as just our key market segments of premium.

Commercial and gaming being covered there.

As we go forward obviously.

All of the things that you talked about are in play.

That being the case I think we've managed through the supply situations.

Very well, we continue to work with our customers and ensure that we're optimizing our builds to their builds and with the additional of Xilinx. We also have another set of end markets that have very strong demand that are all additive to our business.

Thank you for that Lisa I appreciate all the color.

I guess that's my.

Follow up question I wanted to to examine.

Examine the full year guidance that you've given obviously.

Obviously it includes dialing so it's a little bit apples and oranges from last year, but I think in the press release, you guys mentioned that you expect some upside from the original 31% organic growth guidance. If you have any comments on magnitude there that would be helpful and I think just.

What investors would love to hear from you is maybe your view on the data center Capex spending environment and also on the PC market. I think you guys had been maybe a bit more conservative than some of your competition in your market commentary about Pcs, maybe being flattish coming into this year.

Imagine theres, some new puts and takes to that so just some thoughts on how you guys constructed the guidance for the year, especially relative to the original 31% would be really helpful. Thank you very much.

Yeah.

Lots of questions in there Matt So let me try to go through them. So first on the full year 2022 guide. It is a significant increase in guidance up 60%. There are a couple of pieces to that on the organic side of the AMD business. We originally guided up 30.

1% based on what we saw in the market in January as we look at the market now and our own sort of customer and supply situation, we see that organic growth higher into the mid Thirty's, that's primarily driven by very.

Very strong demand in our server business very strong demand in our console or semi custom business additional supply coming online we have taken a bit more of a conservative perspective on the PC market again, I think the softness is in certain parts of the market. It's not in all parts of the market and our focus is on where.

We add the most value in the market and that is that is in the premium segments in terms of the xilinx piece of it.

Full year addition, three five quarters of Xilinx is a significant add on a pro forma basis. The xilinx business is also growing very well and it's growing sort of like in the low twenties. If you considered full year compare to <unk>.

Calendar year 2021, so overall I think we have a lot of broad base.

Set of growth drivers and multiple levers for growth as we go through the year and we continue to work on working with our customers on where the demand is and ensuring that we're satisfying that demand.

Really appreciate the color Lisa Thank you.

Thank you. Our next question is coming from Toshi Hari from Goldman Sachs. Your line is now live.

Thank you for taking the question and congrats on the strong results and completing the acquisition as well.

Two questions myself I guess first on the supply chain situation, Lisa obviously, theres a lot going on in terms of.

Wafer supply and substrates now the China Lockdowns.

What are some of the bigger pain points for you and to the extent that China Lockdowns are impacting your business directly or indirectly.

Are you, assuming any impact to revenue and profitability in the second quarter.

Sure <unk>. Thanks for the question so on the supply environment, we've been working on this really for the last 18 months, we've made a lot of progress.

Both the wafer side and significant investments on the substrates I would say that we continue to get.

So we're very good support from our suppliers that is one of the reasons, we can increase our guidance the way it is.

From a overall.

The China Covid situation from our standpoint, we haven't had any significant impact on our own shipments in our own supply chain. We have been working with some customers that have had some customer build delays and that is contemplated in our second quarter guidance, we're going to continue to work on supply optimization.

<unk> with the addition of Xilinx.

Of the let's call it more mature node 16 nanometer and above wafer supply is still somewhat constrained we're working with sort of the larger scale of AMD to try to bring more supply on board there as.

As well as continuing to ramp.

Our overall capacity to support a very strong sort of next few quarters, hopefully that answered your supply questions.

Yeah for sure. Thank you and then my second question. My follow up question was on the data Center business. It's great to hear that you are.

You've decided to re segment your business. So thank you for that.

I'm curious how meaningful data center was as a percentage of revenue in the quarter.

CPU datacenter GPU and FPGA is from from Xilinx and I guess more importantly, how are you thinking about the medium to long term opportunity in both through a classic datacenter GPU business as well as the FPGA business I think in datacenter GPU.

Mentioned that it was flat in the quarter, but you also talked about being engaged with with more cloud customers. So so curious what you're seeing there and then on the FPGA side, I think Victor and team.

Prior to the deal announcement was pretty vocal about.

The long term growth opportunity there as well so any update from your perspective would be great. Thank you.

Right. Okay. So again, a few pieces to that let me let me try to give you some color and then maybe Victor will add on on the FPGA side. So in terms of yes, we are going to change our segment reporting as defender said as of the second quarter two to be to give you some more alignment to the markets in terms of this quarter for the pieces that you meant.

<unk>.

On higher revenue the datacenter for those pieces was let's call it low <unk> percentage of our overall revenue.

And then in terms of the longer term data Center picture.

We're incredibly excited about the opportunity in data center. When you look at the pieces, we have now and in the CPU franchise is a very strong continuing to get stronger.

Excited with have general looks and how Bergamo looks in sort of the engagements with customers. There. We're excited about the GPU portfolio as well Gpus for us are a longer term.

Sort of roadmap similar to what we did on the CPU side, we had been more focused on let's call. It supercomputing and HBC. So that was strong for us last year and Thats why were flattish.

Year on year, we're very engaged on the AI front now continuing our investments in our software stack and working with cloud guys to optimize our software stack and then moving on.

Two FPGA is and then also our.

Adaptive SFC and then.

The <unk> acquisition I think what we now have is just an incredibly strong portfolio when we're dealing with whether youre talking about the largest cloud hyperscale or are you talking about enterprise and then with <unk> Xilinx. It also gives us exposure to the edge.

As well and so between we have all the compute engines and are able to optimize that so I think you should expect to hear a lot more from us in the data center certainly is at our financial analyst day, but really strong opportunities. There maybe Victor you want to add on I think you covered well the only thing I would add is just again I think not only do we have.

A really broad portfolio of all the compute engines, but we are doubling down on the networking side right since we had strength.

And that in smart Nic and then with <unk>.

Kind of solutions that we can provide to customers and the overall infrastructure. It is not about point things. It's about the total solution and as you probably know scale out and just a lot of these applications can be thrilled by the network. So we really can optimize all of us and the customers really want optimized customized solutions and I think thats, what we can do with <unk>.

The former Xilinx smart Nic as well as Panther I know even going further.

Thank you for all the detail.

Thank you.

Thank you. Our next question is coming from Vivek Arya from Bank of America. Your line is now live.

Thanks for taking my question Lisa My first one is on the server market.

Milan I hope you take and continues to help you take a lot of share in the market I'm curious, what's the state of play in front of the Nextgen Genoa verses, the Sapphire Rapids server cycle from two perspectives.

Just from the industry adoption of DDR five can that be a bottleneck to adoption of these next generation servers and second our perspective is that you would have two different flavors of general over the cloud optimized version.

Coming later, so just give us your sense of how this next generation cycle plays out versus the very strong success Youll had been Milan so far.

Yeah, absolutely vivek. So the way to think about it is the data center market and particularly in servers.

So people are getting much more optimized for workloads and so there are different flavors and we see that even in Milan today, with Milan, and our onex extra D or the.

The extra day, we introduced and so I think it's natural for these solutions to sit side by side I think as you go into general of the next generation.

The next generation platform, we would expect again the adoption there is a lot of excitement in Genoa and Theres a lot of customer demand for Genoa I do expect that general will set again side by side with Milan for quite some time, because youre not going to move the infrastructure instantaneously over and then when you think about Brigham.

<unk>, which is the cloud optimized I think that will be more specific.

Our specific large hyper scaler, who have the need for let's call. It a more performance per dollar performance per watt solution. So the way to think about this is as our business has grown we can invest more broadly and that will give us just a more optimized solution for our customers tamps.

Very helpful. And then Lisa My second question kind of two or three interrelated question on the PC market.

What is your new sense of what the PC Tam can be this year versus what you talked before and then I think as as part of that your competitors have mentioned several times that they are back in the market.

Older Lake and they're taking a lot of share. So I'm wondering what you've seen there and then finally.

What's your share in the commercial market today versus what it was last year. So just something on time.

Competition in commercial exposure thank.

Thank you for.

So vivek when we kind of started the year, we were thinking that the PC Tam could be flat to let's call it down.

Call. It low mid single digits, I think given sort of how we have started this year and then some of the other things in the market.

We're taking a more conservative approach to the PC Tam so for our modeling for the full year guidance, we're modeling something like down high single digits.

A lot of things can happen between now and then so I would say that I think that's a good place for us to model with.

Within that we've always been very focused on where we can add the most value and the premium segments Ryzen 6000, a rembrandt product is extremely well positioned.

From a battery life of performance standpoint, we have a number of commercial.

Very very good systems that are in the process of being launched I think we're excited about that.

To your question about commercial share, we're still underrepresented in the commercial market and we know that and that's that's a focus area for us I think overall from a market share standpoint, we believe were focused in the right segments and so even under the backdrop of let's call. It.

A a softer PC market that we will we can continue to expect to gain revenue share in the process and.

That's sort of our overall strategy, but I think the other piece of it is we have so many levers in the business now as we go forward I think the.

The strength in the business is.

Really looking at the overall data center portfolio, the PC portfolio, the gaming portfolio and the Xilinx portfolio together there are lots of levers for growth and as we go through this year, we see that being a very very helpful.

Thank you Lisa.

Thank you. Our next question today is coming from Stacy <unk> from Bernstein Research. Your line is now live.

Hi, guys. Thanks for taking my questions. My first one I wanted to ask about data centers, so more than doubled last year and more than doubled again this quarter.

You guys have the supply available to double that business again for the full year.

If you can get there and I guess, if the supply is there like do you think it can be fulfilled.

Yeah. So Stacy I think the data center business, particularly the server CPU business continues to be very strong for us I'm not going to proclaim a certain well will.

We will have double every quarter I will say that we expect to grow very strongly over the next few quarters and we are continuing to bring on additional supply to do that the demand is there and it really is about continuing to work with our customers on that but I think our confidence level in data center growth is very high.

Thank you for my follow up I wanted to ask just a quick question on PC. So in the context of.

The PC market Tam that you will see gallon remodeling down high single digits, given your mix shift in your share gains do you think you can actually grow your client revenues year over year in 2022 for the full year.

Yes Stacy.

We are.

We are expecting that we will grow client revenues on a year over year basis.

That timing environment.

We continue to mix shift to let's call it the more premium segments and so it's a revenue share statement.

Got it that's fair to say much more of a year over year revenue growth is things like servers and.

Putting putting xilinx aside for a minute data center servers and consoles more than client.

Yes that is true, but our expectation, though is we have a number of growth drivers in the business.

In terms of what has allowed us to increase the full year guide from.

From an organic standpoint it is.

Our strong visibility in server strong visibility on the console side strong visibility.

Just from a overall supply and demand perspective.

Got it thank you so much.

Thank you. Our next question is coming from Aaron Rakers from Wells Fargo. Your line is now live.

Yes, thanks for taking the questions I'll stick to two if I can.

I guess my first question as we think about the server market and your share gains, but more importantly, we also think about the proliferation of expansion of the product portfolio I'm curious just what you're seeing from a competitive perspective and your thoughts around.

<unk> to mix higher in terms of the server market thinking about the blended ASP trends.

Your server business, how should we think about that as we think about Milan ex Genoa I guess Bergamo thereafter, just that trend looking forward.

Yeah, So Eric.

Obviously, it depends on the mix between cloud and enterprise, but in general as we offer more value, let's call it more performance more capability.

We would expect our asps to mix up and any given quarter. It's more of a what is the cloud versus enterprise mix, but I'm very pleased with the fact that we are.

<unk>, both cloud and enterprise.

Very substantially so I think that tells you that we're growing across the entire server market and we're going to continue to let's call. It optimized products, so that when our customers get more capability and we get more value for our technology.

Yeah.

And then the second quick question is on the capacity.

<unk> discussion I'm curious as you bring xilinx into the model.

Scale of the business going forward, how can we think about flexibility from a perspective of capacity.

PC slowdown Kevin can your capacity be fungible and move that capacity over to servers or even xilinx capacity into server Cpus I'm, just curious of how how we should think about that ability to mix across product segments. As you think about your wafer capacity.

Agreements.

Yeah and.

The way to think about that is so both the silence portfolio and sort of the organic AMD portfolio do use TSMC. So.

We are complementary there as our primary wafer supplier, we used very similar substrate suppliers as well.

The xilinx portfolio tends to be on more mature nodes. Although there is some seven nanometer at the majority of the portfolio is on 16 nanometer and above so I would say, there's not that much fungible fungibility there.

However on the back end on the substrate side. There is very good fungibility across the portfolio and from the standpoint of overall supply.

I think you've heard it from the vendor I mean, we have invested significantly.

Two months in.

Sort of securing the supply and capacity and we're seeing it come online and that's again what.

Like to do is as you see it come online that's when it will go into our revenue forecast, but I feel very good about the progress that we're making and we're continuing to dimension. The company for just a much larger business and so it's a lot of supply that we're bringing online and we're working very much with Victor and his team as well because he has a strong <unk>.

Log in strong demand and where we're looking to use all of the AMD assets to to also accelerate some of his some of his builds.

Thank you.

Thank you. Our next question today is coming from Harlan sur from Jpmorgan. Your line is now live.

Good afternoon, and congratulations on the solid results and closing the acquisition. We saw the team has done a great job of supporting all of the major enterprise workloads in their latest generation epic and.

Driving strong wins on the enterprise side with all of the OEM server guys out there I'm just wondering how much of the strength in the server business is being driven by the strong enterprise design win traction and given your pipeline of wins and orders.

Goodwill enterprise be as a percent of your server business, maybe exiting this year.

Yeah. So harlan thanks, So we've made.

We made great progress on the cloud side. So we have strong adoption on internal as well as external facing workloads.

We've also made strong progress on the enterprise I mean, as as you said all major Oems.

Have epic throughout the portfolio and in this past quarter and in general we've grown the enterprise business about at the same pace as the cloud business, we're still cloud weighted but I believe that it's going to be fairly balanced growth across our across both portfolios.

Perfect and then maybe a question for you or for Victor, but you know what.

And I think about the embedded markets auto industrial aerospace and defense Comm infrastructure consumer just given the strong market position hereby xilinx Garda in a good position to capitalize epic attached to catalyze rising attached to their FPGA solutions that maybe.

Victor can help us understand like what percentage of Xilinx FPGA solutions.

The embedded market next to either an X 86 or high performance arm processor, because I think that the cost of the opportunity and embedded is much larger than the FPGA opportunity and I believe that embedded is a pretty small percentage of overall business for AMD, so pretty big opportunity, but wanted to get your views.

Yes, maybe I'll take this one.

I agree with you actually one of the things that many things Thats really exciting since we joined the AMD is we've done some customer visits and they're really excited about exactly that point.

We have a broader portfolio and on processors and even in some areas. The Gpus is also great.

Great interest the embedded business that <unk> been selling <unk> and <unk>.

In embedded versions of both the server as well as the client kind of products and now with the <unk>.

<unk> and <unk>.

<unk>, we have we really can give a much more complete solution and so that is definitely on the menu of things in terms of revenue synergies, which we'll discuss more at the financial analyst day, but yes, we're really excited about what we have even with existing products and then we.

We're already working on our roadmap for creating more value going forward. So it's.

Great observation.

Oh, great. Thank you.

Thanks, Harlan Thank you our next.

<unk> today is coming from Mark <unk> from Jefferies. Your line is now live.

Hi, Thanks for taking my question.

Lisa I think.

Maybe an easier way for investors to have thought about AMD, historically, particularly more recently as well.

<unk> been successful in delivering.

<unk> Cpus for data processing.

In the data center, and I think people or at least I have thought about.

Xilinx, historically doing networking and communications solutions.

For base stations as well.

Data centers and they've kind of moved into this adaptive computing mode, where theyre doing more data processing also and I wonder.

You've seen other companies.

Companies with general purpose computing solutions.

Kind of added communications capability.

And.

I'm wondering.

Is there an opportunity for more data processing at the at the network edge like I say at the base station, where where xilinx has.

Historically.

Been really strong and do you think the the solutions. The architecture that you would have at the at the base station for the combination of data and Communications network processing do you think that ultimately it looks very similar to what you see deep in the Hyperscale data centers deepened.

Good.

Yeah sure Mark So I think the answer is yes, and maybe I'll generalize it and generalize it a bit more.

We're a big believer I mean, the whole strategy behind AMD is to have the.

First sort of compute engines, and then put them together.

Yes.

Sort of in solutions for specific end markets. So I think our Cpus Gpus, the FPGA to the adaptive <unk> and then the GPU that we're adding from concerned though.

Give us just a tremendous range of capability so to your specific question.

Sort of comms infrastructure I definitely think there's a strong opportunity there.

As Victor mentioned, we've been to a number of.

Our joint large customers and there is absolutely interest in trying to put these solutions together and more broadly, though I think what we see in terms of growth going forward, there will be more customization around solutions for large after these large customers, whether it's cloud customers or <unk>.

Telcos.

Or even some edge opportunities and having these compute engines will allow us to basically optimize those solutions together. So we look forward to telling you sort of a lot more about sort of how we're thinking about this.

These roadmaps as we go into our financial Analyst day.

In June .

And as a follow up if I may.

How are you as you develop those more customized solutions for your for your larger customers. How important is it to have a have your own software ecosystem.

Versus you know to kind of pull everything together versus.

To kind of rely more on the the open source community or other players for that that software layer to sit on top of that that's all I had thank you.

Yes, Mark so the software.

It's very very important and software across all of those engine is important and xilinx.

Xilinx comes with a very strong.

Software stack, we have our own software stack youll see us unify that and that will be a important part of our roadmap going forward and particular open source point, we do believe in open source, we think collaboration as a important part of the ecosystem as well. So all of those are things that we are working on.

To provide more complete solutions for our customers.

Great. Thank you.

Thank you. Our next question is coming from Ross Seymore from Deutsche Bank. Your line is now live.

Thanks for letting me ask a question congrats on a strong quarter and closing the Xilinx steel Lisa just again a lot of moving parts, you've said that a bunch of times. So forgive me if I dive into them a little bit, but as we think about your second quarter Guide I just wanted to get some of the moving parts that you are assuming there because if I pick up the xilinx side or just give you the full quarter of it in a little bit of guidance there.

It looks like the core AMD is kind of growing low single digits sequentially.

You've mentioned about the PC side seeing some weakness you've talked about that a bunch.

And then the strength on the server and the semi custom side, so any sort of color about the puts and takes to get to that organic growth.

Yeah sure Ross. Thanks for the question so for the second quarter in particular, the second quarter guide is driven by.

Sort of one is the full quarter of the xilinx business and.

<unk> in our server business, primarily as a as we see.

The second quarter, yes, there are other puts and takes I would call them on the smaller.

Side of that if you recall I mean, if you think about whether you talk about the PC business or the gaming business. They tend to be more second half weighted for the second quarter. It doesn't tend to be a strong quarter for those businesses and so that's that's not the driver of the sequential.

Increase.

Perfect and I guess, a similar question a perfect segue in your answer there when I think about the full year guide obviously.

Credibly impressive you talked about the organic increases.

It looks like especially what that extra week that you're kind of going up low mid to high single digits in one of those quarters and kind of flattish after that just to get to the full year. So similar sort of question.

What are the puts and takes there as the PC seasonality something you're kind of leaning against a little bit relative to the high single digit drop you've talked about where you guys will still grow but maybe not as fast as in years past given that backdrop or is there something else that that plateaus out in the second half.

I'm not sure that I see a quote unquote plateau, Russ so I wouldn't say that what I would say, though is if I give you sort of the puts and takes of the second half of the year.

The.

Again, we expect that the server business will continue to grow as well.

We said good visibility there we expect the console business to grow in the second half versus the first half also thats typical seasonality.

Typical seasonality in Pcs would also have the second half higher than the first half I think we're modeling for a little bit sub seasonal just given.

Sort of all the puts and takes in the market. There and then we expect the xilinx business to also grow in the second half as more supply comes online.

Given the strong demand. So if you see all those pieces I don't think Theres a plateau I think it's a a continued improvement.

<unk>.

As we see strong demand and also more supply coming online in the second half of the year.

Thanks for that and apologies for the Plateau Award.

[laughter] no whenever apologizes to me so that's really nice Ross.

Yes.

Operator, we'll take two more questions. Please.

Certainly our next question is coming from Timothy Arcuri from UBS. Your line is now live.

Thanks, a lot. My first question is really around semi custom the rest of the business has been has been.

That's quite a bit so I guess my question on semi customers at least or do you think that it can be a $4 billion business. This year. It sounds like it could get pretty close maybe you could get there and I guess also as part of that question.

Thank you we're thinking next year would be an up year also for semi custom, but given some of the consumer uncertainty do you still think that it can be up next year and then I had a second question. Thanks.

Yes, sure Tim so.

Without going into the exact numbers I would say the semi custom business is a strong growth driver.

Have we work with these customers very closely we have good views of where they think the demand is we're still in a place. If you were to look into the retail channel you would say that the demand is underserved today in the semi custom business and.

They're real build is towards holiday so.

The answer is we do believe that.

Semi custom will be at a record for us. This year, we have more content. We also have the valve steam deck.

That also has gotten very strong reviews and is.

It's ramping as we go into the second half of the year and then on 2023 I do believe that 2023 will be another strong year for semi custom and it would be up and again if you look at the history of these ramps it's really around the fourth.

That you see that you really see the business kind of hit its peak.

In addition to that just knowing some of the game releases that are from a software standpoint that are coming out.

There are.

Obviously, there is a good lineup, but theres also.

As expected strong lineup as we go forward. So yes, that's our current view of the semi custom business.

Thanks, a lot and I guess just following up on the overall server market I know that you are not the best read because you're gaining so much market share, but there have been some comments from some of the big cloud customers about.

Moderating or slowing investment and there is some debate about does that mean that there's going to be some slowdown in procurement of servers. So if you strip out your sort of share gain I'm curious of your assessment of just.

Overall strength in the data center market do you see it slowing at all you know later on this year or even into next year. Thanks.

I would say, Tim we haven't seen that.

We haven't seen.

That particular phenomenon, what we do see is that.

There needs to be good planning, so good planning with our server customers and our large cloud.

And we're doing that in our planning extends beyond 2022 extends into 2023 as well and from what we can see its robust demand.

Thank you so much.

Thank you. Our next question is coming from Brett Simpson from Arete Research. Your line is now live.

Yeah, Thanks, very much Lisa I wanted to get your perspective on the AI silicon markets.

You've obviously focused on HBC with MRI to hundreds and you've got.

CPU roadmap on the server side.

A big a big host processor for AI, but can you share with us how we should think about AMD and the next.

Two three years.

<unk> it is like AI training.

Inference, particularly with a GPU portfolio 300 et cetera.

And when do you think this platform is really going to be able to sort of compete and win.

The AI training and inference space. Thank you.

Yeah, absolutely, let me start Brett and then I'll ask Victor to also make some comments.

No question AI is a huge opportunity for us and it's one where we're thinking about it very holistically in terms of how we address so.

On the server CPU side, a lot of inference is done on the server CPU side, we've been investing in that area on the GPU side for both training and inference. There a lot of it is around our software stack and so our focus is on.

Optimizing our software stack with our <unk>.

Large cloud.

Customers and partners and then what Xilinx brings to our portfolio is actually a lot of capability on the AI inference side.

Their current portfolio and then additive to the AMD portfolio. So I think youll see a much broader set of offerings from us.

Hi.

We started talking about sort of the broader product Roadmaps and maybe Victor do you want to give some more yes, we have.

Ben.

We have the AI engine that is already deployed in production in a number of embedded applications and endpoints.

And also edge devices like in cars and are doing a lot of image recognition and all kinds of.

Inference applications in that same architecture can be scaled and brought into the CPU product portfolio and as we've alluded to that is exactly our plan.

We're also.

Moment ago his discussion of our software we are absolutely working on the unified overall software to enable broad portfolio, but also especially in AI. So you'll hear more about that at the financial analyst day, but we're definitely going to be lenient in AI.

Both inference and training and I would say end to end because we have endpoints we are edge devices both <unk>.

Computing and embedded devices and in the cloud and enterprise. So we're very excited about that revenue synergy opportunity actually.

Did you have a great and.

Yes, yes, thanks, Laura Yes, just as a follow up in terms of.

AMD from a software a monetization perspective, we're obviously seeing a big changes.

And the way Youre addressing software, you're moving up the software stack to a high level abstraction.

Is this something where you think over the over the next two or three years, where do you plan to charge for software and can you share with us maybe how we might think about AMD as a as a software business going forward. Thank you.

I think Brett we have.

Maybe it's a broader conversation about our overall software strategy, but as Victor mentioned.

A unified software capabilities around AI are very very important. We also have with the acquisition of <unk>. They have a very strong software team and effort.

Around their Gpus and what we can do there so I think as a <unk>.

Total you should see us investing a lot more in software and then in terms of the monetization and stuff I think we can.

Address that more as we think about the overall solution space that that will be offering across all of these compute engines and again much more great conversation that we can have as as we come into our financial analyst day in June .

Thank you Lisa and as a reminder to everyone on the call our financial Analyst day will be on Thursday June the ninth we look forward to having you. There will also be webcast from our website and thank you to everyone for your participation in todays earnings call and as always we appreciate your support of our company and look forward to speaking with you again soon thank you. Thank you and take care.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

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Hello, and welcome to the AMD first quarter 2022 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

My pleasure to turn the call over to Laura Graves corporate Vice President of Investor Relations. Laura. Please go ahead.

Today, we will discuss AMD first quarter results, including partial quarter contributions from the acquisition of Xilinx, which closed on February 14th 2022.

We will also discuss AMD results on a standalone basis for the first quarter of 2022.

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 in the slides posted on our website.

Participants on today's conference call are Dr. Lisa Su, our chair and Chief Executive Officer, and the vendor Kumar, our executive Vice President and Chief Financial Officer and Treasurer.

Victor Peng President of Amd's adaptive and embedded computing group will also join us for Q&A.

This is a live call and will be replayed via webcast on our website.

Before we begin I would like to note AMD will host its 2022 financial analyst day on Thursday June nine and our second quarter quiet time is expected to begin at the close of business on Friday June 17.

Cause actual results to differ with that I would like to turn the call over to Lisa Lisa.

Thank you Laura and good afternoon to all those listening in today.

For the last several years, we have been on a journey to both scale and transform AMD.

We have consistently executed our strategy expanded our portfolio of leadership products and diversified our business all while driving best in class growth.

We reached a significant inflection point in our journey during the first few months of 2022 as we took several major steps that fundamentally reshape our business.

In addition to delivering record financial results, we closed our strategic acquisition of Xilinx and announced our plans to acquire <unk>.

The strategic importance of the Xilinx acquisition to our long term goals cannot be overstated.

As the industry's number one provider of FPGA and adaptive computing solutions xilinx significantly expands our technology and product portfolio.

<unk> also adds multiple high margin long term revenue streams spanning a new set of markets and customers further strengthening and diversifying our business model.

Importantly, xilinx has successfully executed its own growth strategy in recent years with the increased adoption of adaptive silicon across data Center communications automotive and other large embedded markets.

With <unk>, we will further expand our data center solutions capabilities.

<unk> will add a proven team that has developed an industry, leading GPU and software stack already deployed with key customers, including IBM HPE, Microsoft Oracle and Goldman Sachs.

Pin Sandoz differentiated technology further expands our product portfolio and will enable AMD to innovate at the silicon software and platform levels to deliver leadership solutions for a cloud enterprise and edge customers.

Now turning to our first quarter financial performance, we started the year very strong with record quarterly revenue and net income.

First quarter revenue, including the contribution is from six weeks of Xilinx grew 71% year over year to a record $5 9 billion.

We expanded gross margin seven percentage points to 53% and more than doubled both operating and net income year over year.

Excluding xilinx revenue grew 55% year over year to a record $5 3 billion gross margin expanded five percentage points to 51% and operating income more than doubled to a record $1 6 billion.

Turning to our computing and graphics segment revenue increased 33% year over year to $2 8 billion driven primarily by the ramp of our latest ryzen and radeon products.

Client compute revenue grew by a strong double digit percentage year over year based on higher ryzen mobile and desktop processor sales.

As a result, we believe we gained client processor revenue share for the eighth straight quarter.

In notebooks record mobile processor revenue was driven by the launch of our Rembrandt rising 6000 mobile processors that extend the leadership compute gaming and battery life capabilities of our mobile processors.

In commercial we recently introduced our latest Ryzen 6000 pro processors with leadership performance and battery life and modern security and Manageability features.

We are well positioned to accelerate our growth in commercial notebooks in 2022 based on the expanded number of design wins on track to launch.

In graphics revenue grew by a strong double digit percentage year over year with record desktop graphics channel sales.

Desktop GPU sales nearly doubled year over year as sales of our Radeon 6000 series graphics cards were strong.

In mobile the first notebooks, featuring our latest Radeon 6000, mobile Gpus launched in the quarter and we expect sales to ramp over the coming quarters.

Data Center graphics revenue was flat year over year, as we launched our instinct to 10 accelerators.

We expanded our engagements with large cloud customers in the quarter and launched our <unk> software suite targeting extra scale class HBC and AI applications.

Turning to our enterprise embedded and semi custom segment revenue increased 88% year over year to $2 5 billion driven by record server semi custom and embedded processor sales.

Semi custom sales grew by a significant double digit percentage year over year based on strong demand for Sony and Microsoft consoles as well as valves new steam deck.

Sales for this game console generation continued to outpace all prior generations, and we expect 2022 to be a record year for our semi custom business.

Turning to our embedded business revenue more than doubled year over year led by growth in automotive.

We also secured multiple design wins in next generation security and firewall devices from tier one networking providers.

Okay.

Turning to server, we had another record quarter as revenue more than doubled year over year and increased by a double digit percentage sequentially.

We have more than doubled server processor revenue year over year in eight of the last 10 quarters, highlighting the growing demand for epic processors with cloud enterprise and <unk> customers.

Cloud revenue more than doubled year over year as hyperscale or has expanded their internal infrastructure deployments and 70, new AMD powered instances launch from Alibaba, Amazon Baidu cloud, Microsoft Azure, Google and others.

There are now more than 460, AMD based cloud instances available from the largest hyperscale or with additional instances on track to launch in the coming quarters.

In enterprise revenue more than doubled year over year with strong growth in key verticals, including it infrastructure financial services and database applications.

Our sales pipeline continues to be very strong and we saw our win rate grow in the first quarter across a broad set of enterprise and customers.

We launched our first epic processors with <unk> stacked chip lives in the quarter.

This technology extends our performance leadership and technical computing workloads by up to 66% compared to our prior generation.

I chose Cisco Dell HP, Lenovo and supermicro, all large servers, featuring the new Cpus in the quarter.

Excitement for our next generation <unk> server processors continues to grow as we expanded customer and partnering sampling in the quarter.

We expect general it will be the industry's highest performance general purpose server CPU further extending the performance energy efficiency and <unk> advantages of our epic processors.

We remain on track to launch general in the second half of the year and expect to continue our share gain trajectory based on expanded cloud enterprise and HBC customer adoption.

Turning to the Xilinx business for the six weeks following acquisition close Xilinx revenue was $559 million.

On a pro forma basis for the full quarter Xilinx delivered its fourth straight quarter of greater than 20% year over year revenue growth and the second straight quarter of greater than $1 billion of revenue.

In data center first quarter demand was led by expanded FPGA as a service and smart Nic deployments at tier one hyperscale.

As well as low latency networking solutions with Fintech companies.

We saw strength in communications led by wire demand and access and optical transport.

And wireless vessel based <unk> deployments continue ramping in multiple regions and we secured a strategic design win with a tier one communications equipment provider to power. Their next Gen baseband solutions with a virtual <unk> solution.

We saw strong demand across the xilinx embedded markets led by record pro forma full quarter revenue in automotive industrial vision in health care and consumer.

Looking forward, we see very strong demand across all of the Xilinx end markets and are focused on increasing supply.

As one example, we're integrating xilinx is differentiated AI engine across our CPU product portfolio to enable industry, leading insurance capabilities with the first products expected in 2023.

We have now delivered greater than 45% year over year revenue growth for seven straight quarters and increased net income by more than 60% year over year for the last 10 quarters.

Longer term I'm incredibly excited about our additional growth opportunities as we add the xilinx and <unk> teams.

Now see a significantly larger tam opportunity for AMD across a diverse set of end markets based on our broader portfolio of leadership compute engines and expanded solutions capabilities.

I look forward to sharing more about the products and technologies that will enable the next stage of our growth journey at financial Analyst day in June .

Now I'd like to turn the call over to the vendor to provide some additional color on our first quarter financial performance the vendor.

Thank you Lisa and good afternoon, everyone. The first quarter was an excellent start to the year with strong demand for our leadership products, resulting in record quarterly revenue continued gross margin expansion record profitability and record.

Cash flow generation.

In addition, we are very pleased to have closed the xilinx transaction and announced our intention to acquire and Sandoz.

First quarter consolidated revenue was $5 9 billion up 71% from a year ago, driven by a significant growth across all businesses and the inclusion of signings revenue for the partial period, excluding the xylene contribution AMD revenue was $5 3 billion.

Up 55% from a year ago with data center revenue doubling year over year gross margin was 53% up 660 basis points from a year ago, driven by higher server processor revenue and high margin Xilinx revenue.

Gross margin for AMD, excluding xilinx was 51% up 480 basis points year over year, primarily driven by higher silver cross sell revenue.

Operating expenses were $1 3 billion compared to 830 30 million a year ago as we increase investments in our long term product roadmaps to support the future growth of our business operating income more than doubled from a year ago to a record $1 8 billion.

Up $1 1 billion, primarily driven by significant revenue growth and higher gross margin operating margin was 31% up from 22% a year ago. Net income was a record $1 6 billion up $947 million from a year ago dilute.

Earnings per share was $1 13 per share compared to 52 per share a year ago.

6% of revenue compared to $485 million or 23% of revenue a year ago. The increase in operating income was driven primarily by higher revenue, partially offset by higher operating expenses.

<unk> Sir.

<unk> operating income grew significantly to $881 million or 35% of revenue compared to $277 million or 21% of revenue a year ago. The higher operating income and margin were driven by increased revenue richer product mix and then.

$83 million licensing gain.

Xilinx revenue for the partial quarter was 559 million with operating income of $233 million or 42% of revenue on a pro forma basis for the full quarter <unk> generated over 1 billion of revenue up 22% compared to a year ago.

With growth growth across all <unk>.

Xilinx major.

End market categories.

We are on track to achieve our cost synergy goals for the acquisition and expect the addition of xilinx to be accretive to non-GAAP earnings per share for 2022.

Turning to the balance sheet cash cash equivalents and short term investments were $6 5 billion at the end of the first quarter we.

We deployed $1 9 billion to repurchase common stock in the first quarter to date, we have utilized $3 7 billion of our initial 4 billion stock repurchase program. We also announced a new $8 billion share repurchase program during the quarter in total we had.

$8 3 billion in remaining authorization at the end of the first quarter.

Quarterly free cash flow was a record $924 million compared to $832 million in the same quarter last year and $736 million in the prior quarter.

We successfully executed a five year 3 billion sustainability linked credit facility to replace our existing 500 million facility. This further demonstrates our commitment to our corporate ESG goals.

Inventory was $2 4 billion up $476 million from the prior quarter due to the addition of Xilinx inventory.

With our strategic end markets I look forward to sharing further details with you at our financial Analyst day.

Today's outlook is based on current expectations and contemplates the current global supply environment and customer demand signals.

The year over year increase is expected to be driven by the addition of xilinx revenue plus higher server semi custom and client revenue.

Quarter over quarter increase is expected to be primarily driven by xilinx revenue plus higher silver revenue. In addition for Q2 2022, we expect non-GAAP gross margin to be approximately 54% non-GAAP operating expenses to be approximately $1 five 6 billion or 20.

4% of revenue.

non-GAAP interest expense taxes, and other to be approximately $270 million based on the 13% effective tax rate.

And the diluted share count to be approximately 164 billion shares.

For the full year 2020, we now expect revenue to be approximately $26 3 billion an increase of approximately 60%.

And include an additional week in the fourth quarter.

In closing we had an excellent start to 2022 with strong revenue growth across all businesses. We are pleased to have completed the <unk> acquisition, which strengthens our business model with revenue diversification accretive gross margin and increase cash generation.

Recall Laura.

Thank you very much to vendor operator, we're ready to go ahead and begin our first question.

Thank you very much everybody. Good afternoon, congratulations Lisa on obviously getting xilinx closed in on the strong results.

I guess.

There's a lot going on from a macro perspective.

The markets that you serve and in the supply chain Lisa So I mean, the first half of the year I think youre doing I don't know 50, 455% organic growth in the first quarter.

Maybe you could talk me through the puts and takes in the quarter I think there's a perception that.

You have additional supply coming online theres, obviously supply constraints and Lockdowns in China.

Your server business doing extraordinarily well in the numbers that you just printed.

And then maybe some perception of a softening in the PC market. So there's a lot going on in kind of love you to walk me through the puts and takes of the quarter. If you could thank you.

Yes, absolutely Matt. Thanks for the question. So we did have a very strong first quarter. There is a lot going on without a doubt in the business I would say if you look at the strength in our business in the first quarter. It was really broad based so very very strong survey results. We continue to gain share we continue to bring more supply on.

They're also a very strong results in our semi customer game console business as well as in the client and graphics businesses.

There is some softness in the PC market, but we had for the last number of quarters actually been shifting our mix to the higher end or the more premium segments of the <unk>.

Commercial and gaming being covered there.

As we go forward obviously.

All of the things that you talked about are in play.

That being the case I think we've managed through the supply situations.

Thank you for that Lisa I appreciate all the color.

I guess my.

Follow up question I wanted to.

The full year guidance that you've given.

Obviously it includes dialing so it's a little bit apples and oranges from last year, but.

I think in the press release, you guys mentioned that you expect some upside from the original 31% organic growth guidance. If you have any.

Comments on magnitude there that would be helpful. And then I think just.

Yeah.

1% based on what we saw in the market in January as we look at the market now and our own sort of customer and supply situation, we see that organic growth higher into the mid <unk>, that's primarily driven by.

Strong demand in our server business very strong demand in our console or semi custom business additional supply coming online we have taken a bit more of a conservative perspective on the PC market again, I think the softness is in certain parts of the market. It's not in all parts of the market.

And our focus is on where we add the most value in the market and that is that that is in the premium segments in terms of the xilinx piece of it.

The full year addition, three five quarters of Xilinx is a significant add on a pro forma basis. The xilinx business is also growing very well and it's growing sort of like in the low twenties. If you considered full year compare to.

Calendar year 2021, so overall I think we have a lot of broad base set.

Really appreciate the color Lisa Thank you.

Thank you. Our next question is coming from Toshi Hari from Goldman Sachs. Your line is now live.

Thank you for taking the question and congrats on the strong results and completing the acquisition as well.

I had two questions myself I guess first on the supply chain situation, Lisa obviously, theres a lot going on in terms of.

Wafer supply and substrates now the China Lockdowns.

What are some of the bigger pain points for you and to the extent that China Lockdowns are impacting your business directly or indirectly.

Are you, assuming any impact to revenue and profitability in the second quarter.

Sure Yeah. Thanks for the question so on the supply environment, we've been working on this really for the last 18 months, we've made a lot of progress.

Both the wafer side and significant investments on the substrates I would say that we continue to get.

So we're very good support from our suppliers that is one of the reasons, we can increase our guidance the way it is.

From a overall you mentioned the China Covid situation from our standpoint, we haven't had any significant impact on our own shipments in our own supply chain. We have been working with some customers that have had some customer build delays and that is contemplated in our second quarter guidance.

We're going to continue to work on supply optimization with the addition of Xilinx.

Some of the let's call it more mature node 16 nanometer and above wafer supply is still somewhat constrained we're working with sort of the larger scale of AMD to try to bring more supply on board there.

As well as continuing to ramp.

Our overall capacity to support a very strong sort of next few quarters, hopefully that answered your supply questions. Yes.

Yeah for sure. Thank you and then my second question. My follow up question was on the data Center business. It's great to hear that you are.

You've decided to re segment in your business. So thank you for that.

I'm curious how meaningful data center was as a percentage of revenue in the quarter.

CPU datacenter GPU and FPGA is from from Xilinx and I guess more importantly, how are you thinking about the medium to long term opportunity in both your classic datacenter GPU business as well as the FPGA business I think in datacenter GPU.

Mentioned that it was flat in the quarter, but you also talked about being engaged with with more cloud customers. So sort of curious what youre seeing there and then on the FPGA side, I think Victor and team.

Prior to the deal announcement was pretty vocal about.

The long term growth opportunity there as well so any update from your perspective would be great. Thank you.

Alright, Okay. So again, a few pieces to that let me let me try to give you some color and then maybe Victor will add on on the FPGA side. So in terms of yes, we are going to change our segment reporting as defender said as of the second quarter two to be to give you more alignment to the markets in terms of this quarter for the pieces that you mentioned.

On higher revenue the datacenter for those pieces was let's call it low <unk> percentage of our overall revenue.

And then in terms of the longer term data Center picture.

We're incredibly excited about the opportunity in data center. When you look at the pieces. We have now I mean, the CPU franchise is a very strong continuing to get stronger. We're excited with have general looks and how bergamo looks in sort of the engagements with customers. There. We're excited about the GPU portfolio as well Gpus for us all.

Our a longer term.

Sort of roadmap similar to what we did on the CPU side, we had been more focused on let's call. It supercomputing and HBC. So that was strong for us last year and Thats why were flattish.

Year on year, we're very engaged on the AI front now continuing our investments in our software stack and working with cloud guys to optimize our software stack and then moving on.

Two FPGA is and then also our.

Adaptive SFC and then.

The <unk> acquisition I think what we now have is just an incredibly strong portfolio when we're dealing with whether you're talking about the largest cloud hyperscale or are you talking about enterprise and then with <unk> Xilinx. It also gives us exposure to the edge.

As well and so between we have all the compute engines and are able to optimize that so I think you should expect to hear a lot more from us in the data center certainly is at our financial analyst day, but really strong opportunities. There maybe Victor you want to add I think you covered well the only thing I would add is just again I think not only do we have.

A really broad portfolio of all of the compute engines, but we are doubling down on the networking side right since we have strength.

And that in Smart Nic and then with Penn Sandow.

The kind of solutions that we can provide to customers and the overall infrastructure. It is not about point things. It's about the total solution and as you probably know scale out and just a lot of these applications you can be thrilled by the network. So we really can optimize all of us and the customers really want optimized customized solutions and I think thats, what we can do with <unk>.

The former Xilinx smart Nic as well as Panther I know even going further.

Thank you for all the detail.

Thank you.

Thank you. Our next question is coming from Vivek Arya from Bank of America. Your line is now live.

Alright, Thanks for taking my question Lisa My first one is on the server market.

Milan help you take and continues to help you take a lot of share in the market I'm curious, what's the state of play in front of the Nextgen Genoa verses, the Sapphire Rapids server cycle from two perspectives.

Just from the industry adoption of DDR five come back the bottleneck to adoption of these next generation servers and second our perspective is that you would have two different flavors of general over the cloud optimized version.

Coming later, so just give us your sense of how this next generation cycle plays out versus the very strong success Youll had been Milan so far.

Yeah, absolutely vivek so the way to think about it is the data center market, particularly in servers.

So people are getting much more optimized for workloads and so there are different flavors and we see that even in Milan today, with Milan, and our onex extra days or the.

The extra day, we introduced and so I think it's natural for these solutions to sit side by side I think as you go into general of the next generation.

The next generation platform, we would expect again the adoption, there's a lot of excitement on Genoa and Theres a lot of customer demand for Genoa I do expect that general will set again side by side with Milan for quite some time, because youre not going to move the infrastructure instantaneously over and then when you think about Burger.

<unk>, which is the cloud optimized I think that will be more specific.

Very helpful. And then Lisa My second question kind of two or three interrelated question on the PC market.

What is your new sense of what the PC Tam can be this year versus what you talk before and then I think as part of that your competitors have mentioned several times that they are back in the market.

Older Lake and they're taking a lot of share. So I'm wondering what you've seen there and then finally.

What's your share of the commercial market today versus what it was last year. So just something on time.

Competition in commercial exposure.

Thank you sure.

So vivek when we kind of started the year, we were thinking that the PC Tam could be flat to let's call it down.

Let's call it low mid single digits, I think given sort of how we have started this year and then some of the other things in the market.

We're taking a more conservative approach to the PC Tam so for our modeling for the full year guidance, we're modeling something like down high single digits now a lot of things can happen between now and then so I would say that I think that's a good place for us to model with.

Within that we've always been very focused on where we can add the most value and the premium segments Ryzen 6000, a rembrandt product is extremely well positioned.

From a battery life of performance standpoint, we have a number of commercial.

Very very good systems that are in the process of being launched I think we're excited about that.

A softer PC market that we will we can continue to expect to gain revenue share in the process and.

That's sort of our overall strategy, but I think the other piece of it is we have so many levers in the business now as we go forward I think the.

The strength in the business is.

Thank you Lisa.

Thank you. Our next question today is coming from Stacy <unk> from Bernstein Research. Your line is now live.

Hi, guys. Thanks for taking my questions. My first one I wanted to ask you about data centers, so more than doubled last year and more than doubled again this quarter.

Have the supply available to double that business again for the full year.

If you can get there and I guess, if the supply is there like do you think it can be fulfilled.

Yeah. So Stacy I think the data center business, particularly the server CPU business continues to be very strong for us I'm not going to proclaim a certain well.

Thank you for my follow up I wanted to ask just a quick question on PC. So in the context of.

The PC market Tam that you will see gallon remodeling down high single digits, given your mix shifts from your share gains do you think you can actually grow your client revenues year over year in 2022 for the full year.

Yes Stacy.

We are.

We are expecting that we will grow client revenues on a year over year basis.

That timing environment.

We continue to mix shift to let's call it the more premium segments and so it's a revenue share statement.

Got it that's fair to say much more of a year over year revenue growth is things like servers and.

And putting <unk> aside for a minute datacenter in servers and consoles more than client.

Yes that is true, but our expectation, though is we have a number of growth drivers in the business.

In terms of what has allowed us to increase the full year guide from.

From an organic standpoint it is.

Our strong visibility in server strong visibility on the console side strong visibility.

Just from a overall supply and demand perspective.

Got it thank you so much.

Thank you. Our next question is coming from Aaron Rakers from Wells Fargo. Your line is now live.

Yes, thanks for taking the questions I'll I'll stick to two if I can.

I guess my first question as we think about the server market and your share gains, but more importantly, we also think about the proliferation of expansion of the product portfolio I'm curious just what youre seeing from a competitive perspective and your thoughts around.

<unk> to mix higher in terms of the server market thinking about the blended ASP trends.

Your server business, how should we think about that as we think about Milan ex Genoa I guess Bergamo thereafter, just that trend looking forward.

Yeah. So obviously.

Obviously, it depends on the mix between cloud and enterprise, but in general as we offer more value, let's call it more performance more capability.

Would expect our asps to mix up and.

Any given quarter, it's more of a what is the cloud versus enterprise mix, but I'm very pleased with the fact that we.

Growing both cloud and enterprise.

Very substantially so I think that tells you that we're growing in our <unk>.

Ross the entire server market and we're going to continue to let's call. It optimized products, so that when our customers get more capability and we get more value for our technology.

And then the second quick question is on the capacity discussion I'm curious as you bring xilinx into the model.

Scale of the business going forward, how can we think about flexibility from a perspective of capacity.

Agreements.

Yeah.

The way to think about that is so both the xylem portfolio and sort of the organic AMD portfolio do use TSMC. So.

We are complementary there as our primary wafer supplier, we used very similar substrate suppliers as well.

On the back end on the substrate side, there is very good fungibility across the portfolio and from the standpoint of overall supply.

I think you've heard it from the vendor I mean, we have invested significantly.

Two months in.

Sort of securing the supply and capacity and we're seeing it come online and that's again what.

Like to do is as you see it come online thats when it will go into our revenue forecast.

I feel very good about the progress that we're making and we're continuing to dimension. The company for just a much larger business and so it's a lot of supply that we're bringing online and we're working very much with Victor and his team as well because he has a strong backlog and strong demand and where we're looking to use all of the AMD assets to to also accelerate.

Some of his some of his builds.

Thank you.

Thank you. Our next question today is coming from Harlan sur from Jpmorgan. Your line is now live.

Good afternoon, and congratulations on the solid results and closing the acquisition. We sold the team has done a great job of supporting all of the major enterprise workloads in their latest generation epic.

Goodwill enterprise be as a percent of your server business, maybe exiting this year.

Yeah. So harlan thanks, So we've made.

We made great progress on the cloud side. So we have strong adoption on internal as well as external facing workloads.

We've also made strong progress on the enterprise I mean, as as you said all major Oems.

Perfect and then maybe a question for you or for Victor, but you know what.

I think about the embedded markets auto industrial aerospace and defense Comm infrastructure consumer just given the strong market positioning hereby xilinx I mean, they are in a good position to capitalize epic attached to catalyze ryzen attached to their FPGA solution. So maybe.

Victor can help us understand like what percentage of Xilinx FPGA solutions.

For AMD, so pretty big opportunity, but wanted to get your views.

Yes, maybe I'll take this one.

I agree with you actually one of the things that many things Thats really exciting since we joined the AMD is we've done some customer visits and they're really excited about exactly that point.

We have a broader portfolio and on processors and even in some areas. The Gpus. It's also.

Interest the embedded business at any deal has been.

<unk> been selling <unk> and.

In embedded versions of both the server as well as the client kind of products and now with the <unk>.

<unk> and <unk>, we have we really can give a much more complete solution and so that is definitely on the menu of things in terms of revenue synergies, which we'll discuss more at the financial analyst day, but yes, we're really excited about what we have even with existing products and then we.

We're already working on our roadmap for creating more value going forward. So it's.

Great observation.

Great. Thank you.

Thanks Harlan. Thank you. Our next question today is coming from Mark <unk> from Jefferies. Your line is now live.

Hi, Thanks for taking my question.

Lisa I think.

Maybe an easier way for investors to have thought about AMD, historically, particularly more recently as well.

<unk> been successful in delivering.

<unk> Cpus for data processing.

In the data center, and I think people or at least I have thought about this.

Xilinx, historically doing networking and communications solutions.

For base stations as well.

Data centers.

They've kind of moved into this adaptive computing mode, where theyre doing more data processing also and I wonder.

You've seen other.

Companies with general purpose computing solutions.

Kind of added communications capability.

And I'm wondering.

Is there an opportunity for more data processing at the at the network edge like I say at the base station work, where xilinx has.

Historically.

<unk>.

Yes, sure Mark So I think the answer is yes, and maybe I'll generalize it and generalize it a bit more.

We're a big believer I mean, the whole strategy behind AMD is to have the.

First sort of compute engines, and then put them together.

Yes.

And.

In solutions for specific end markets. So I think our Cpus Gpus, the FPGA to the adaptive <unk> and then the GPU that we're adding from concerned though.

Give us just a tremendous range of capability so to your specific question.

Sort of comms infrastructure I definitely think there's a strong opportunity there.

As Victor mentioned, we've been to a number of.

Telcos.

These roadmaps as we go into our financial Analyst day in June .

And as a follow up if I may.

How are you as you develop those more customized solutions for your for your larger customers. How important is it to have a have your own software ecosystem.

Versus to kind of pull everything together versus.

To kind of rely more on the the open source community or other players for that that software layer to sit on top of that that's all I had thank you.

Yes, Mark so the software.

It's very very important and software across all of those engine is important and.

Xilinx comes with a very strong.

To provide more complete solutions for our customers.

Great. Thank you.

Thank you. Our next question is coming from Ross Seymore from Deutsche Bank. Your line is now live.

Thanks for letting me ask a question congrats on a strong quarter and closing the Xilinx steel Lisa just again a lot of moving parts, you've said that a bunch of time. So forgive me if I dive into them a little bit, but as we think about your second quarter Guide I just wanted to get some of the moving parts that you are assuming there because if I pick up the xilinx side or just give you the full quarter of it in a little bit of guidance there.

It looks like the core AMD is kind of growing low single digits sequentially.

You've mentioned about the PC side seeing some weakness you've talked about that a bunch.

And then the strength on the server and the semi custom side, so any sort of color about the puts and takes to get to that organic growth.

Yeah sure Ross. Thanks for the question so for the second quarter in particular, the second quarter guide is driven by.

Sort of one is the full quarter of the xilinx business and.

<unk> in our server business, primarily as a as we see.

The second quarter, yes, there are other puts and takes I would call them on the smaller.

Increase.

Perfect and I guess, a similar question a perfect segue in your answer there when I think about the full year guide obviously.

Credibly impressive you talked about the organic increases.

I'm not sure that I see a quote unquote plateau, Russ so I wouldn't say that what I would say, though is if I give you sort of the puts and takes of the second half of the year.

The.

Again, we expect that the server business will continue to grow as a as we said good visibility there we expect the console business to grow in the second half versus the first half also thats typical seasonality.

Typical seasonality in Pcs would also have the second half higher than the first half I think we're modeling for a little bit sub seasonal just given.

Sort of all the puts and takes in the market. There and then we expect the xilinx business to also grow in the second half as more supply comes online.

Given the strong demand. So if you see all those pieces I don't think Theres a plateau I think it's a a continued improvement.

<unk>.

As we see strong demand and also more supply coming online in the second half of the year.

Thanks for that and apologies for the plateau.

[laughter] no whenever apologizes to me so that's really nice Ross.

Yes.

Greater we'll take two more questions. Please.

Certainly our next question is coming from Timothy Arcuri from UBS. Your line is now live.

Thanks, a lot. My first question is really around semi custom the rest of the business has been has been.

Asked quite a bit so I guess my question on semi customers. Lisa do you think that it can be a $4 billion business. This year. It sounds like it could get pretty close maybe you could get there and I guess also as part of that question.

I think you were thinking next year would be an up year also for semi custom, but given some of the consumer uncertainty do you still think that it can be up next year and then I had a second question. Thanks, yes.

Yes, sure Tim so.

Without going into the exact numbers I would say the semi custom business is a strong growth driver.

We work with these customers very closely we have good views of where they think the demand is we're still in a place. If you were to look into the retail channel you would say that the.

The demand is underserved today in the semi custom business and.

They're real build is towards holiday so.

The answer is we do believe that semi.

Semi custom will be at a record for us. This year, we have more content. We also have the valve steam deck.

It also has gotten very strong reviews and is ramping as we go into the second half of the year and then on 2023.

Do believe that 2023 will be another strong year for semi custom and would be up and again, if you look at the history of these ramps.

Really around the fourth quarter.

That you see that you really see the business kind of hit its peak.

In addition to that just knowing some of the game releases that are from a software standpoint that are coming out.

There are.

Obviously, there is a good lineup.

So.

Unexpected strong lineup as we go forward. So yes, that's that's our current debut of the semi custom business.

Overall strength in the data center market do you see it slowing at all you know later on this year or even into next year. Thanks.

I would say, Tim we haven't seen that.

We haven't seen.

That particular phenomena.

We do see is that.

There needs to be good planning, so good planning with our server customers and our large cloud.

And we're doing that in our planning extends beyond 2022 extends into 2023 as well and from what we can see its robust demand.

Thank you so much.

Thank you. Our next question is coming from Brett Simpson from Arete Research. Your line is now live.

Yes, thanks, very much Lisa I wanted to get your perspective on the AI silicon markets.

You've obviously focused on HBC with MRI 200, and you've got.

CPU roadmap on the server side.

A big a big host processor for AI, but can you share with us how we should think about AMD and the next.

Two three years.

It is like AI training.

Inference, particularly with a GPU portfolio 300 et cetera.

And when do you think this platform is really going to be able to sort of compete and win in the AI training and inference space. Thank you.

Yeah, absolutely, let me start Brett and then I'll ask Victor to also make some comments.

No question AI is a huge opportunity for us and it's one where we're thinking about it very holistically in terms of how we address so.

On the server CPU side, a lot of inference is done on the server CPU side, we've been investing in that area on the GPU side for both training and inference. There a lot of it is around a software stack and so our focus is.

On optimizing our software stack with our <unk>.

Large cloud.

Customers and partners and then Xilinx brings to our portfolio is actually a lot of capability on the AI inference side.

Their current portfolio and then additive to the AMD portfolio. So I think youll see a much broader set of offerings from us in AI as we start talking about sort of the broader product Roadmaps and maybe Victor you want to give some more.

Ben.

We have the AI engine that is already deployed in production in a number of embedded applications and endpoints.

And also edge devices like in cars and are doing a lot of image recognition to all kinds of <unk>.

<unk> applications in that same architecture can be scaled and brought into the CPU product portfolio and as we've alluded to that is exactly our plan.

A moment ago the discussion around software we are absolutely working on the unified overall software to enable broad portfolio, but also especially in AI. So youll hear more about that at our financial analyst day, but we are definitely going to be linear and AI.

Inference and training and I would say end to end because we have endpoints we are edge devices both.

Computing and embedded devices and in the cloud and enterprise. So we're very excited about that revenue synergy opportunity actually.

Did you have a fall right in.

Yes, yes, thanks, Laura Yes, just as a follow up in terms of.

AMD from a software a monetization perspective, we are obviously seeing a big changes.

And the way Youre addressing so far you're moving up the software stack to a high level of obstruction.

Is this something where you think over the over the next two or three years will you do you plan to charge for software and can you share with us maybe how we might think about AMD is.

As a software business going forward. Thank you.

Yes, I think Brett we have.

Maybe it's a broader conversation about our overall software strategy, but as Victor mentioned.

<unk> unified software capabilities around AI are very very important. We also have with the acquisition of <unk>. They have a very strong software team and effort around their gpus and what we can do there so I think.

Total you should see us investing a lot more in software and then in terms of the monetization and stuff I think we can.

Sure.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

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