Q1 2024 Advanced Micro Devices Inc Earnings Call
Operator: Greetings and welcome to the AMD First Quarter 2024 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mitch Haws, Vice President, Investor Relations. Thank you, Mitch. You may begin.
Greetings and welcome to the a M D first quarter 'twenty 'twenty four conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded.
Now my pleasure to introduce your host Mitch Haws, Vice President Investor Relations. Thank you Miss you may begin.
Mitch Haws: Thank you, and welcome to AMD's first quarter 2024 financial results conference call. By now, you should have had the opportunity to review a copy of our earnest press release and the accompanying slides. If you have not had the chance to review these materials, they can be found on the Investor Relations page of AMD.com.
Mitch Haws: Thank you and welcome to Amd's first quarter 2024 financial results Conference call.
Mitch Haws: By now you should have had the opportunity to review a copy of our earnings press release and the accompanying slides.
Mitch Haws: If you have not had the chance to review these materials. They can be found on the Investor Relations page of AMD Dot com.
Mitch Haws: We will refer primarily to non-GAAP financial measures during today's call, and the full non-GAAP to GAAP reconciliations are available in today's press release and the slides posted on our website. Participants on today's call are Dr. Lisa Su, our Chair and Chief Executive Officer, and Jean Hu, our Executive Vice President, Chief Financial Officer, and Treasurer. This is a live call and will be replayed via webcast on our website. Before we begin, I would like to note that Mark Papermaster, Executive Vice President and Chief Technology Officer, will attend the TD Cowen Technology, Media, and Telecom Conference on May 29, and Jean Hu, Executive Vice President, Chief Financial Officer, and Treasurer, will attend the JPMorgan Global Media and Communications Conference on Tuesday, May 21st. The Bank of America Global Technology Conference on Wednesday, June 5th and the Jefferies NASDAQ Investor Conference on Tuesday, June 11.
Mitch Haws: We will refer primarily to non-GAAP financial measures during today's call and the full non-GAAP to GAAP reconciliations are available in today's press release and the slides posted on our website.
Speaker Change: Participants on today's call are Dr. Lisa Su, our chair and Chief Executive Officer, and Jean Hu, Our executive Vice President Chief Financial Officer and Treasurer.
Speaker Change: This is a live call and will be replayed via webcast on our website.
Speaker Change: Before we begin I would like to note that Mark Papermaster Executive Vice President and Chief Technology Officer.
Speaker Change: The TD Cowen Technology Media and Telecom conference on May 29th.
And Jean Hu Executive Vice President Chief Financial Officer, and Treasurer will attend the call the.
Speaker Change: The J P Morgan Global Media and Communications conference on Tuesday may 21st.
Speaker Change: The Bank of America Global Technology Conference on Wednesday June 5th.
Speaker Change: And the Jefferies NASDAQ Investor Conference on Tuesday June 11th.
Mitch Haws: Today's discussion contains forward-looking statements based on current beliefs, assumptions, and expectations. I speak only as of today, and as such, involve risks and uncertainties that could cause actual results to differ materially from our current expectations. Please refer to the cautionary statement in our press release for more information on the factors that could cause actual results to differ materially. With that, I'll hand the call over to Lisa.
Speaker Change: 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.
Speaker Change: These refer to the cautionary statement in our press release for more information on the factors that could cause actual results to differ materially with that I will hand, the call over to Lisa.
Lisa T. Su: Thank you, Mitch, and good afternoon to all those listening today. This is an incredibly exciting time for the industry as the widespread deployment of AI is driving demand for significantly more compute across a broad range of markets. Under this backdrop, we are executing very well as we ramp up our data center business and enable AI capabilities across our product portfolio. Looking at the first quarter, revenue increased to $5.5 billion, we expanded gross margin by more than two percentage points, and we increased profitability as data center and client segment sales each grew by more than 80% year over year. Data Center Segment revenue grew 80% year-over-year and 2% sequentially to a record $2.3 billion.
Lisa T. Su: Thank you Mitch and good afternoon to all those listening today.
Lisa T. Su: This is an incredibly exciting time for the industry as the widespread deployment of AI is driving demand for significantly more compute across a broad range of markets.
Lisa T. Su: Under this backdrop, we are executing very well as we ramp our data center business and enable AI capabilities across our product portfolio.
Lisa T. Su: Looking at the first quarter revenue increased to $5 5 billion, we expanded gross margin by more than two percentage points and increased profitability as data center and client segment sales each grew by more than 80% year over year.
Lisa T. Su: Data Center segment revenue grew 80% year over year, and 2% sequentially to a record $2 3 billion.
Lisa T. Su: The substantial year-over-year growth was driven by the strong ramp of AMD Instinct MI300x GPU shipments and a double-digit percentage increase in server CPU sales. We believe we gained server CPU revenue share in the seasonally down first quarter, led by growth in enterprise adoption and expanded cloud deployment. In the cloud, while the overall demand environment remained mixed, hyperscalers continued adopting fourth-gen EPYC processors to power more of their internal workloads and public instances. There are now nearly 900 AMD-powered public instances available globally as Amazon, Microsoft, and Google all increased their 4th Gen EPYC processor offerings with new instances and regional deployments.
The substantial year over year growth was driven by the strong ramp of AMD instinct, <unk> 300, ex GPU shipments and a double digit percentage increase in server CPU sales.
Lisa T. Su: We believe we gained server CPU revenue sharing the seasonally down first quarter led by growth in enterprise adoption and expanded cloud deployments.
Lisa T. Su: In cloud while the overall demand environment remains mixed Hyperscale is continued adopting fourth gen epic processors to power more of their internal workloads in public instances.
Lisa T. Su: There are no nearly 900 AMD powered public instances available globally as Amazon, Microsoft and Google All increased their fourth Gen epic processor offerings with new instances and regional deployments.
Lisa T. Su: In the enterprise, we have seen signs of improving demand as CIOs need to add more general purpose and AI compute capacity while maintaining the physical footprint and power needs of their current infrastructure. This scenario aligns perfectly with the value proposition of our EPYC processors.
Lisa T. Su: In the enterprise, we have seen signs of improving demand at cio's need to add more general purpose and AI compute capacity, while maintaining the physical footprint and power needs of their current infrastructure.
Lisa T. Su: This scenario aligns perfectly with the value proposition of our epic processors, given our high core count and energy efficiency. We can deliver the same amount of compute with 45% fewer servers compared to the competition cutting initial capex by up to half and Loring annual opex by more than 40%.
Lisa T. Su: Given our high core count and energy efficiency, we can deliver the same amount of compute with 45% fewer servers compared to the competition, cutting initial CapEx by up to half and lowering annual OpEx by more than 40%. As a result, enterprise adoption of EPYC CPUs is accelerating, highlighted by deployments with large enterprises including American Airlines, DBS, Emirates Bank, Shell, and STMicro. We're also building momentum with AMD-powered solutions powering the most popular ERP and database applications.
Lisa T. Su: As a result enterprise adoption of epic Cpus is accelerating highlighted by deployments with large enterprises, including American Airlines, DBS Emirates Bank shell and SD micro.
Lisa T. Su: We're also building momentum with AMD powered solutions powering the most popular ERP and database applications. As one example, the latest generation of Oracle exit data the leading database solution used by 76 of the Fortune 100 is now powered exclusively by fourth Gen epic processors.
Lisa T. Su: As one example, the latest generation of Oracle Exadata, the leading database solution used by 76 of the Fortune 100, is now powered exclusively by 4th Gen EPYC processors. Looking ahead, we're very excited about our next-gen Turin family of EPYC processors, featuring our Zen5 core. We're widely sampling Turin, and the silicon is looking great.
Lisa T. Su: Looking ahead, we're very excited about our next Gen turn family of Epic processors, featuring our Zen five core we are widely sampling turn and the silicon is looking great in.
Lisa T. Su: In the cloud, the significant performance and efficiency increases of Turin position us well to capture an even larger share of both first- and third-party workloads. In addition, there are 30% more TURN platforms in development from our server partners compared to 4th Gen EPYC platforms, increasing our enterprise SAM with new solutions optimized for additional workloads. Tern remains on track to launch later this year.
Lisa T. Su: In the cloud the significant performance and efficiency increases of turn position us well to capture an even larger share of both first and third party workloads.
Lisa T. Su: In addition, there are 30% more turn platforms in development from our server partners compared to fourth Gen epic platforms, increasing our enterprise Sam with new solutions optimized for additional workloads.
Lisa T. Su: Churn remains on track to launch later this year.
Lisa T. Su: Turning to our broader datacenter portfolio, we delivered our second straight quarter of record datacenter GPU revenue as MI300 became the fastest-selling product in AMD history, passing $1 billion in total sales in less than two quarters. In the cloud, MI300x production deployments expanded at Microsoft, Meta, and Oracle to power generative AI training and inferencing for both internal workloads and a broad set of public offerings. For the enterprise, we're working very closely with Dell, HPE, Lenovo, Supermicro, and others as multiple MI300x platforms enter volume production this quarter.
Lisa T. Su: Turning to our broader data center portfolio, we delivered our second straight quarter of record datacenter GPU revenue as M 300 became the fastest ramping product in Amd's history, passing $1 billion in total sales in less than two quarters.
Lisa T. Su: In cloud and my 300 X production deployments expanded at Microsoft and Oracle to power generative AI training and inferencing for both internal workloads in a broad set of public offerings.
Lisa T. Su: For the enterprise, we are working very closely with Dell HPE, Lenovo supermicro and others as multiple <unk> 300 ex platforms enter volume production this quarter in.
Lisa T. Su: In addition, we have more than 100 enterprise and AI customers actively developing or deploying MI300x. On the AI software front, we've made excellent progress adding upstream support for AMD hardware in the OpenAI Triton compiler, making it even easier to develop highly performant AI software for AMD platforms. We also released a major update to our ROCm software stack that expands support for open source libraries including VLLM and frameworks including JAX, adds new features like video decoding, and significantly increases generative AI performance by integrating advanced attention algorithm support for sparsity and FP8.
Lisa T. Su: In addition, we have more than 100 enterprise and AI customers actively developing or deploying <unk> 300 ex.
Lisa T. Su: On the AI software front, we've made excellent progress, adding upstream support for AMD hardware in the open AI Triton compiler, making it even easier to develop highly performing AI software for AMD platforms.
Lisa T. Su: We also released a major update to our <unk> software stack that expanded support for open source libraries, including V. L. L M and frameworks, including Jack's adds new features like video D code and significantly increases generative AI performance by integrating advanced attention algorithms support for smart city and FBA.
Lisa T. Su: Our partners are seeing very strong performance in their AI workloads. As we jointly optimize for their models, MI300x GPUs are delivering leadership inferencing performance and substantial TCO advantages compared to H100. For instance, several of our partners are seeing significant increases in tokens per second when running their flagship LLMs on MI300x compared to H100.
Lisa T. Su: Our partners are seeing very strong performance in their AI workloads as we jointly optimize for their models and <unk> 300, ex Gpus are delivering leadership inferencing performance and substantial tcl advantages compared to <unk> hundred.
Lisa T. Su: For instance, several of our partners are seeing significant increases in tokens per second when running their flagship <unk> on <unk> 300, ex compared to <unk> hundred.
Lisa T. Su: We're also continuing to enable the broad ecosystem required to power the next generation of AI systems, including, as a founding member of the Ultra Ethernet Consortium, working to optimize the widely adopted Ethernet protocol to run AI workloads at data center scale. MI300 demand continues to strengthen, and based on our expanding customer engagements, we now expect data center GPU revenue to exceed $4 billion in 2024, up from the $3.5 billion we guided in January.
Lisa T. Su: We're also continuing to enable the broad ecosystem required to power. The next generation of AI systems, including as a founding member of the Ultra Ethernet consortium working to optimize the widely adopted Ethernet protocol to run AI workloads at data Center scale.
Lisa T. Su: And my 300 demand continues to strengthen and based on our expanding customer engagements. We now expect datacenter GPU revenue to exceed $4 billion in 2024 up from the $3 5 billion, we guided in January.
Lisa T. Su: Longer term, we're increasingly working closer with our cloud and enterprise customers as we expand and accelerate our AI hardware and software roadmaps and grow our data center GPU footprint. Turning to our client segment, revenue was $1.4 billion, an increase of 85% year-over-year, driven by strong demand for our latest generation Ryzen mobile and desktop processors with OEMs and in-the-channel. However, client segment revenue declined 6% sequentially.
Lisa T. Su: Longer term, we are increasingly working closer with our cloud and enterprise customers as we expand and accelerate our AI hardware and software Roadmaps and grow our datacenter GPU footprint.
Lisa T. Su: Turning to our client segment revenue was $1 4 billion, an increase of 85% year over year, driven by strong demand for our latest generation ryzen mobile and desktop processors with Oems and in the channel.
Lisa T. Su: Client segment revenue declined 6% sequentially.
Lisa T. Su: We saw strong demand for our latest generation Ryzen processors in the first quarter. Ryzen desktop CPU sales grew by a strong double-digit percentage year-over-year, and Ryzen mobile CPU sales nearly doubled year-over-year, as new Ryzen 8040 notebook designs from Acer, Asus, HP, Lenovo, and others ramped up. We expanded our portfolio of leadership enterprise PC offerings with the launch of our Ryzen Pro 8000 processors earlier this month. Ryzen Pro 8040 Mobile CPUs deliver industry-leading performance and battery life for commercial notebooks, and our Ryzen Pro 8000 series desktop CPUs are the first processors to offer dedicated on-chip AI accelerators in commercial desktop PCs.
Lisa T. Su: We saw strong demand for our latest generation ryzen processors in the first quarter Ryzen desktop CPU sales grew by a strong double digit percentage year over year, and ryzen mobile CPU sales nearly doubled year over year as new rising 80, 40 notebook designs from Acer, a huge HP lenovo and others ramp.
Lisa T. Su: We expanded our portfolio of leadership enterprise PC offerings with the launch of our Ryzen Pro 8000 processors earlier this month.
Lisa T. Su: <unk> Pro 80, 40, mobile Cpus deliver industry, leading performance and battery life for commercial notebooks, and our Ryzen Pro 8000 series desktop Cpus are the first processor to offer dedicated unshaped, AI accelerators and commercial desktop Pcs.
Lisa T. Su: We see clear opportunities to gain additional commercial PC share based on the performance and efficiency advantages of our Ryzen Pro portfolio and an expanded set of AMD-powered commercial PCs from our OEM partners. Looking forward, we believe the market is on track to return to annual growth in 2024, driven by the start of an enterprise refresh cycle and AI-PC adoption. We see AI as the biggest inflection point in PCs since the internet, with the ability to deliver unprecedented productivity and usability gains.
Lisa T. Su: We see clear opportunities to gain additional commercial PC share based on the performance and efficiency advantages of our ryzen pro portfolio and an expanded set of AMD powered commercial Pcs from our OEM partners.
Lisa T. Su: Looking forward, we believe the market is on track to return to annual growth in 2024, driven by the start of an enterprise refresh cycle in AIP see adoption.
Lisa T. Su: We see AI as the biggest inflection point in Pcs since the internet with the ability to deliver unprecedented productivity and usability gains.
Lisa T. Su: We're working very closely with Microsoft and a broad ecosystem of partners to enable the next generation of AI experiences powered by Ryzen processors, with more than 150 ISVs on track to be developing for AMD AI PCs by the end of the year. We will also take the next major step in our AI-PC roadmap later this year with the launch of our next-generation Ryzen mobile processors, codenamed Strix. Customer interest in STRIX is very high based on the significant performance and energy efficiency uplifts we are delivering.
Lisa T. Su: We're working very closely with Microsoft and a broad ecosystem of partners to enable the next generation of AI experiences powered by ryzen processors with more than 150 <unk> on track to be developing for AMD AIP cease by the end of the year.
Lisa T. Su: We will also take the next major step in our AIP C. Roadmap later this year with the launch of our next generation Ryzen mobile processors code named strikes.
Lisa T. Su: Customer interest in <unk> is very high based on the significant performance and energy efficiency Uplifts, we are delivering.
Lisa T. Su: DesignWin Momentum for premium notebooks is outpacing prior generations as Strix enables next-generation AI experiences in laptops that are thinner, lighter, and faster than ever before. We're excited about the growth opportunities for the PC market, and based on the strength of our Ryzen CPU portfolio, we expect to grow revenue share this year. Now turning to our gaming segment, revenue declined 48% year-over-year and 33% sequentially to $922 million. First quarter semi-custom SoC sales declined in line with our projections as we are now in the fifth year of the console cycle. In gaming graphics, revenue declined year-over-year and sequentially.
Lisa T. Su: Design win momentum for premium notebooks is outpacing prior generations as strict enables next generation AI experiences and laptops that are thinner lighter and faster than ever before.
Lisa T. Su: We're excited about the growth opportunities for the PC market and based on the strength of our ryzen CPU portfolio, we expect to grow revenue share this year.
Lisa T. Su: Now turning to our gaming segment revenue declined 48% year over year, and 33% sequentially to $922 million.
Lisa T. Su: First quarter semi custom Soc sales declined in line with our projections as we are now in the fifth year of the console cycle.
Lisa T. Su: And gaming graphics revenue declined year over year and sequentially.
Lisa T. Su: We expanded our Radeon 7000 series family with the global launch of our Radeon RX7900GRE and also introduced our driver-based AMD Fluid Motion Frames technology that can provide large performance increases in thousands of games. Turning to our Embedded segment, revenue decreased 46% year-over-year and 20% sequentially to $846 million as customers remained focused on normalizing their inventory levels. We launched our Spartan UltraScale Plus FPGA family with high I.O. counts, power efficiency, and state-of-the-art security features, and we're seeing a strong pipeline of growth for our cost-optimized embedded portfolio across multiple markets. Given the current embedded market conditions, we're now expecting second quarter embedded segment revenue to be flat sequentially, with a gradual recovery in the second half of the year.
Lisa T. Su: We expanded our Radeon 7000 series family with the global launch of our Radeon Rx 7900, GRE and also introduced our driver based AMD fluid motion frames technology that can provide large performance increases in thousands of games.
Lisa T. Su: Turning to our embedded segment revenue decreased 46% year over year, and 20% sequentially to $846 million as customers remain focused on normalizing their inventory levels.
Lisa T. Su: We launched our Spartan ultra scale, plus FPGA families with high Io counts power efficiency and state of the art security features and we're seeing a strong pipeline of growth for our cost optimized embedded portfolio across multiple markets.
Lisa T. Su: Given the current embedded market conditions, we're now expecting second quarter embedded segment revenue to be flat sequentially with a gradual recovery in the second half of the year.
Lisa T. Su: Longer term, we see AI at the edge as a large growth opportunity that will drive increased demand for compute across a wide range of devices. To address this demand, we announced our second generation of Versal Adaptive SoCs that deliver a 3x increase in AI tops per watt and a 10x greater scalar compute performance compared to our prior generation of industry-leading Adaptive SoCs. Versal Gen2 Adaptive SoCs are the only solution that combines multiple compute engines to handle AI pre-processing, inferencing, and post-processing on a single chip, enabling customers to rapidly add highly performant and efficient AI capabilities to a broad range of products. We were pleased to be joined at our launch by Subaru, who announced they adopted Versal AI Edge Series Gen 2 devices to power the next generation of their EyeSight ADA
Lisa T. Su: Longer term, we see AI at the edge as a large growth opportunity that will drive increased demand for compute across a wide range of devices.
Lisa T. Su: To address this demand, we announced our second generation of virtual adaptive Soc.
Lisa T. Su: That deliver a three X increase in AI tops per watt and a 10 X greater scalar compute performance compared to our prior generation of industry, leading adaptive sfc's.
Lisa T. Su: Russell Gen. Two adaptive ssds are the only solution that combined multiple compute engines to handle AI preprocessing inferencing and post processing on a single chip, enabling customers to rapidly add highly performance and efficient AI capabilities to a broad range of products.
Lisa T. Su: We were pleased to be joined at our launch by Subaru, who announced they adopted Versal AI edge series Gen. Two devices to power. The next generation of their eyesight Adas system.
Lisa T. Su: Embedded design momentum remains very strong as customers adopt our full portfolio of FPGAs, CPUs, GPUs, and adaptive SoCs to address a larger portion of their compute needs. In summary, we executed well in the first quarter, setting us up to deliver strong annual revenue growth and expanded gross margin driven by growing adoption of our Instinct, EPYC, and Ryzen product portfolios. Our priorities for 2024 are very clear.
Lisa T. Su: Embedded design win momentum remains very strong as customers adopt our full portfolio of FPGA Cpus Gpus and adaptive src's to address a larger portion of their compute needs.
Lisa T. Su: In summary, we executed well in the first quarter setting us up to deliver strong annual revenue growth and expanded gross margin driven by growing adoption of our instinct epic and ryzen product portfolios.
Lisa T. Su: Our priorities for 2024 are very clear accelerate our datacenter growth by ramping instinct, GPU production and gaining share with our epic processors.
Lisa T. Su: Accelerate our data center growth by ramping up Instinct GPU production and gaining share with our EPYC processors. Launch our next generation Zen5 PC and server processors that extend our leadership performance, and expand our adaptive computing portfolio with differentiated solutions. Looking further ahead, AI represents an unprecedented opportunity for AMD. While there has been significant growth in AI infrastructure buildouts, we are still in the very early stages of what we believe is going to be a period of sustained growth driven by an insatiable demand for both high-performance AI and general-purpose compute.
Lisa T. Su: Launch our next generation Zen five PC and server processors that extend our leadership performance and expand our adaptive computing portfolio with differentiated solutions.
Lisa T. Su: Yeah.
Lisa T. Su: Looking further ahead AI represents an unprecedented opportunity for AMD.
Lisa T. Su: There has been significant growth in AI infrastructure build outs, we're still in the very early stages of what we believe is going to be a period of sustained growth driven by an insatiable demand for both high performance AI and general purpose compute.
Lisa T. Su: We have expanded our investments across the company to capture this large growth opportunity, from rapidly expanding our AI software stack to accelerating our AI hardware roadmaps, increasing our go-to-market activities, and partnering closely with the largest AI companies to co-optimize solutions for their most important workloads. We are very excited about the trajectory of the business and the significant growth opportunities ahead. Now, I'd like to turn the call over to Jean to provide some additional color on our first quarter results. Jean?
Lisa T. Su: We have expanded our investments across the company to capture this large growth opportunity from rapidly expanding our AI software stack to accelerating our AI hardware roadmaps, increasing our go to market activities and partnering closely with the largest AI companies to co optimize solutions for their most important workloads.
Lisa T. Su: We are very excited about the trajectory of the business and the significant growth opportunities ahead, now I would like to turn the call over to Jim to provide some additional color on our first quarter results Jean.
Jean Hu: Thank you, Lisa, and good afternoon everyone. I'll start with a review of our financial results and then provide our current outlook for the second quarter of fiscal 2024. We delivered strong year-over-year revenue growth in our data center and client segments in the first quarter and drew 230 basis points of growth margin expansion. For the first quarter of 2024, revenue was $5.5 billion, up 2% year-over-year, as revenue growth in the data center and client segments was partially offset by lower revenue in our gaming and embedded segments.
Jim: Thank you Lisa and good afternoon, everyone I will start with a review of our financial results and then provide our current outlook for the second quarter of fiscal 2024.
Jim: We delivered a strong year over year revenue growth that <unk> data center and client segments in the fourth quarter and <unk> 230 basis points of gross margin expansion.
Jim: For the first quarter of 2020 for revenue was $5 5 billion up 2% year over year as revenue growth in the data center and client segment was partially offset by lower revenue in our gaming and embedded segments.
Jean Hu: Revenue declined 11% sequentially as higher data center revenue resulting from the ramp of our AMD Instinct GPUs was offset by lower gaming and embedded segment revenue. However, growth margin was 52%, up 230 basis points year-over-year, driven by higher revenue contributions from the data center and client segments, partially offset by lower embedded and gaming segment revenue contributions. Operating expenses were $1.7 billion, an increase of 10% year-over-year, as we continued investing aggressively in R&D and marketing activities to address the significant AI growth opportunities ahead of us.
Jim: Revenue declined 11% sequentially as higher datacenter revenue, resulting from the ramp of our A&P instinct Gpus was offset by lower gaming and embedded segment revenues.
Jim: Gross margin was 52% up 230 basis points year over year, driven by higher revenue contribution from the data center and client segment, partially offset by lower embedded in the gaming segment revenue contribution.
Jim: Operating expenses at $1 7 billion, an increase of 10% year over year as we continued to invest in grass heavily in R&D and marketing activities to address the significant the AI growth opportunities ahead of us.
Jean Hu: Operating income is $1.1 billion, representing a 21% operating margin, taxes, interest expense, and other with 120 million. For the fourth quarter of 2024, diluted earnings per share was $0.62, an increase of 3% year-over-year. Now turning to our reportable segments, starting with the data center.
Jim: Operating income was $1 1 billion, representing a 21% operating margin.
Jim: Taxes interest expense and other was $120 million.
Jim: For the fourth quarter for 2024 diluted earnings per share was <unk> 62.
Jim: An increase of four 3% year over year.
Jean Hu: Data Center delivered record quarterly segment revenue of $2.3 billion, up 80%, a $1 billion increase year-over-year. Data Center accounted for more than 40% of total revenue, primarily led by the ramp of AMD Instinct GPUs from both cloud and enterprise customers and a strong double-digit percentage growth in our server processor revenue as a result of growth across our Zen4 products. On a sequential basis, revenue increased 2%, driven by the ramp of our AMD-instinct GPUs partially offset by seasonal decline in server CPU sales.
Jim: Now turning to our <unk> segment.
Jim: <unk> made a data center.
Jim: Data center deleverage at record quarterly segment had revenue of $2 3 billion up 80% of 1 billion increase year over year datacenter accounted for more than 40% of total revenue primarily by the by the ramp of AMD instinct Gpus from both cloud and <unk>.
Jim: Price customers and a strong double digit percentage growth.
Jim: Also real processor revenue as a result of growth across our sample products.
Jim: On a sequential basis revenue increased 2% driven by the ramp of our AMD instinct Gpus, partially offset by seasonal declines in silver CPU sales.
Jean Hu: Data Center Segment Operating Income was $541 million, or 23% of revenue, compared to $148 million, or 11% a year ago. Operating income was up 266% year-over-year due to operating leverage even as we significantly increased our investment in R&D. Client segment revenue was $1.4 billion, up 85% year-over-year, driven primarily by Ryzen 8000 series processors. On a sequential basis, client revenue declined 6%.
Jim: Data Center segment operating income was $541 million or 23% of revenue.
Jim: <unk> to 148 million or 11% a year ago.
Jim: Operating income was up 266% year over year due to operating leverage.
Jim: We significantly increased our investment in R&D.
Jim: <unk> segment revenue was $1 4 billion up 85% year over year, driven primarily by rising 8000 this series of processes.
Jim: On a sequential basis <unk> revenue declined 6%.
Jean Hu: The client segment operating income was $86 million, or 6% of revenue compared to an operating loss of $172 million a year ago driven by higher revenue. The gaming segment revenue was $922 million, down 48% year-over-year and down 33% sequentially due to a decrease in semi-customer and Radeon GPU sales. Gaming segment operating income was $151 million, or 16% of revenue compared to $314 million, or 18% a year. Embedded segment revenue was $846 million, down 46% year-over-year and 20% sequentially as customers continue to manage their inventory levels.
Jim: Client segment operating income was 86 million or 6% of revenue compared to an operating loss of 172 million a year ago driven by higher revenue.
Jim: Gaming segment revenue was $922 million down, 48% year over year and down 33% sequentially.
Jim: Two a decrease in semi customer and the Radeon GPU sales.
Jim: Gaming segment operating income was 151 million or 16% of revenue compared to $300 to 14 million or 18% a year ago.
Jim: <unk> segment revenue was $846 million down 46% year over year at 20% sequentially as customers continue to manage their inventory levels.
Jean Hu: Embedded segment operating income was $342 million, or 41% of revenue compared to $798 million, or 51% a year ago. Turning to the balance sheet and cash flow, during the quarter, we generated $521 million in cash from operations, and free cash flow was $379 million. Inventory increased sequentially by $301 million to $4.7 billion, primarily to support the continued ramp of data center and client products in advanced process nodes. At the end of the quarter, cash, cash equivalents, and short-term investment was $6 billion. As a reminder, we have 750 million of debt maturing this June. Given our ample liquidity, we plan to retire the debt utilizing existing cash.
Jim: <unk> segment operating income was 342 million or 41% of revenue compared to 798 million or 51% a year ago.
Jim: Turning to the balance sheet and the cash flow during the quarter share we generated a 500 and the $21 million in cash from operations and our free cash flow was $379 million.
Jim: Inventory increased sequentially by 300, and the 1 million to $4 7 billion, primarily to support the continued ramp of a data center and client <unk> products in advanced process nodes.
Jim: At the end of the quarter cash cash equivalents and short term investments was <unk> 6 billion.
Jim: As a reminder, we have a 750 million of debt maturing. This June given our ample liquidity, we plan to retire the debt utilizing existing cash.
Jean Hu: Now turning to our second quarter, 2024 Outlook. We expect revenue to be approximately $5.7 billion, plus or minus $300 million. sequentially, we expect datacenter segment revenue to increase by a double-digit percentage primarily driven by datacenter GPU RAM. Client Segment Revenue to Increase, Embedded Segment Revenue to be Flat. And in the gaming segment, based on current demand signals, revenue is expected to decline by a significant double-digit percentage. Year for year, we expect our data center and client segment revenue to be up significantly, driven by the strength of our product portfolio.
Speaker Change: Now turning to our second quarter 2020 for outlook.
Speaker Change: We expect revenue to be approximately $5 7 billion, plus or minus 300 million.
Speaker Change: Sequentially, we expect the data center segment revenue to increase by double digit percentage year, primarily driven by the datacenter GPU ramp.
Speaker Change: Client segment revenue to increase in <unk> segment revenue to be flat.
Speaker Change: And the in the gaming segment based on current demand signals revenue to decline by significant double digit percentage.
Speaker Change: Year over year, we expect our data center and client segment revenue to be up significantly driven by the strength of our product portfolio.
Jean Hu: They embedded in the gaming segment revenue to decline by a significant double-digit percentage. In addition, we expect second quarter non-debt growth margin to be approximately 53%, non-debt operating expenses to be approximately $1.8 billion, the non-GAP effective tax rate to be 13%, and the diluted share count is expected to be approximately 1.64 billion shares.
Speaker Change: Embedded in the gaming segment revenue to decline by a significant double digit percentage.
Speaker Change: We expect second quarter non-GAAP gross margin to be approximately 53% non-GAAP operating expenses to be approximately $1 8 billion.
Speaker Change: non-GAAP effective tax rate to be 13% and a diluted share count is expected to be approximately one 6 million shares.
Jean Hu: In closing, we started the year strong. We made significant progress on our strategic priorities, delivered year-over-year revenue growth in our data center and client segments, and expanded the growth match. Looking ahead, we believe the investment we are making will position us very well to address the large AI opportunities ahead. With that, I'll turn it back to Mitch for the Q&A session.
Speaker Change: In closing we started the year strong we made a significant progress on our strategic priorities delever the year over year revenue growth in our data center and the client segment and expanded the gross margin looking.
Speaker Change: Looking ahead, we believe the investments we are making will position us very well to address the large opportunities ahead with that I'll turn it back to meet you for the Q&A session.
Mitch Haws: Thank you, Jane. Paul, we're happy to poll the audience for questions. Thank you. We'll now be conducting a question and answer session.
Speaker Change: Thank you Jean Paul we are happy to poll the audience for questions. Thank.
Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Thank you, we'll now be conducting a question and answer session.
Speaker Change: Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Toshiya Hari with Goldman Sachs. Please proceed with your question.
Speaker Change: Thank you. Our first question is from Toshi Hari with Goldman Sachs. Please proceed with your question.
Toshiya Hari: Hi, thank you so much for taking the question. Lisa, my first question is about the MI300.
Toshiya Hari: Hi, Thank you so much for taking the question.
Toshiya Hari: At least on my first question is on the 300, you are taking up the full year outlook from three and a half two.
Lisa T. Su: You're taking up the full year outlook from three and a half billion to four billion. I'm curious, what's driving that incremental $500 million in revenue? Is it new customers? Or is it additional bookings from existing customers? Is it more cloud computing? Is it more enterprise? If you can sort of provide some color there, that would be helpful. And then on the supply side, there's been headlines or chatter that Co-Op and or HBM could be a pretty severe constraining factor for you guys. If you can speak to how you're handling the supply side of the equation, that would be helpful too. And then, I have a quick follow-up.
Toshiya Hari: The $4 billion.
Toshiya Hari: I'm curious, what's driving that incremental $500 million in revenue.
Toshiya Hari: Is it new customers is it additional bookings from existing customers or is it more cloud is a more enterprise. If you can sort of provide color there that would be helpful. And then on the supply side theres been headline.
Toshiya Hari: Headlines or chat or the co off Andrew HBM could be pretty severe constraining factor for you guys. If you can speak to.
Toshiya Hari: How youre handling the supply side of the equation that'd be helpful too.
Toshiya Hari: Quick follow up.
Lisa T. Su: Great. Thank you, Toshiya, for the question. Look, you know, the MI300 ramp is going really well. If we look at just what's happened over the last 90 days, we've been working very closely with our customers to qualify MI300 in their production data centers, both from a hardware standpoint and a software standpoint. You know, so far, things are going quite well, and what we see now is just greater visibility for both current customers as well as new customers committing to MI300.
Toshiya Hari: Great. Thank you Tushar for the question.
Toshiya Hari: The.
Speaker Change: 300 ramp is going really well if we look at just what's happened over the last 90 days, we've been working very closely with our customers to qualify them I 300 in and their production data centers of both from a hardware standpoint software standpoint.
Speaker Change: So far things are going quite well and what we see now is just greater visibility to both current customers as well as new customers are committing to 300, so that gives us the confidence to go from three $5 billion to $4 billion and I view. This as very much it's a very dynamic.
Lisa T. Su: So that gives us the confidence to go from 3.5 to 4 billion. And, you know, I view this as, you know, very much, it's a very dynamic market, and there are lots of customers. We said in the prepared remarks that we have over, you know, 100 customers that we're engaged with in both, you know, development as well as deployment. So overall, the ramp is going really well. As it relates to the supply chain, actually, I would say I'm very pleased with how supply has ramped, you know, it is absolutely the fastest product ramp, you know, that we have done, it's a very complex product, you know, chiplets, you know, co-auth, you know, 3D integration, HBM, and so far, it's gone extremely well, we've gotten great support from our partners, and so, you know, I would say even in the quarter that we just finished, we actually did a little bit better than expected when we first started the quarter, I think, you know, Q2 will be another significant ramp, and we're going to ramp supply every quarter this year, so I think the supply chain is going well, you know, we are tight on supply, so, you know, there's no question in the near term that if we had more supply, you know, we have demand for that product, and, you know, we're going to continue to work on those elements as we go through the year, but I think both on the demand side and the supply side, I'm very pleased with how the ramp is going.
Toshiya Hari: Market and there are lots of customers, we said on the in the prepared remarks that we have over 100 customers that we're engaged with and both development as well as.
Toshiya Hari: <unk> deployment. So overall the ramp is going really well.
Toshiya Hari: As it relates to the supply chain actually I would say I'm very pleased with how our supply has ramped.
Toshiya Hari: It is absolutely the fastest product ramp.
Toshiya Hari: That we have done it's a very complex product chip loads co Los <unk> integration HBM and so far it's gone extremely well we've gotten great support.
Toshiya Hari: From our partners and so I would say even in a quarter that we just finished we actually did a little bit better than expected. When we first started the quarter I think Q2 will be another significant ramp and we're going to ramp supply every quarter. This year. So I think the supply chain is going well.
Toshiya Hari: Our tight on supply. So there is no question.
Toshiya Hari: In the near term that if we had more supply we have demand.
Toshiya Hari: For that product and we're going to continue to work on those those elements as we go through the year, but I think both on the demand side and the supply side I'm very pleased with how the ramp is going.
Speaker Change: Thank you for all the details and then as my follow up I was hoping you could speak to your datacenter GPU roadmap.
Lisa T. Su: And then, as my follow-up, I was hoping you could speak to your data center GP roadmap beyond the MI300. The other concern that we hear is, you know, your nearest competitor has been pretty transparent with their roadmap, and, you know, that extends into 25 and oftentimes 26. So maybe this isn't the right venue for you to, you know, give too much. But beyond the MI300, how should we think about your roadmap and your ability to compete in the data center? Yeah, sure. So, look, you know, Toshiya...
Speaker Change: Beyond the 300.
Speaker Change: The other.
Speaker Change: Concern that we hear is youre in.
Toshiya Hari: Nearest competitor has been pretty transparent with their roadmap and Fedex.
Toshiya Hari: That makes sense to enter into 'twenty, five and oftentimes 26, So maybe this isn't the right venue for free.
Toshiya Hari: Give too much but beyond the 300, how should we think about your roadmap and your ability to compete.
Toshiya Hari: In data center.
Lisa T. Su: Yeah, sure. So look, you know, Toshiya, when we start with the roadmap, I mean, we always think about it as a multi-year, multi-generational roadmap. So we have, you know, the follow-ons to MI300, as well as the next, next generations, you know, well in development. I think what is true is we're getting much closer to our top AI customers. They're actually giving us significant feedback on the roadmap and what we need to meet their needs. Our chiplet architecture is that it is actually very flexible.
Speaker Change: Yeah sure so look.
Speaker Change: Sure.
Speaker Change: We start with the roadmap I mean, we always think about it as a multi year multi generational roadmap. So we have the <unk>.
Speaker Change: Follow ons to <unk> 300, as well as the next next generations, well and development I think what is true is we're getting much closer to our top AI customers. They are actually giving us significant feedback on the roadmap and what we need to meet their needs. Our triplet architectural is our architecture is actually very flexible.
Lisa T. Su: And so that allows us to actually, you know, actually make changes to the roadmap as necessary. So we're very confident in our ability to continue to be very competitive. Frankly, I think we're going to get more competitive. You know, right now, I think MI300x is in a sweet spot for inference, very, very strong inference performance. I see as we bring in additional products, you know, later this year and into 2025, that that will continue to be a strong spot for us.
Speaker Change: So that allows us to actually.
Speaker Change: Actually make changes to the roadmap as necessary. So we're very confident in our ability to continue to be very competitive frankly, I think we're going to get more competitive right. Now I think that my 300 <unk> is in a sweet spot for inference very very strong inference performance.
Speaker Change: As we bring in additional products later this year into 2025.
Speaker Change: That will continue to be a strong spot for us and then we're also enhancing our trading performance in our software roadmap to go along with it so more details to come in the coming months, but we have a strong roadmap that goes through the next couple of years.
Lisa T. Su: And then we're also enhancing our training performance and our software roadmap to go along with it. So more details to come in the coming months, but, you know, we have a strong roadmap that goes through the next couple of years and it is informed by just, you know, a lot of learning from working with our top customers.
Speaker Change: It is informed by a lot of learning in.
Speaker Change: And working with our top customers.
Speaker Change: I appreciate it thank you.
Speaker Change: Sure.
Ross Clark Seymore: Our next question is from Ross Seymour with Deutsche Bank. Please proceed with your question.
Speaker Change: Our next question is from Ross Seymore with Deutsche Bank. Please proceed with your question.
Ross Clark Seymore: Hi, thanks for having me ask a question. On the non-AI side of the data center business, it sounds like the enterprise side has some good traction, even though the sequential drop happened seasonally, Lisa, but I was just wondering what's implied in your second quarter guidance for the data center CPU side of things? And generally speaking, how are you seeing that whole kind of GPU versus CPU crowding out dynamic playing out for the rest of 2024?
Ross Clark Seymore: Okay. Thanks, certainly ask a question.
Ross Clark Seymore: None.
Ross Clark Seymore: Non AI size of the data center business. It sounds like the enterprise side has some good traction even though the sequential drop happened seasonally Lisa but I was just wondering whats implied in your second quarter guidance for the datacenter CPU side of things and generally speaking how are you seeing that whole kind of GPU versus CPU crowding out dynamic playing out for the rest of 2024.
Lisa T. Su: Yeah, sure, Ross, thanks for the question. You know, I think our EPYC business has actually performed pretty well. The market is a bit mixed. I think some of the cloud guys are still, you know, working through, you know, sort of their optimizations. I think it's different by customer.
Lisa T. Su: Yeah sure Ross Thanks for the question I think.
Lisa T. Su: Our epic business has actually performed pretty well the market is a bit mixed I think some of the cloud guys are still working through sort of their optimizations I think it's different by customer we did see here in the first quarter actually some very.
Lisa T. Su: We did see here in the first quarter some very, you know, nice early signs in the enterprise space, you know, sort of large customers starting refresh programs. The value proposition of Genoa is very, very strong, and we're seeing that pull through across the enterprise. In the second quarter, you know, we expect overall data center growth to be, you know, strong double digits. And then within that, we expect server growth to be up as well.
Lisa T. Su: Nice early signs in the enterprise space sort of large customers starting refresh programs.
Lisa T. Su: The.
Lisa T. Su: Our value proposition of general is very very strong and we're seeing that pull through across the enterprise.
Lisa T. Su: In the second quarter, we expect overall data center to be up strong double digits.
Lisa T. Su: Within that we expect server to be up as well.
Lisa T. Su: And as we go into the second half of the year, you know, I think there are a couple of drivers for us. We do expect some improvement in the overall market conditions for the server business, but we also have our turn launch in the second half of the year that will also, we believe, extend our leadership position within the server market. So, you know, overall, I think the business is performing well, and we believe that we're continuing to be very well positioned to gain share throughout the year.
Lisa T. Su: As we go into the second half of the year I think there are a couple of drivers for US we do expect some improvement in the overall market conditions.
Lisa T. Su: For the server business, but we also have our turn launch in the second half of the year.
Lisa T. Su: We will also we believe extend our leadership position with within the server market. So overall I think the business is performing well and we believe that we're continuing to be very well positioned to gain share throughout the year.
Lisa T. Su: Thanks for that. And I guess as my follow-up, just switching over to the client side, I noted you guided it up sequentially. Any sort of magnitudes around that for the second quarter? And perhaps more importantly, when you talk about the whole AI PC side of things, do you believe that's more of a unit driver for you, an ASP driver, or will it be? Yeah, so I think, again, I think we're pretty good.
Speaker Change: Thanks for that and I guess as my follow up just switching over to the client side.
Speaker Change: Did you guided it up sequentially any sort of magnitude around that for the second quarter and perhaps more importantly, when you talk about the whole AIP fee side of things do you believe that's more of a unit driver for you and AOSP driver or will it be both.
Lisa T. Su: Yeah, so I think, again, I think we're pretty excited about the AIPC, both the opportunity in the near term and even more so in the medium term. You know, I think the client business is performing well, both on the channel and on the MNC side. We expect client to be up sequentially in the second quarter. And as we go into the second half of the year, to your question about units, you know, versus ASPs, I think we expect some increase in units as well as ASPs.
Speaker Change: Yes, So I think again I think we're pretty excited about the IPC.
Speaker Change: Both opportunity in let's call it the near term and even more so in the medium term I.
Speaker Change: I think the client business is performing well both on the channel and on the.
Speaker Change: MNC side, we expect clients to be up sequentially.
Speaker Change: In the second quarter and as we go into the second half of the year to your question about units.
Speaker Change: Versus Asps I think we expect.
Lisa T. Su: You know, the AIPC products, when we look at the Strix products, they're really well suited for the premium segments of the market. And I think that's where you're going to see the strongest AIPC content in the beginning. And then as we go into 2025, you will see it more across the rest of the portfolio.
Speaker Change: Some increase in units as well as Asps.
Speaker Change: The AIP see our products when we look at the strict products.
Matthew D. Ramsay: Thank you. Our next question is from Matt Ramsay with TD Cowan. Please proceed with your question.
Speaker Change: They are really well suited for the premium segments of the market and I think thats, where youre going to see.
Speaker Change: Some of the.
Speaker Change: The IPC content strongest in the beginning and then as we go into 2025, you would see it more across the rest of the portfolio.
Speaker Change: Thank you.
Speaker Change: Thanks Ross.
Speaker Change: Thank you. Our next question is from Matt Ramsay with TD Cowen. Please proceed with your question.
Matthew D. Ramsay: Yes. Thank you very much good afternoon everybody.
Matthew D. Ramsay: Yes, thank you very much. Good afternoon, everybody. Lisa, I have sort of a longer term question and then a shorter term follow up one. I guess one of the questions that I've been getting from folks a lot is, as you described it, how they compare doing investments in their internal silicon versus using a merchant supplier like yourselves, and maybe what advantages the experience across a large footprint of customers can give your company that those guys doing internal ASICs might not get.
Speaker Change: Lisa.
Matthew D. Ramsay: Longer term question and then a shorter term follow up on I guess the.
Matthew D. Ramsay: One of the questions that I've been getting from folks a lot.
Matthew D. Ramsay: Obviously your primary competitor has announced.
Matthew D. Ramsay: I guess, a multiyear road map and we continue to hear more and more from from other folks about inter.
Speaker Change: Internal ASIC programs at some of your primary customers, whether they be for inference or training or both.
Speaker Change: I guess it would be really helpful. If you could sort of talk to us about how your conversations go with those customers how.
Speaker Change: Committed they are to your long term roadmap multi generation as you described it how they juxtaposed doing investments over their internal silicon versus using a merchant supplier like yourself and maybe what advantages.
Speaker Change: Across a large footprint of customers can give your company.
Speaker Change: Those guys doing internal asics.
Speaker Change: Might not yet thanks.
Lisa T. Su: Yeah, sure, Matt. Thanks for the question. So, look, I think, you know, one of the things that we see and we've said is that, you know, the TAM for AI compute is growing extremely quickly. And, you know, we see that continuing to be the case in all conversations. You know, we had highlighted a TAM of, let's call it, 400 billion in 2027. I think, you know, some people thought that was aggressive at the time.
Speaker Change: Yeah sure Matt Thanks for the question so.
Speaker Change: Look I think one of the things that we see and we have said is that the.
Matthew D. Ramsay: The Tam for AI compute is growing extremely quickly and.
Matthew D. Ramsay: And we.
Matthew D. Ramsay: We see that continuing to be the case in all conversations we had highlighted a tam of let's call. It $400 billion in 2027, I think some people thought that was aggressive at the time, but.
Speaker Change: But the overall AI compute needs as we talk to customers is very very strong and you've seen that in some of the announcements.
Lisa T. Su: But, you know, the overall AI compute needs, as we talk to customers, are very, very strong. And you've seen that in some of the announcements, you know, even recently with some of the largest cloud guys. You know, from my view, there are several aspects of it.
Speaker Change: Recently with some of the largest cloud guys.
Speaker Change: From my view there are several aspects of it first of all we have great relationships with all of sort of the top AI companies and the idea. There is we want to innovate together.
Lisa T. Su: First of all, we have great relationships with all of, you know, sort of the top AI companies. And the idea there is we want to innovate together. When you look at, you know, these large language models and everything that you need for, you know, training and inferencing there, although there will be many solutions, I don't think there's just one solution that will fit all.
Speaker Change: When you look at these large language models and everything that you need for training and inferencing of there. Although there will be many solutions I don't think Theres just one solution that will fit all the GPU is still the preferred architecture, especially as the algorithms and the models are continuing to evolve over time and that.
Lisa T. Su: The GPU is still the preferred architecture, especially as the algorithms and the models are continuing to evolve over time. And that favors our architecture and also our ability to really optimize, you know, the CPU with the GPU. So, you know, from my standpoint, I think we're very happy with the partnerships that we have. I think this is a huge opportunity for all of us to really innovate together. And, you know, we see that there's a very strong, you know, commitment to working together over multiple years, you know, going forward. And that's, you know, that's, I think, a testament to some of the work that we've done in the past. And that very much is what happened with the EPYC roadmap as well.
Speaker Change: That favors our architecture and also our ability to really optimize CPU with GPU. So from my standpoint, I think we're very happy with the partnerships that we have I think this is a huge opportunity for all of us to to really innovate together and we see that.
Speaker Change: There's a very strong commitment to working together over multiple years.
Speaker Change: Going forward.
Speaker Change: That's I think a.
Speaker Change: A testament to some of the work that we've done in the past and that very much is what happened with the epic roadmap as well.
Speaker Change: No.
Lisa T. Su: And appreciate that, Lisa. As for my follow-up, a little bit shorter term, and I guess having followed the company super closely for a long time, I think there's always been noise in the system, whether the stock price is $2 a share or 200, there's been kind of consistently consistent noise one way or the other, but the last month and a half. [inaudible] Sure, Matt. Look, I think...
Speaker Change: With that Lisa as my follow up.
Speaker Change: A little bit shorter term and I guess, having followed the company Super closely for a long time I think there's been there's always been noise in the system from whether the stock price is $2 a share or 200, theres been kind of always consistent noise, one way or the other but the last market to happen soon.
Speaker Change: Extreme in that sense, and so I wanted to just.
Speaker Change: I've got random reports in my Inbox about changes in demand from some of your 300 customers are planned demand for consuming your product I think you answered earlier about the supply situation and how youre working with your partners there, but has there been any change for them.
Speaker Change: The customers that you are in ramp with now or that you assume will be of what their intention is for demand.
Speaker Change: Factors that may be strengthened rather than gone down in recent periods, because I keep getting questions about it. Thanks.
Lisa T. Su: Sure, Matt. Look, I think I might have said this earlier, but maybe I'll repeat it again. I think that the demand side is actually really strong. And what we see with our customers and what we are tracking very closely is customers moving from, let's call it, initial POCs to pilots, to full-scale production, to deployment across multiple workloads. And we're moving through that sequence very well. I feel very good about the deployments and ramps that we have ongoing right now.
Speaker Change: Sure, Matt look I think I might have said it earlier, but maybe I'll repeat it again I think the demand side is actually really strong and what we see with our customers and what we are tracking very closely is customers moving from let's call. It initial poc's too.
Speaker Change: Highlights to full scale production to deployment across multiple workloads and we're moving through that sequence of very well.
Speaker Change: I feel very good about the deployments and ramps that we have ongoing right now and I also feel very good about new customers who are.
Lisa T. Su: And I also feel very good about new customers who are earlier on in that process. So from a demand standpoint, we continue to build backlog as well as build engagements going forward. And similarly, on the supply standpoint, we're continuing to build supply momentum. But from a speed of ramp standpoint, I'm actually really pleased with the progress.
Speaker Change: And sort of earlier on in that process. So from a demand standpoint, we continue.
Speaker Change: To build backlog as well as build engagements going forward and similarly on the supply standpoint, we're continuing to build supply momentum, but from a speed of ramp standpoint, I'm actually really pleased with the progress.
Speaker Change: Alright, Thank you very much.
Lisa T. Su: Thank you. Our next question is from Aaron Rakers with Wells Fargo. Please proceed with your question.
Speaker Change: Thank you. Our next question is from Aaron Rakers with Wells Fargo. Please proceed with your question.
Aaron Christopher Rakers: Yeah, thanks for taking a question. And I apologize if, you know, if I missed this earlier, but I know last quarter you talked about having enough capacity to support significant upside to the ramp of the MI300. I know that you have upped your guide now to 4 billion. I'm curious how you would characterize the supply relative to that context offered last quarter, as we think about that new kind of target of 4. Would you characterize it as still having, you know, supply capacity upside potential?
Aaron Christopher Rakers: Yeah. Thanks for taking the question and I apologize.
Aaron Christopher Rakers: Sure.
Aaron Christopher Rakers: If I missed this earlier, but I know last quarter, you talked about having a <unk>.
Aaron Christopher Rakers: Securing enough capacity to support significant upside to the ramp.
Aaron Christopher Rakers: The ramp of BMI 300, I know that you. After your guide not a $4 billion I'm curious of how you would characterize the supply relative to that contract offered last quarter as we think about that that new kind of target of four.
Aaron Christopher Rakers: Would you characterize it as still having supply capacity upside potential. Thank.
Lisa T. Su: Thank you.
Speaker Change: Thank you.
Lisa T. Su: Yes, Aaron. So, you know, we've said before that, you know, our goal is to ensure that we have supply that exceeds the current guidance, and that is true. So as we've upped our guidance from three and a half to four billion, we still have supply visibility significantly beyond that.
Speaker Change: Yes, Erin so.
Speaker Change: We've said before that our goal is to ensure that we have supply that exceeds the current.
Speaker Change: <unk> and that is true so as we've upped our guidance from three $5 billion to $4 billion, we still we have supply of visibility.
Aaron Christopher Rakers: <unk> beyond that.
Aaron Christopher Rakers: Yep. Okay. Thank you. And then as a quick follow-up, going back to the earlier question on server demand, more traditional servers, as you see, you know, the ramp of maybe share opportunities in more traditional enterprise, I'm curious how you would characterize the growth that you expect to see in the more traditional server CPU market as we move through 24 or even longer term. How would you characterize that growth trend?
Erin: Yeah. Okay. Thank you and then as a quick follow up going back to an earlier question on server demand more traditional server.
Aaron Christopher Rakers: Do you see the ramp of maybe share opportunities in more traditional enterprise I'm curious of how you would characterize the growth that you expect to see a more traditional server CPU market.
Aaron Christopher Rakers: We move through 'twenty, four or even longer term, how you would characterize that growth from.
Lisa T. Su: Yeah, I think Aaron.
Lisa T. Su: Yeah, I think, Aaron, what I would say is there is, you know, the need for refresh of, let's call it, older equipment is certainly there. So we see a refresh cycle coming.
Speaker Change: Yes, I think what I would say is there are the need for refresh of let's call older equipment is certainly there. So we see a refresh cycle coming we also see AI head nodes as another place where we see growth in let's call. It the more traditional CPU market, our sweet spot is.
Aaron Christopher Rakers: Really in the highest performance.
Aaron Christopher Rakers: Sort of high core count.
Aaron Christopher Rakers: Energy efficiency.
Aaron Christopher Rakers: Space and that is playing out well and we're also we've traditionally been very strong in let's call. It cloud first party workloads and that is now extending to cloud third party workloads, where we see of enterprises, who are let's call. It in more of a hybrid environment adopting AMD both in the cloud and on Prem.
Lisa T. Su: We also see, you know, AI head nodes as another place where we see growth in, let's call it, the more traditional market. You know, our sweet spot is really in the, you know, highest performance, you know, sort of high core count, you know, energy efficiency space, and that is playing out well. And, you know, we've traditionally been very strong in, let's call it, you know, cloud first party workloads, and that is now extending to cloud third party workloads, where, you know, we see enterprises who are, let's call it, in more of a hybrid environment, adopting AMD, both, you know, in the cloud and on prem. So I think overall, we see it as, you know, a continued, you know, good progression for us with the server business going through 2024 and beyond.
Aaron Christopher Rakers: So I think overall, we see it as.
Aaron Christopher Rakers: A continued good progression for us with the with the server business going through 2024 and beyond.
Speaker Change: Thank you.
Speaker Change: Thanks.
Vivek Arya: Thank you. Our next question is from Vivek Arya with Bank of America Securities. Please proceed with your question.
Speaker Change: Thank you. Our next question is from Vivek Arya with bank.
Vivek Arya: America Securities. Please proceed with your question.
Vivek Arya: Thanks for taking my question. Lisa, I just wanted to go back to the supply question and the $4 billion outlook for this year. I think at some point there was a suggestion that the $4 billion number, right, that there are still supply constraints. But I think at another point you said that you had supply visibility significantly beyond that. Given that we are almost at the middle of the year, you know, I would have thought that you would have much better visibility into the backup.
Vivek Arya: Thanks for taking my question Lisa I, just wanted to go back to the supply.
Vivek Arya: <unk> on the 4 billion outlook for this year.
Vivek Arya: I think at some point there was a.
Vivek Arya: Sure.
Speaker Change: $4 billion number right.
Vivek Arya: There has been supply constrained, but I think at a different point you said that you have.
Vivek Arya: <unk> visibility significantly beyond that.
Vivek Arya: Given that we are almost at the middle of the year.
Vivek Arya: I would've thought that you would have much better visibility about the backup.
Lisa T. Su: So is the $4 billion number a supply constraint number, or is it a demand constraint number? Or, you know, alternatively, if you could give us some sense of what the exit rate of your GPU sales could be. I think on the last call, you know, a billion and a half was suggested. But could it be a lot more than that in terms of your exit rate of MI for this year?
Vivek Arya: 4 billion number of supply constrained number or is it a demand.
Vivek Arya: Strained on number or alternatively, if you could give us some sense of what the exit rate.
Vivek Arya: Your GPU sales could be I think on the last call.
Vivek Arya: A billion and a half would've suggested.
Vivek Arya: Would it be a lot more than that in terms of your exit date of MRI for this year.
Lisa T. Su: Yeah, Vivek, let me try to make sure that we answered this question clearly. From a full year standpoint, our $4 billion number is not supply capped. I'm sorry, yes, it's not supply capped. It is, you know, we do have supply capability above that. It is more back half-weighted.
Speaker Change: Yeah, Vivek, let me try to make sure that we answered this question clearly.
Speaker Change: On a full year standpoint are 4 billion number is not.
Vivek Arya: Supply capped.
Speaker Change: I'm, sorry, yes, it's not supply Cup.
Lisa T. Su: So if you're looking at, you know, sort of the near term, the near term, I would say, you know, for example, in the second quarter, we do have more demand than we have supply right now, and we're continuing to work on pulling in some of that supply. You know, my goal is to make sure that we pass all of the milestones as we're ramping products. And as we pass those milestones, you know, we factor that into the overall full-year guidance for AI.
Speaker Change: We do have supply.
Speaker Change: Capability above that it is more back half weighted.
Vivek Arya: No.
Vivek Arya: At.
Vivek Arya: Sort of the near term the near term I would say for example in the second quarter. We do have more demand than we have supply right now and we're continuing to work on pulling in some of that supply by the way I think this is an overall.
Vivek Arya: Industry issue. This is not at all related to AMD I think overall AI.
Speaker Change: Hi, <unk>.
Speaker Change: <unk> has exceeded anyone's expectations in 2024, so you've heard it from the memory guys you've heard it from the foundry guys. We're all ramping capacity as we go through the year.
Speaker Change: And as it relates to visibility we do have good visibility into what's happening as I said, we have great customer engagements that are going forward.
Speaker Change: My goal is to make sure that we pass all of the milestones as we're ramping products and as we pass those milestones.
Speaker Change: We put that into the <unk>.
Speaker Change: Overall full year guidance for for AI.
Lisa T. Su: But in terms of how customer progression is going, they're actually going quite well. And we continue to bring new customers on board, and we continue to expand workloads with our current customers. And so hopefully that clarifies the question, Vivek.
Speaker Change: But in terms of how.
Speaker Change: Customer progression things are going and that theyre actually going quite well.
Speaker Change: And we continue to bring new customers on and we continue.
Speaker Change: To expand workloads with our current customers and so hopefully that.
Speaker Change: <unk> the question Vivek.
Vivek Arya: Thank you, Lisa. Maybe one not on MI but maybe on the embedded business, I think you sound a bit more measured about Q2 and the second half rebound, which is similar to what we have heard from a lot of the auto industrial peers. But where are you in the inventory clearing cycle? And if embedded has a somewhat more measured rebound in the back half, what implication does that have on gross margin expansion?
Vivek Arya: Thank you Lisa.
Vivek Arya: Maybe one not on <unk>, but maybe on the embedded business I think you sound a bit more measured about Q2 in the second half rebound because similar to what we have heard from a lot of the auto industrial peers.
Vivek Arya: But where are you in the inventory clearing cycle and.
Vivek Arya: Embedded has a somewhat more measured rebound in the back half.
Vivek Arya: What implication does that have on gross margin expansion can we continue to expect I don't know 100 basis points a quarter in terms of gross margin expansion because of the data center mix or just any puts and takes of embedded and then what it means for gross margins in the back half. Thank you.
Vivek Arya: Can we continue to expect, I don't know, 100 basis points a quarter in terms of gross margin expansion because of the data center mix, or just any puts and takes of, you know, embedded, and then what does it mean for gross margins in the back? Hi Vivek, thank you for the question.
Jean Hu: Hi Vivek, thank you for the question. I think the embedded business declined a little bit more than expected, really due to weaker demand in some of the markets, very specifically communication has been weak, and some pockets of industrial and automotive, as you mentioned, it's actually quite consistent with the peers. Second half, we do think the first half is the bottom of embedded business, and we'll start to see gradual recovery in the second half. And going back to your gross margin question, when you look at our gross margin expansion in both Q1 and guided Q2, the primary driver is the strong performance on the data center side.
Speaker Change: Hi, Vivek. Thank you for the question I think the embedded business.
Speaker Change: Declined a little bit more than expected really due to the weaker demand in some of the markets very specifically communication has been weak and some pockets of <unk> industrial and the automotive IC you mentioned, it's actually quite consistent with the peers.
Speaker Change: However, we do think in the first half or the bottom of the embedded business and that will start to see gradual recovery in the second half and going back to your gross margin question is when you look at our gross margin expansion in both Q1 and the guide to the Q2 the primary driver.
Speaker Change: The strong performance on the datacenter side that datacenter will continue to ramp in second half or.
Jean Hu: The data center will continue to ramp up in the second half; I think that will continue to be the major driver of a gross margin expansion in the second half. Of course, if embedded is doing better, we'll have more of a tailwind in the second half.
Speaker Change: That will continue to be the major driver of gross margin expansion in second half of course, if embedded as doing better we'll have a mall tailwind in second half.
Speaker Change: Thank you.
Timothy Michael Arcuri: Thank you. Our next question is from Timothy Arcuri with UBS. Please proceed with your question.
Speaker Change: Thank you. Our next question is from Timothy Arcuri with UBS. Please proceed with your question.
Timothy Michael Arcuri: Thanks very much. I also wanted to ask about your data center GPU roadmap. The customers that we talk to say that they're engaged not just because of MI300 but really because of what's coming. And it seems like there's a big demand shift to rack-scale systems that try to optimize performance per square foot, given some of the data center and power constraints. So can you just talk about how important systems are going to be in your roadmap, and do you have all the pieces you need as the market shifts to rack-scale systems?
Timothy Michael Arcuri: Thanks, very much I also wanted to ask about your datacenter GPU roadmap.
Timothy Michael Arcuri: The customers.
Timothy Michael Arcuri: Customers that we talk to say that they are engaged not just because of my 300, but really because of what's coming and it seems like there's a big demand shifts to rack scale systems that try to optimize performance per square foot given some of the data center and power constraints. So can you just talk about how important systems, we're going to be new roadmap and do you have all the pieces you need.
Timothy Michael Arcuri: As the market shifts to lack scale systems, yes.
Lisa T. Su: Yeah, sure, Timothy. Thanks for the question. You know, for sure, look, our customers are engaged in a multi-generational conversation. So, you know, we're definitely going, you know, out over the next, you know, couple of years. And as it relates to the overall, you know, system integration, it is quite important. It is something that, you know, we're working very closely with our customers and partners on. You know, that's a significant investment in networking, working with a number of networking partners as well to make sure that, you know, the scale-out capability is there.
Speaker Change: Yes sure Timothy Thanks for the question for sure our customers are engaged in the multi generational conversation. So we've.
Speaker Change: Definitely going.
Speaker Change: Out over the next couple of years and as it relates to the overall system integration. It is a quite important it is something that we're working very closely with our customers and partners on.
Speaker Change: That's a significant investment in networking working with a number of networking partners as well to make sure that the scale out capability is there and to your question of do we have the pieces. We do absolutely have the pieces I think the work that we've always done with our infinity fabric as well as.
Lisa T. Su: And to your question of whether we have the pieces, we absolutely have the pieces. I think the work that we've always done with our Infinity Fabric as well as, you know, with our Pensando acquisition has brought in a lot of networking expertise. And then we're working across the networking ecosystem with key partners like, you know, Broadcom and Cisco and Arista, who were with us at our AI data center event in December. Our work right now in future generations is not just specifying a GPU, it is specifying, let's call it, full system reference designs, and that's something that will be quite important going forward.
Speaker Change: Our <unk> acquisition, that's brought in a lot of networking expertise.
Speaker Change: We're working across the networking ecosystem with key partners like Broadcom, and Cisco and Arista, who are with us at our AI data Center event.
Speaker Change: In December so.
Speaker Change: Our work right now and future generations as not just specifying a GPU it is specifying let's call it.
Speaker Change: Full system reference designs, and that's something that will be quite important going forward.
Speaker Change: Thanks, a lot and then just as a quick follow up I know this year it looks like it's going to be pretty back half loaded in your server CPU business just like it was last year and I know you've kind of held our hands at.
Speaker Change: This time last year sort of on what the full year could look like and how back end loaded or could be so I kind of wonder could you give us some milestones in terms of how much server CPU could grow this year, how backend loaded it could be as it is like up 30%. This year for your server CPU business year over year is that a reasonable bogey I just wonder if you can kind of give us any guidance on that piece of the business. Thanks.
Lisa T. Su: on that piece with this. Yeah, I mean, I think, Tim, I think.
Timothy Michael Arcuri: Yeah, I mean, Tim, I think the best way to say it is our data center segment is on a very, very strong ramp as we go through the back half of the year, server CPUs, certainly, data center GPUs, you know, for sure. So, you know, I don't know that we're going to get into specifics, but I could say, you know, in general, you should expect the overall segment level to be, you know, very strong double digits.
Speaker Change: Yes, I mean I think.
Speaker Change: Tim I think the best way to say it is our data center segment.
Speaker Change: Is on a very very strong ramp as we go through the back half of the year server Cpus certainly.
Speaker Change: Datacenter Gpus for sure. So I don't know that were going to get into specifics, but I can say in general you should expect overall at the segment level to be very strong double digits.
Speaker Change: Thank you Lisa.
Speaker Change: <unk>.
Joseph Lawrence Moore: Thank you. Our next question is from Joe Moore with Morgan Stanley. Please proceed with your question.
Speaker Change: Thank you. Our next question is from Joe Moore with Morgan Stanley. Please proceed with your question.
Joseph Lawrence Moore: Great, thank you. I wonder if you could address the profitability of MI300. I know you said a couple quarters ago that it would eventually be above the corporate average, but it would take you a few quarters to get there. Can you talk about where you are on that?
Joseph Lawrence Moore: Great. Thank you I Wonder if you could.
Joseph Lawrence Moore: Address the profitability and then my 300 that I know you said a couple of quarters ago that it would eventually be above corporate average, but it would take you a few quarters to get there can you talk about where you are in that.
Jean Hu: Thank you, Joe. Our team has done an incredible job to ramp MI300. As you probably know, it's a very complex product, and we are still in the first year of the ramp. Both from yield, the testing time, and the process improvement, those things are still ongoing. We do think, over time, the growth margin should be accretive to the corporate average.
Speaker Change: Yes. Thank you Jo all our team has done an incredible job to ramp I mean 300.
Speaker Change: As you probably know it's a very complex product and we are still at a fourth year of the ramp.
Speaker Change: Both from yield the testing time and the process improvement that those things are still ongoing we do think over time, the gross margin should it be accretive to corporate average.
Joseph Lawrence Moore: Great, thank you. And then a separate follow-up on the Turin transition on the server. I know when you transitioned into Genoa, you said it could take a little while that there were significant platform shifts and things like that. Turin seems to be much more kind of ecosystem-compatible. How quickly do you think you might see that product ramp within your server? Yeah, Joe, I think for more...
Speaker Change: Great. Thank you and then.
Speaker Change: A separate follow up on the tour and transition on server.
Speaker Change: I know when you had transitioned and in general you said it could take a little while that there were significant platform shifts and things like that.
Speaker Change: And it seems to be much more kind of ecosystem compatible how quickly do you think you might see that product ramp with the new server portfolio.
Lisa T. Su: Yeah, Joe, I think from what we see, look, I think Turin is the same platform, so that does make it an easier ramp. I do think that Genoa and Turin will coexist for some amount of time because customers are deciding when they're going to bring out their new platforms. We expect Turin to give us access to a broader set of workloads, so our SAM actually expands with Turin, both in the enterprise and the cloud. And from our experience, I think you'll see a faster transition than, for example, when we went from Milan to Genoa.
Speaker Change: Yes, Joe I think.
Speaker Change: From what we see I think <unk> is the same platform. So that does make it an easier ramp I do think that general in turn will coexist for some amount of time, because our customers are deciding when theyre going to bring out their new platforms. We expect her to give us access to a broader set of workloads. So our Sam.
Speaker Change: Actually expands with turn both in enterprise and cloud and from our.
Speaker Change: From our experience I think youll see a faster transition than for example, when we went from Milan to general.
Speaker Change: Great. Thank you.
Stacy Aaron Rasgon: Thank you. Our next question is from Stacy Rasgon with Bernstein Research. Please proceed with your question. Bye, guys. Thanks for taking my call.
Speaker Change: Thank you. Our next question is from Stacy <unk> with Bernstein Research. Please proceed with your question.
Stacy Aaron Rasgon: Hi guys, thanks for taking my questions. For my first one, I wanted to address the MI300 ramped into Q2. So you said you've done a billion dollars, give or take, in cumulative sales, which puts it at maybe, I don't know, maybe $600 million in Q1. You're guiding total revenues up about $225 million into Q2, but you've got client ops, you've got traditional data center ops, you've got embedded flat. Gaming is going to be down, but I'd hazard a guess that the client and traditional data center offset it, if not more. Does the MI300 ramp into Q2? Is it more or less than the total corporate ramp that you've got built into guidance?
Stacy: Hi, guys. Thanks for taking my questions. My first one I wanted to address the EMI 300 ramped into Q2. So you said you've done a $1 billion give or take and cumulative sales, which puts it at maybe I don't know maybe $600 million in Q1 regarding total revenue was up about $225 million into Q2, but you've got client drop you've got traditional data.
Speaker Change: <unk>, you've got embedded flat gaming is going to be down, but I would hazard a guess with declines in traditional data center offset if not more.
Speaker Change: Mm 300 ramp into Q2 is it more or less than the total corporate ramp that you've got built into guidance right now.
Speaker Change: So you are expecting.
Jean Hu: Hi Stacy, thanks for the question. You always ask a math question. So I think in general it is more, the data center GPU RAM will be more than the overall company's.
Speaker Change: Hi, Stacy Thanks for the question you always ask Matt a question. So I think in general it is.
Speaker Change: Wall.
Stacy: The datacenter GPU ramp it will be more than the overall company 207 million ramp.
Stacy Aaron Rasgon: Okay, so that means gaming must be down a lot, right? If client and traditional data are all on top of it, okay. Yeah, you're right. Gaming is down in a similar zip code like a queue.
Speaker Change: Okay. So that means gaming must be down like a lot right of client.
Stacy: Yes, you are right. The gaming is down similar ZIP code the life like Q1.
Jean Hu: Got it. So maybe, yeah, maybe, let me give you some color about the gaming business, right? You know, if you look at gaming, the demand has been quite weak, that's quite a well-known fact, and also their inventory level. So based on the visibility we have, the first half, you know, both Q1, Q2, we guided it down sequentially more than 30%. We actually think the second half will be lower than the first half.
Stacy: Got it got it so maybe yes, maybe let me give you some color about the gaming business right.
Stacy: If you look at the gaming demand has been quite weak.
Stacy: Quite a.
Stacy: Very well known and also their inventory levels. So based on the visibility we have at the first half.
Stacy: Post Q1, Q2, we guided down sequentially more than 30%, we actually think our second half will be.
Stacy Aaron Rasgon: That's basically how we're looking at this year for the gaming business. And at the same time, gaming's gross margin is lower than our company average. So overall, you know, we'll help the mix on the gross margin side. That's just some color on the gaming side. But you're right, Q2 gaming's down a lot.
Stacy: Lower than first half that's basically how we're looking at that this year for the gaming business and.
Stacy: And at the same time the gaming gross margin is lower than our company average you saw overall.
Speaker Change: Will help the mix on the gross margin side.
Speaker Change: Just some color on the gaming side, but you are right Q2 gave me dialogue.
Stacy Aaron Rasgon: That's helpful. Thank you.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: For my second question I wanted to look at the near term datacenter profitability. So operating profit was down 19% sequentially on 2% revenue growth is that just the margins of the Gpus filtering and relative to the Cpus and I know you said Gpus would eventually be above corporate average are they below the CPU average in.
Jean Hu: For my second question, I wanted to look at near-term data center profitability. So operating profit was down 19% sequentially on 2% revenue growth. Is that just the margins of the GPUs filtering in relative to the CPUs? And I know you said GPUs would eventually be above the corporate average. Are they below the CPU average? I mean, they clearly are, I guess, in the near term, but are they going to stay that way?
Speaker Change: I mean, they clearly are I guess in the near term, but are they going to stay that way.
Jean Hu: Yeah, I think you're right. The GPU growth margin right now is below the data center growth margin level. I think there are two reasons. Actually, the major reason is that we actually increased the investment quite significantly to, as Lisa mentioned, expand and accelerate our roadmap on the AI side. That's one of the major drivers of the operating income coming down slightly. On the growth margin side, going back to your question, we said in the past, and we continue to believe the case, that data center GPU growth margin over time will be accretive to the corporate average, but it will take a while to get to the server level for growth margin.
Speaker Change: Yes, I think you are right. The GPU gross margin right now is below the data center gross margin level I think there are two reasons.
Speaker Change: Actually the major reason is that we actually increase that investment quite significantly.
Speaker Change: To a speech I mentioned that to expand and accelerating our roadmap in the AI side. That's one of the major driver. So for the operating income coming down slightly on the gross margin side, but going back to your question is we said in the posture I know we continue to believe the KC dataset.
Speaker Change: The GPO gross margin over time that will be accretive to corporate average, but it will take a while to get to the silver level for gross margin.
Speaker Change: Got it that's helpful. Thank you.
Stacy Aaron Rasgon: That's helpful. Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Harlan Sur: Thank you. Our next question is from Harlan Sur with J.P. Morgan. Please proceed with your question.
Harlan Sur: Our next question is from Harlan sur with Jpmorgan.
Harlan Sur: Morgan. Please proceed with your question.
Lisa T. Su: Good afternoon, thanks for taking my question. On your data center GPU segment and the faster time-to-production shipments giving you just up to your full year GPU outlook, how much of it is faster bring-up of your customers' frameworks driven by your latest ROCm software platform and maybe stronger collaboration with your customers' engineers just to get them to crawl faster? You know, what appears to be a pretty strong urgency for them to move forward with their important AI initiatives.
Harlan Sur: Hey, good afternoon. Thanks for taking my question on your data Center GPU segment, and the faster time to production and shipments given you're just up to your full year GPU outlook, how much of it is faster bring up all of your customers frameworks driven by.
Speaker Change: <unk> software platform and maybe stronger collaboration with your customers engineers, just to get them to call faster and how much of it is just a more aggressive build out plan by customers versus their prior expectations given.
Speaker Change: What appears to be pretty strong urgency for them to move forward with the important AI initiatives.
Harlan Sur: Yeah, Harlan, thank you for the question. You know, what it really is is, you know, both us and our customers feel, you know, confident in broadening the ramp because, you know, if you think about it, first of all, the ROCm stack has done really well. And, you know, the work that we're doing is hand in hand with our customers to optimize, you know, their key models.
Speaker Change: Yeah Harlan. Thank you for the question what it really is is.
Speaker Change: Both.
Harlan Sur: US and our customers feeling confident in broadening the ramp because if you think about it first of all the <unk> stock has done really well and.
Harlan Sur: The work that we're doing is hand in hand, with our customers to optimize.
Harlan Sur: There are key models and it was important to get sort of verification and validation debt.
Harlan Sur: Everything would run well and we've now passed some important milestones in that area and then I think the other thing is as you said, there's a huge demand for more AI compute and so.
Harlan Sur: And, you know, it was important to get, you know, sort of verification and validation that, you know, everything would run well. And we've now passed some important milestones in that area. And then I think the other thing is, as you said, there's a huge demand for more AI compute. And so, you know, our ability to participate in that and help customers, you know, get that up and running is great. So I think overall, as we look at it, this ramp has been very, very aggressive.
Jean Hu: [inaudible]
Harlan Sur: Our ability to participate in that and help customers.
Harlan Sur: Get that up and running is.
Harlan Sur: Is is great. So I think overall as we look at it. This ramp has been very very aggressive as you think about where we were just a quarter ago.
Harlan Sur: Each of these.
Harlan Sur: Each of these are.
Harlan Sur: Pretty complex bring ups and.
Harlan Sur: Im very happy with how they've gone and by the way, where we're only sitting here in April so theres still a lot of 2020 for it to go and there is.
Harlan Sur: Great customer momentum in the process.
Speaker Change: Yes, absolutely.
Harlan Sur: Yeah, absolutely. Just going back, just kind of rewinding back to the March quarter. So similar to the PC client business, right, which declined at the low end of the seasonal range. If I make certain assumptions about your data center GPU business, I X that out of data center.
Speaker Change: Just going back just kind of rewinding back to the March quarter. So similar to the PC client business right, which declined at the low end of the season in Orange, if I make certain assumptions around your data center GPU business.
Speaker Change: Out of data center it looks like your server CPU business was also down at the lower end of the seasonal range by my math It was down like five 6% sequentially is that right.
Jean Hu: It looks like your server CPU business was also down at the lower end of the seasonal range. By my math, it was down like five, 6% sequentially. Is that right?
Harlan Sur: And that's less than half the decline of your competitor. And if so, what drove the less than seasonal declines? I assume some of it was share gain. Sounds like enterprise was also better. Looks like you guys did drive a little bit more cloud instance adoption, but anything else that drove the slightly better seasonal pattern in March for data center?
Speaker Change: That's less than half of the decline of your competitor and if so like what drove the less than seasonal declines I assume some of it will share gains sounds like enterprise was also better it looks like you guys did drive a little bit more cloud instance, adoption, but anything else that drove the slightly better seasonal pattern in March for data Center.
Jean Hu: Hello, this is Jean. I think the server business has been performing really well. Year for year, it actually increased by a very strong double-digit. I think sequentially it is more seasonal, but we feel pretty good about continuing to get share there. Thank you.
Speaker Change: Yes, yes, Hello messaging I think.
Speaker Change: The server business has been performing really well year over year <unk> actually increase very strong double digit I think sequentially. It is more seasonal but.
Speaker Change: We feel pretty good about to continue gaining share there.
Lisa T. Su: And if I just add Harlan to your question, we did see strength in enterprise in the first quarter, and I think that has offset, perhaps, some of the normal seasonality.
Speaker Change: Yes, and if I just add.
Speaker Change: Harlan to your question, we did see strength in enterprise.
Speaker Change: In the first quarter and I think that has.
Speaker Change: <unk> offset perhaps some of the normal seasonality.
Speaker Change: All we have in Q2.
Unknown Executive: Thank you. Our next question is from Tom O'Malley with Barclays. Please proceed with your question.
Tom O'malley: Thank you. Our next question is from Tom O'malley with Barclays. Please proceed with your question.
Unknown Executive: Hey, thanks for taking my question. I just wanted to ask about the competitive environment, obviously on the CPU side, you had a competitor talk about launching a high core count product in the coming quarter, kind of ramping up now and more so into Q3. You've seen really good pricing tailwinds as a function of the higher core count, but can you talk about what you're seeing in that market? Do you think that there's any risk for more aggressive pricing, which would impact your ASP ramp for the rest of the year?
Tom O'malley: Thanks for taking my question I, just wanted to ask on the competitive environment, obviously on the CPU side you had a.
Tom O'malley: A competitor talking about launching a high core count product.
Tom O'malley: In the coming quarter kind of ramping now and more so into Q3.
Tom O'malley: Seen really good pricing tailwind as a function of the higher core count, but can you talk about what youre seeing in that market do you think that theres any risk.
Tom O'malley: For more aggressive pricing, which would impact your ASP you ramp for the rest of the year.
Lisa T. Su: Yeah, when we look at our, you know, server CPUs, sort of ASPs, they're actually very stable. You know, I think we, again, tend to be indexed towards the higher core counts. You know, overall, I would say the pricing environment is stable. This is about, you know, sort of TCO for, you know, sort of customer environments and, you know, sort of our performance and our performance per watt, our leadership, and, you know, that usually translates into a TCO advantage for our customers.
Speaker Change: Yes, when we look at our server CPU.
Speaker Change: Asps are actually very stable.
Speaker Change: I think we again, we tend to be index towards the higher core counts.
Speaker Change: Overall, I would say the pricing environment is stable.
Speaker Change: This is about the sort.
Speaker Change: Sort of <unk> for sort of the customer environment and sort of our performance and our.
Speaker Change: Our performance per watt or our.
Speaker Change: Our leadership and that usually translates into <unk> advantage for our customers.
Unknown Executive: helpful. And then just a broader question to follow up here. So I think it was asked earlier about the importance of systems. But on your end, how important is the Open Ethernet consortium to you being able to move more into systems? I know that today, you obviously have some internal assets, and then you can partner with others. But is there a way that you can be competitive before there is an industry standard on the Ethernet side?
Speaker Change: Helpful. And then just a broader question to follow up here. So I think you got asked earlier about the importance of system.
Speaker Change: On your end how important is the open Ethernet consortium to you being able to move towards the systems I know, but today you obviously have some internal assets and then you can partner with others, but is there a way that you could be competitive before there is an industry standard on the Ethernet side and can you talk about when you think the timing of that kind of consortium comes to market and then enables you to.
Speaker Change: To maybe accelerate that robot thanks, a lot.
Lisa T. Su: Yeah, I think it's very important to say that we are very supportive of the open ecosystem. We're very supportive of the Ultra Ethernet Consortium. But I don't believe that that is a limiter to our ability to build large-scale systems. I think Ethernet is something that many in the industry feel will be the long-term answer for networking in these systems.
Unknown Executive: And can you talk about when you think the timing of that kind of consortium comes to market and enables you to, to maybe accelerate that roadmap? Thanks a lot. Yeah, I think it's very important to say we are we are very supportive of the
Speaker Change: Yes, I think it's very important to say we are we are very supportive of the.
Speaker Change: The open ecosystem, we're very supportive of the Altra Ethernet consortium, but I don't believe that that is a limiter.
Speaker Change: Two our ability to build large scale systems I think Ethernet is something that many in the industry feel will be the long term answer.
Speaker Change: <unk> networking in these systems and we have a lot of work that we're doing.
Speaker Change: With internally as well as with our customers and partners to enable that.
Speaker Change: Okay.
Speaker Change: Okay.
Paul.
Operator: Thank you. We're ready for our final question. Our last question is from Harsh Kumar with Piper Sandler. Please proceed with your question.
Paul: Thank you for ready for our final question. Our last question is from harsh Kumar with Piper Sandler. Please proceed with your question.
Harsh V. Kumar: Hey, thank you for letting me ask a question. Lisa, I had two. One is for you, and one, perhaps, for Jean.
Harsh V. Kumar: Hi, Thank you for letting me ask the question Lisa I had two one is for you on one perhaps with GE. So we recently hosted a very large custom GPU companies or a call.
Lisa T. Su: So we recently hosted a very large custom GPU company for a call. And they talked about kind of mega data centers coming up in the near to midterm, you know, talking about nodes potentially in the 100,000 plus range and maybe up to a million. So as we look out at these kinds of data centers, from an architectural standpoint, is that a situation where the winner takes all, where if somebody gets in, you know, they kind of get all the sockets, or will there be lines where your chip, perhaps, or your board can be placed right next to somebody else's board, maybe on a separate line? Just help us understand how something like that would play out if there was a chance for more than one competitor to play in such a large data center.
And then you talked about kind of Mega data centers coming up in the near to midterm talking about potentially in the 100000 plus range and maybe up to $1 million. So as we look out at these kinds of data centers from an architectural standpoint is that a situation, where we get tapes, all where if somebody gets in.
Harsh V. Kumar: Yes.
Harsh V. Kumar: And all of the Falcon or will they be in lines, where you are.
Harsh V. Kumar: Chip, perhaps your board can be placed right next to somebody else's board maybe on a separate line.
Harsh V. Kumar: Help us understand how something like that could play out if there is a chance for more than one competitor that play and centralized data center.
Harsh V. Kumar: Yeah. So, you know, I'll talk maybe a little bit more at the strategic level. I think as we look at, you know, sort of how AI shapes up over the next few years, there are, you know, customers who would be looking for very large, you know, training environments, and perhaps that's what you're talking about. I think, you know, our view of that is, number one, we view that as a very attractive area for AMD.
Harsh V. Kumar: So.
Harsh V. Kumar: Maybe a little bit more at the strategic level I think as we look at.
Harsh V. Kumar: Sort of how AI shapes up over the next few years. There there are customers who would be looking at very large.
Harsh V. Kumar: Raining environments, and perhaps thats, what youre talking about I think our view of that is number one we view that as a very attractive area for AMD. It's in <unk>.
Harsh V. Kumar: It's an area where, you know, we believe we have the technology to be, you know, very competitive there. And, you know, I think the desire would be to, you know, have optionality in terms of how you build those things out. So, you know, obviously, a lot has to happen between here and there, but I think your overarching question is, "Is it winner takes all?" I don't think so. That being the case, we believe that, you know, AMD is very well positioned.
Area, where we believe we have the technology to be.
Harsh V. Kumar: Wonderful. Thank you.
Very competitive there and I.
Harsh V. Kumar: I think the desire would be to have optionality in terms of how you build those out. So obviously a lot has to happen between here and there, but I think your overarching question of is it a winner takes all I don't think so that being the case.
Harsh V. Kumar: We believe that.
<unk> is very well positioned to play in those let's call it.
Harsh V. Kumar: A very large scale systems.
Jean Hu: And then maybe a quick one for Jean. So Jean, I put everything into the model that you talked about for June. I get about a more or less $400 million rise in the June quarter over March. You mentioned that both MI300 and EPYC would grow. Curious if you could help us think about the relative sizing of those two segments within the course. I'm getting, the point I'm trying to make is I'm getting roughly about a $900 million number for MI300 per June. Is that, am I in the ballpark, or am I way off?
Speaker Change: Just wanted to say thank you and then maybe a quick one for Jim Savina put everything into the model that you've talked about for June.
Unknown Executive: More or less the $400 million rise in the June quarter over March.
Unknown Executive: You mentioned that both of them are 300 epic will grow.
Unknown Executive: Curious if you can help us think about the relative sizing of those two segments within the Gulf I'm getting the point I'm trying to make is im getting roughly about a $900 million number for.
Unknown Executive: Mm 300 for June is that am I in the ballpark on my way off here.
Harsh V. Kumar: Harsh, we're not going to guide a specific segment below the segment revenue. I think the most important thing is that we did say data center is going to grow double-digit sequentially. I will leave it over there. Subsegment, there are a lot of details.
Speaker Change: We're not going to guide a specific segment of below the segment revenue.
Speaker Change: I think the most important thing is to say data center is going to grow double digit sequentially.
Speaker Change: With over there.
We have a segment that there are a lot of the details.
Jean Hu: Fair enough. I had to try. Thank you, guys. Thank you so much. Yeah, yeah, yeah. Thank you.
Speaker Change: But if I had to try it. Thank you guys. Thank you so much yes, yes. Thank you.
Operator: Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments. Okay, that concludes today's webinar.
Thank you there are no further questions at this time I'd like to hand, the floor back over to management for any closing comments.
Unknown Executive: Great, that concludes today's call. Thanks to all of you for joining us today.
Great that concludes today's call. Thanks to all of you for joining us today.
Speaker Change: Okay.
Speaker Change: Okay.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.