Q3 2024 Advanced Micro Devices Inc Earnings Call

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Speaker Change: Greetings and welcome to the AMD 3rd Quarter 2024 Conference Call.

Speaker Change: We will refer primarily to non-GAAP financial measures during today's call. The full non-GAAP to GAAP reconciliations are available in today's press release and the slides posted on our website.

Speaker Change: Participants on today's conference 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 force know Rod Executive Vice President and General manager datacenter business solutions.

Speaker Change: Well they tend to UBS annual technology conference on Tuesday December 3rd.

Speaker Change: And Jean who will attend the Barclays Global TMT Conference on Thursday December 12.

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: Please refer to the cautionary statement in our press release for more information on factors that could cause actual results to differ materially.

Speaker Change: I'll hand, the call over to Lisa.

Lisa Su: Thank you Mitch and good afternoon to all those listening today.

Lisa Su: We delivered strong top and bottom line growth in the third quarter with revenue coming in above expectations, driven by record instinct and epic product sales and robust demand for ryzen PC processors.

Lisa Su: Third quarter revenue increased 18% year over year to a record $6 8 billion, a significantly higher data center and client processor sales more than offset declines in gaming and embedded product sales.

Lisa Su: We expanded gross margin by two five percentage points and increased earnings per share by 31% year over year as datacenter segment revenue more than doubled.

Lisa Su: Turning to the segments.

Lisa Su: Data Center segment revenue increased 122% to a record $3 5 billion.

Lisa Su: We believe we gained server CPU share in the quarter as enterprise wins accelerated cloud providers expanded their use of epic Cpus across their infrastructure and we began the initial ramp of fifth Gen epic processors.

Lisa Su: <unk> has become the CPU of choice for the modern data center and our multi generation product portfolio delivers leadership performance and significant <unk> advantages across virtually every enterprise and cloud workload.

Lisa Su: In cloud epic Cpus are deployed at scale to power many of the most important services, including office 365, Facebook teams Salesforce SAP zoom, Uber Netflix and many more.

Lisa Su: Metal alone has deployed more than $1 5 million epic Cpus across their global data Center fleet to power their social media platforms.

Speaker Change: Cloud flares selected general X processors, with our industry, leading <unk> chip stacking technology to power. Their next generation servers that support twice as many requests per second and deliver 60% higher performance per watt versus their prior generation.

Speaker Change: Public cloud instances increased 20% year over year to more than 950, as Microsoft AWS and others launched or expanded their epic processor powered offerings in the quarter.

Speaker Change: Epic instance, adoption with enterprise customers also grew in the quarter highlighted by wins with Adobe Boeing Micron, Nestle slack Synopsys, Tata and others.

Speaker Change: In the enterprise sales grew by a strong double digit percentage year over year for the fifth straight quarter as epic CPU adoption accelerated and sell through momentum grew.

Speaker Change: Dell HPE, Lenovo and others have expanded the number of fourth Gen epic platforms. They offer by 50% in the last year. There are now more than 200 different ethics solutions available that are optimized for a broad range of enterprise and edge workloads.

Speaker Change: We are building strong momentum with large enterprise customers highlighted in the third quarter by wins with large technology energy financial services and automotive companies in the quarter, including Airbus Daimler truck, Fedex, HSBC, Siemens Walgreens and others.

Speaker Change: We launched our next generation turn family earlier this month that delivers absolute performance and Tcl leadership across both enterprise scale up and cloud native scale out workloads.

Speaker Change: <unk> has already said more than 130 performance records for virtualization database AI business applications and energy efficiency with the full epic portfolio accounting for more than 500 performance World Records.

Speaker Change: More than 135th Gen Epic enterprise platforms are in development from all the leading server Oems and Oems. These new servers complement existing fourth gen epic platforms, providing a top to bottom stack of platforms optimized for a broad range of business applications.

Speaker Change: In cloud, Google and OCI announced plans to launch fifth Gen. Epic instances early next year, and we expect broad adoption with our largest cloud customers based on the significant performance and efficiency advantages of turn.

Speaker Change: As an example, oracle's turn instances deliver 35% higher performance per core, 33% faster memory speeds and double the networking bandwidth delivering a level of compute performance and capability that is only possible with epic Cpus.

Speaker Change: Looking ahead, we are very well positioned for continued growth and share gains based on the strength of our broad epic portfolio and the momentum we have built with cloud and enterprise customers.

Speaker Change: We also took a major step in the quarter to advance the X 86 architecture, forming an ecosystem advisory group with Intel several industry luminaries and the largest cloud PC and enterprise leaders to accelerate innovation by driving consistency and compatibility across both the X 86 instruction set and architectural.

Speaker Change: Interfaces and ensuring we evolve X 86, as a compute platform of choice for developers and customers.

Speaker Change: Turning to our data center AI business datacenter GPU revenue ramped as <unk> 300, <unk> adoption expanded with cloud OEM and AI customers.

Speaker Change: Microsoft and <unk> expanded their use of <unk> 300, ex accelerators to power their internal workloads in the quarter.

Speaker Change: Microsoft is now using <unk> 300, <unk> broadly for multiple co pilot services powered by the family of GPT for models.

Speaker Change: Meta announced they are optimized and broadly deployed mid 300 <unk> to power their inferencing infrastructure at scale, including using <unk> 300 ex exclusively to serve all live traffic for the most demanding Lama 405 be frontier model.

Speaker Change: We are also working closely with meta to expand their instinct deployments to other workloads, where <unk> offers tcl advantages including training.

<unk> 300, <unk> public cloud instance, availability expanded in the quarter with Microsoft Oracle cloud and multiple AI specialized cloud providers now offering instinct instances with leadership performance and Tcl for many of the most widely used models.

Speaker Change: Instinct Cloud instance, adoption is strong with multiple startups and industry leaders adopting <unk> 300 instances to power their models and services, including our central AI fireworks AI Luma AI and data bricks.

Speaker Change: Yeah.

Speaker Change: On the AI software front since launching <unk> 310 months ago, we have expanded functionality at every layer of the <unk> stack and increase the number of models that run out of the box on instinct accelerators to more than $1 million, enabling customers to get up and running as fast as possible with maximum out of the box performance.

Speaker Change: With the release of <unk> $6, two last quarter, and <unk> 300, <unk> inference and performance has improved to four times since launch and trading performance has increased 80%.

Speaker Change: We are working closely with a growing number of marquee cloud and enterprise customers to fine tune their specific inferencing workloads for <unk> 300, with many customers seeing 30% higher performance compared to competitive offerings and we continue to expand our work with the open source community broadening support for key frameworks like jacks.

Speaker Change: Libraries, like BLM and hardware agnostic compilers like Triton.

Speaker Change: At our advancing AI event earlier. This month, we were excited to be joined by the creators and leaders of some of the most important AI software technologies, who have added foundational support for rocket into Triton, The Lama stack SG Lang BLM and tensor flow and are working to enable broader open source Committee community.

Speaker Change: Work with instinct platforms.

Speaker Change: With this growing support from the broader AI software ecosystem and the significant advances we have made in our software stack. Rocco now provides AI developers with a truly open software alternative that has been deployed and validated at scale.

To expand our AI systems capabilities, we announced a definitive agreement to acquire <unk> systems, one of the leading providers of AI infrastructure to the world's largest hyperscale computing companies.

Speaker Change: The <unk> team complements our silicon and software capabilities with critical systems expertise needed to deliver a rack and cluster level solutions.

With <unk>, we will be able to design and validate our nexgen AI silicon and systems in parallel greatly accelerating time to deploy instinct accelerators at datacenter scale.

Speaker Change: Customer feedback has been very positive as the GTE acquisition enables hyperscale customers to rapidly deploy AMD AI infrastructure at scale and provides Oems and Oems with optimized board and module designs for a wide range of differentiated enterprise solutions.

Speaker Change: On the regulatory front, we made good progress as we recently passed the HSR waiting period required for U S approval, we remain on track to close the acquisition in the first half of 2025.

Speaker Change: As a reminder, we plan to divest <unk> industry, leading U S based datacenter infrastructure manufacturing business at the close of the transaction and are pleased that we have received significant interest from a number of parties to date.

Speaker Change: Okay.

Speaker Change: Looking ahead, we launched our next Gen <unk> hundred 25 X GPU earlier this month that extends our memory capacity and bandwidth advantages and delivers up to 20% higher inferencing performance compared to <unk> 200, and competitive training performance.

Speaker Change: Customer and partner interest for <unk> hundred 25 X as high production shipments are planned to start this quarter with widespread system availability from Dell HPE, Lenovo supermicro and others starting in the first quarter of 2025.

Speaker Change: Longer term, we are successfully accelerated our product development pace to deliver an annual cadence of new instinct products.

Speaker Change: Our Nexgen <unk> $3 50 series Silicon is looking very good and is on track to launch in the second half of 2025 with the largest generational increase in AI performance, we have ever delivered.

Speaker Change: Development on our 400 series based on the Cdna next architecture is also progressing very well towards a 2026 launch.

Speaker Change: Okay.

We have built significant momentum across our data center AI business with deployments increasing across an expanding set of cloud enterprise and AI customers. As a result, we now expect datacenter GPU revenue to exceed $5 billion in 2024 up from $4 5 billion, we guided in July and our expectation of two <unk>.

Speaker Change: When we started the year.

Speaker Change: Turning to our client segment revenue was $1 9 billion, an increase of 29% year over year, driven by strong demand for our latest generation Zen five notebook and desktop processors.

Speaker Change: Desktop channel sales grew by a significant double digit percentage led by the launch of our Ryzen 9000 series processors that deliver leadership productivity gaming and content creation performance.

Speaker Change: We are seeing strength across our ryzen desktop portfolio and are on track to launch our next Gen. Ryzen 9000 X <unk> processors in November with leadership gaming performance.

Speaker Change: In mobile Ryzen, AI 300 series sales ramped significantly from the prior quarter as Acer HP, Lenovo, a Susan others announced new consumer and commercial notebooks with leadership compute and AI performance.

Speaker Change: We made good progress expanding our presence in the commercial PC market in the quarter closing multiple large deals with astrazeneca buyer.

Speaker Change: Mazda shell Volkswagen and other enterprise customers.

Speaker Change: We also launched our ryzen AI Pro 300 series family. The first Cpus with Enterprise class security Manageability and AI capabilities for co pilot plus Pcs.

Speaker Change: HP and Lenovo are on track to more than triple the number of ryzen AI pro platforms. They offer in 2024, and we expect to have more than 100 ryzen pro commercial platforms in market next year positioning us well for share gains as businesses refresh the hundreds of millions of Windows 10, Pcs that will no longer receive Mike.

Speaker Change: Resource technical support starting in 2025.

Speaker Change: Now turning to our gaming segment revenue declined 69% year over year to $462 million.

Speaker Change: Semi custom sales declined as Microsoft and Sony reduce channel inventory.

Speaker Change: Sony announced the PS five pro with significant increases in graphics, and Ray tracing performance and AI, driven upscaling, featuring our new AMD semi custom Soc that extends our multi generational partnership.

Speaker Change: And gaming graphics revenue declined year over year as we prepare for our transition to our Nextgen Radeon Gpus based on our DNA for architecture.

Speaker Change: In addition to a strong increase in gaming performance rdna, four deliver significantly higher rate rates in performance and adds new AI capabilities. We are on track to launch the first rdna for Gpus in early 2025.

Okay.

Speaker Change: Turning to our embedded segment third quarter revenue decreased 25% year over year to $927 million.

Speaker Change: Embedded demand continues to recover and gradually led by strength in test and emulation offset by ongoing softness in the industrial market.

Speaker Change: Momentum continues building for our differentiated versal family of adaptive Sse's <unk>.

Speaker Change: Led by strong demand for our vessel premium VP of $19, two which is the world's largest adaptive essos, an FPGA that is power and multiple platforms for all three of the largest EDA vendors.

Speaker Change: Our Versal portfolio is also being adopted broadly across multiple aerospace customers. As one example, Spacex recently launched their latest generation broadband satellites powered by Versal AI core adaptive Soc.

Speaker Change: To build on this momentum we taped out Telluride last quarter. The first product in our second Gen vessel family that delivers up to <unk> more compute and enables AI application acceleration on a single chip.

Speaker Change: Design win momentum is very strong across our portfolio tracking to grow more than 20% year over year in 2024, and positioning us well to grow our embedded business faster than the overall market in the coming years.

Speaker Change: In summary, the business accelerated in the third quarter, and we expect strong demand for our instinct epic and ryzen processors to result in another quarter of significant year over year growth.

Speaker Change: Taking a step back this month marks my 10th anniversary as <unk> CEO.

Speaker Change: In the last 10 years, we have successfully completed multiple arcs first by turning the company around and setting the solid financial and operational foundation required for sustained growth.

And then by transforming AMD into the high performance and adaptive computing leader.

Speaker Change: While I'm incredibly proud of what we've accomplished I'm, even more excited about the unprecedented growth opportunities in front of us.

Speaker Change: Looking out over the next several years, we see significant growth opportunities across our data center client and embedded businesses driven by the nearly insatiable demand for more compute.

Speaker Change: Each of these opportunities is amplified exponentially by the rapid adoption of AI, which is enabling new experiences that will make high performance computing and even more essential part of our daily lives.

Speaker Change: In the data center alone, we expect the AI accelerator Tam will grow at more than 60% annually to 500 billion in 2028.

Speaker Change: To put that in context. This is roughly equivalent to annual sales for the entire semiconductor industry in 2023.

Speaker Change: Beyond the data center, we are adding leadership AI capabilities across our product portfolio and partnering deeply with a broad ecosystem of partners to deliver differentiated AI solutions at scale.

Speaker Change: This is an incredibly exciting time for AMD as the breadth of our technology and product portfolios combined with our deep customer relationships and diversity of markets. We address provide us with a unique opportunity as we execute our next arc and make AMD. The end to end AI leader now.

Speaker Change: Now I'd like to turn the call over to Jim to provide some additional color on our third quarter results Jean.

Jim: Thank you Lisa and good afternoon, everyone I'll start with the review of our financial results and then provide our current outlook for the fourth quarter of fiscal 2024.

Jim: We're very pleased with our strong third quarter financial results.

Jim: Year over year basis datacenter segment, the revenue more than doubled and clay on the segment revenue grew 29%.

Jim: We expanded gross margin by 250 basis points and they drove earnings per share growth of 31%.

Jim: For the third quarter of 2020 for revenue was $6 8 billion.

Jim: Up 18% year over year and the revenue as revenue growth in our data center and client segment was partially offset by lower revenue in our gaming and impacted the segment.

Revenue increased 17% sequentially, primarily driven by growth in our data center and client segment.

Gross margin was 54% up 250 basis points year over year, primarily driven by higher datacenter segment revenue.

Jim: Operating expenses were $1 96 billion, an increase of over 15% year over year as we continue to invest in R&D and go to market activities.

Jim: Operating income was $1 7 billion, representing a 25% operating margin.

Jim: Taxes interest expense and other was 211 million and diluted earning per share was <unk> 92, an increase of 431% year over year and 33% sequentially.

Jim: Now turning to our reportable segments.

Jim: Starting with the datacenter datacenter delivered record quarterly segment revenue of $3 5 billion.

122% nearly a 2 billion increase year over year, an increase of 25% sequentially.

Jim: Growth in revenue was led primarily by the strong ramp of AMD, <unk> GPU shipments and growth in AMD <unk> Cpus sales.

Jim: The data center segment accounted for 52% of total revenue in the third quarter.

Jim: Data Center segment operating income was <unk>, 29% of revenue compared to $300 6 million or 19% a year ago.

Jim: Data Center segment operating income more than tripled compared to the prior year driven by higher revenue and operating leverage.

Client segment revenue was $1 9 billion up 29% year over year, and 26% sequentially driven primarily by strong demand for our Zen five AMD ryzen processors.

Jim: Client segment operating income was 276 million or 15% of revenue compared to operating income all for one country and a $40 million a year ago or 10% of our revenue.

Jim: Primarily driven by higher revenue, partially offset by higher operating expenses.

Jim: Gaming segment revenue was $462 million down 69% at year over year, and a 29% sequentially, primarily due to a decrease in semi customer revenue.

Jim: Gaming segment operating income was $10 million or 2% of revenue compared to 208 million or 14% a year ago.

Jim: Yeah.

Jim: <unk> segment revenue was 927 million down 25% a year over year as customers continue to normalize their inventory levels.

Jim: Revenue increased 8% sequentially as demand improved in several end markets.

Jim: Embedded segment operating income was 372 million or 40% of revenue compared to six countries and Tal meeting, our 49% a year ago.

Jim: Turning to the balance sheet and the cash flow during the quarter. We generated a 600 meter ended 2000 8 million in cash from operations and free cash flow was 496 million.

Jim: Excluding certain non recurring payments related to acquisitions from operating cash flows our free cash flow was 600 and a $19 million.

Inventory increased sequentially by 383 million to $5 4 billion, primarily to support the continued ramp of datacenter segment of products.

Jim: At the end of the Quad sure cash cash equivalents and short term investment was $4 5 billion.

Jim: In the third quarter, we returned 250 <unk> cash to shareholders repurchasing one 8 million shares and we have a $4 9 billion of authorization remaining.

Jim: Now turning to our fourth quarter of 2020 for outlook.

Jim: We expect revenue to be approximately $7 5 billion plus or minus $300 million.

Up 22% year over year, driven by strong growth in our data center and client segments more than offset decline in the gaming and the embedded segment.

Jim: Okay.

Jim: We expect revenue to be up approximately 10% sequentially driven primarily by growth across data center client and the gaming segment.

Jim: In addition, we expect our fourth quarter non-GAAP gross margin to be approximately 54%.

Jim: non-GAAP operating expenses to be approximately 2.05 billion non.

Jim: non-GAAP other net income to be $17 million non-GAAP effective tax rate to be 13% and the diluted share count is expected to be approximately 164 billion shares.

Jim: In closing, we're pleased with our strong execution in the third quarter, we delivered record revenue along with the strong year over year expansion in gross margin and earnings per share growth.

Jim: Looking ahead, we are very well positioned to deliver another record quarter of revenue in the fourth quarter driven by continued momentum in our data center and client segments. Importantly, we are making a strategic investment at acquisition of MD <unk> end to end AI infrastructure leader.

Speaker Change: And to drive long term profitable growth with that our trying to back to <unk> for the Q&A session.

Jim: Okay.

Speaker Change: Thank you Jean John let's pull the audience for questions.

Speaker Change: Thank you Mitch we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Speaker Change: Press Star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: And the first question comes from the line of Toshi Hari with Goldman Sachs. Please proceed with your question.

Toshi Hari: Hi, good afternoon. Thank you so much for taking the question. My first one is on the datacenter GPU business.

Toshi Hari: Lisa you took up your 24 outlook by 500 million curious what drove the change there.

Toshi Hari: And more importantly, as you look forward into calendar 'twenty five.

Toshi Hari: Can you give us quantitative guidance on this call, but conceptually how are you thinking about growth in your <unk> business between your large cloud customers and enterprise customers and if you can speak to the possibility of adding new customers within cloud again specific to anything that would be really helpful.

Speaker Change: Sure sure. Thank you for the question. So first of all we had a very strong quarter for the datacenter overall in Q3, and especially for the instinct product portfolio, we actually completed.

Speaker Change: Some important customer milestones and we were able to ramp a bit above our initial expectations.

Speaker Change: Data Center GPU was very strong in the third quarter and we raised overall our guidance for the year from exceeding $4 5 billion to exceeding 5 billion based on the completion of some of those customer milestones. So we feel good about the trajectory as we go through the end of this year and then to your overall question about 2025 at a high level.

Speaker Change: Look we feel very good about the market.

Speaker Change: Everything that we see talking to customers. There is still a significant investment in trying to build out the infrastructure required.

Speaker Change: Across all of the AI workloads, and then within that our product portfolio is.

Speaker Change: Is getting stronger with the annual cadence launching 325 later.

Speaker Change: Later, this quarter and $3 55 in the second half of next year and then in terms of customers our customer engagements are actually broadening quite well. So that's broadening in two ways. So certainly cloud.

Speaker Change: Our largest cloud customers are broadening the set of workloads that they're running.

Speaker Change: On an AMD instinct, and we're also very engaged with a number of large cloud and enterprise customers that are <unk>.

Speaker Change: Actively working with us on optimizing their workloads and we would expect those would be good opportunities for us over the next couple of quarters as well.

Speaker Change: Great and then a quick follow up maybe one for Jean on gross margin, you're guiding Q4 gross margin essentially flat sequentially. If you can walk through the puts and takes there that would be really helpful. And then again as you look forward into 'twenty five.

Speaker Change: Youre kind of speaking to continued data center growth.

Speaker Change: The one would think the embedded business hopefully begins to.

To recover and then within some of your businesses like server CPU I would expect enterprise.

Speaker Change: To grow perhaps faster off a low base. So I do think you have a lot going for you from a gross margin standpoint, but.

Speaker Change: Where are those points valid and then what should we be what should we be thinking about in terms of potential headwinds as well. Thank you. Yeah. Thank you for that question. Firstly, we are very pleased Davita. Our Q3 gross margin performance that we delivered a 53, 6% and that we are guiding approximate 54% in Q4.

Speaker Change: In general when you look at the 2024 hour gross margin improvement has been primarily driven by the mix, especially datacenter business to continue to be the strong growth driver of our business, it's accounting for more than 50% of our revenue mix that helps us too.

Speaker Change: <unk> improved gross margin going into 2025.

Speaker Change: We're not going to to guidance specifically, but.

Speaker Change: As you mentioned they are puts and takes that will help us going forward I would say for our space going forward. Its largest growth driver is our data center business, both the CPU side, the GPU side, and you're absolutely right. We see our enterprise server business continue to expand that will be it.

Speaker Change: Tailwind on gross margin side, and secondly embedded business.

Speaker Change: Covering and gradually but that will also help us with our gross margin at the same time that we're also seeing our client business expansion nicely client.

Speaker Change: <unk> business today is more focused on consumer side, which tend to be below corporate average that's.

Speaker Change: Something had to win the award you await.

Speaker Change: And lastly, I will say our team has done a great job to continue to improve operational efficiency, while we scale. The company next year you can see we're going to benefit from economy economics of scale to continue to drive operational efficiency to improve gross margin.

Speaker Change: And the next question comes from the line of Aaron Rakers with Wells Fargo. Please proceed with your question.

Speaker Change: Yes, thanks for taking the question I'll do two as well.

Speaker Change: I guess, maybe building on the latter point that you just made I'm curious of how you would characterize your.

Speaker Change: Supply chain, having evolved now talking about $5 billion, how do we think about what you've been doing on the supply side given the lead times. The production cycles of these M. I a $303 25 Gpus as we look out into 2025 and I have another question.

Speaker Change: Sure Erinn, so look I've been very happy with how our supply chain has ramped over the last number of quarters its.

Speaker Change: Clearly, it's a tight supply environment, but we've done a great job getting ensuring that we have capacity across the entire supply chain again that was part of the reason for the.

Speaker Change: The higher revenue in the third quarter around our instinct business, just both customer demand as well as our supply chain improvement and going into the next.

A few quarters going into 2025, I think we expect that the environment will continue to be tight, but we have also a plan for significant growth going into 2025, and so we feel good about our overall supply chain capability.

Speaker Change: And then as a quick follow up when I look at the sequential guidance in revenue at the midpoint, let's call it about $680 million.

Speaker Change: Once a week.

Speaker Change: Could you help us frame of how much of that is driven by client versus the data center piece of the business. Thank you.

Speaker Change: Sure.

Speaker Change: So certainly if you look at the sequential guide the largest contributor is the data center business and.

Speaker Change: That is now such a large piece of our business is over 50% of our business in Q3 and it will continue to grow in Q4, our client segments. We also expect to perform well I think we've done.

Speaker Change: Well with our launches this year, both on the desktop Zen five launches as well as the notebook AIP see launches so we expect.

Speaker Change: Growth there and then the other segments on a sequential basis gaming embedded would be more modest.

Speaker Change: And the next question comes from the line of Ross Seymore with Deutsche Bank. Please proceed with your question.

Ross Seymore: Hey, guys. Thanks for let me ask a question Lisa Congrats on the 10 year anniversary.

Speaker Change: <unk>.

Speaker Change: When you gave the segment guidance kind of playing off the last question.

Ross Seymore: You didn't mention embedded as being up and then Lisa just talked about it being uplift just curious I know, it's kind of a muted recovery, but what's happening in the embedded business implied in your fourth quarter guidance and how are you thinking about 2025 just directionally.

Lisa Su: Ross, Let me start and then maybe Jean can add look we've seen some improvement in the embedded business you saw some improvement in the sequential in Q3, we expect some modest improvement in Q4, what we're seeing is really a mix across the different sub segments in the embedded there are some segments that.

Lisa Su: Our stronger so our test and emulation business actually did very well, we're ramping our new universal plot.

Lisa Su: Platform there.

Lisa Su: Aerospace and defense did well also continues to be relatively strong.

Lisa Su: Communications has not seen much recovery, so I would say that thats still.

Lisa Su: Fairly muted and industrial is also a little bit on the softer side. So between all of those we expect a little bit of growth into Q4, and let's call. It.

Lisa Su: Modest growth in 2025, but we're planning for it to be a little bit mixed amongst the segments, maybe Jean if you want to add.

I think you covered it.

Speaker Change: Great and I guess for my follow up just on the epic business.

Speaker Change: Incredibly well there Lisa have you seen any kind of loosening up of the crowding out effect with the Ebola in your case.

Speaker Change: Sting side, taking demand away from the epic side. It doesn't seem to have slowed you down much. This year, you're still up by my math, maybe 33% or so and how are you thinking about that kind of CPU versus GPU dynamic from a customer spend perspective, as we look into 'twenty five.

Speaker Change: Yeah sure, let me talk a little bit about the datacenter GPU business look we've been extremely pleased with the progress there I think the market environment has certainly gotten better over the last couple of quarters, we've seen some of the large cloud customers now.

Speaker Change: There is sort of adding to their data center capacity and refreshes. We've seen enterprises also start with some of their modernization activities within that sort of market environment. Our product portfolio has done extremely well. So here in the third quarter. The Zen four portfolio between Genoa in Bergen.

Speaker Change: <unk> was very strong we saw at the beginning ramp of our Gen. Five turn capabilities and then we also actually saw pretty good demand even on Zen three or Milan family, just given the performance of <unk>.

Speaker Change: Price.

Speaker Change: Ratios there. So overall, we have a very strong top to bottom stack and we do see some strength in the overall server market, which adds to some of the AI opportunity that we have.

And the next question comes from the line of Ben Reitzes with Melius Research. Please proceed with your question.

Speaker Change: Yes.

Ben Reitzes: If I could stick to the pattern of two I wanted to follow up a little bit on servers.

Ben Reitzes: Thanks for the question.

Ben Reitzes: Going into next year.

Ben Reitzes: It seems like you're poised for more share gains and I was just wondering.

Ben Reitzes: There is a perception that.

Ben Reitzes: Gpus are cannibalizing the servers, but what are you seeing specifically in Turin.

Ben Reitzes: Is it with this momentum that you are talking about is it the right CPU for GPU.

Ben Reitzes: Our hyperscale or some particular liking. The fact, you can consolidate and create more room for a.

Ben Reitzes: Hi gear.

Speaker Change: What is the particular catalyst.

Speaker Change: That youre seeing out there with this upgrade thanks.

Speaker Change: Sure Ben So I think when I look at turn and the environment going into 2025 turn is actually very well optimized for sort of the broad set of server workloads are traditional CPU workloads, including both scale up and scale out workloads, So I think that.

Speaker Change: Is is very positive we believe that there will be strong AI <unk>.

Speaker Change: Content on Cpus and that helps turn as well. It's also an important piece of the head node of any GPU configuration. So overall I think those are all.

Speaker Change: Good catalyst for us and primarily we're at this point, where we're expanding the workloads in general as we are working with our largest cloud customers and we're making strong progress in enterprise, which has been very important for us in the enterprise sale takes longer.

Speaker Change: A significant amount of.

Speaker Change: <unk> work and just.

Speaker Change: Making sure that CIO are familiar with our offerings, but I think between R. R.

Speaker Change: Zen four five offerings now, we really have a very broad portfolio that satisfies.

Speaker Change: The vast majority of the.

Speaker Change: Traditional CPU workloads.

Speaker Change: Okay. Thanks, and then I just wanted to follow up on the PC market there is.

Speaker Change: You guys keep outperforming but theres just general concerns that.

Speaker Change: Of consumer weakness and I was just wondering what youre seeing in the <unk>.

Speaker Change: Is there a risk of.

Speaker Change: More than seasonal decline in the <unk>.

Do you feel like things will keep going unabated.

Speaker Change: PC market for you guys, particularly.

Speaker Change: Well, we see a few things in the PC market. So our business tends to be more consumer weighted so the second half of the year is usually stronger than the first half of the year and this year. That's added to the fact that we have a couple of product launches. So we launched our desktop products.

Speaker Change: For <unk>, five and our Ryzen 9000 series and we also launched our AIP next generation Ryzen AI 300 products. So I think the combination of those two have given us let's call. It a stronger then.

Speaker Change: The normal second half of the year I would expect there will be seasonality going into the first half.

That's typical in our business I think the main point is.

Speaker Change: This is the strongest PC portfolio we've had.

Speaker Change: Sort of in.

Speaker Change: In our in our history, I think across desktop and notebook and as we go into 2025 I think there's generally some optimism about the the PC market, let's call. It may be growing mid single digits and within that.

Speaker Change: We have the IPC catalyst as well as some of the Windows 10 of sort.

Speaker Change: End of support coming in 2025 as catalysts. So I think we feel good about the PC market in 2025, but we would expect some level of seasonality going into the first half of the year.

Speaker Change: And the next question comes from the line of Joshua <unk> with TD Cowen <unk> Company. Please proceed with your question.

Speaker Change: Hey, guys. Thanks for taking my question I'll keep it to one since I'm new here.

On the datacenter GPU side it.

Speaker Change: I realize everyone wants new customer announcements in 2025 guidance, but we're you know we're not going to get that certainly not today.

Speaker Change: Maybe you could speak to how much of a runway you think exists.

Speaker Change: At existing customers and how much of a catalyst and might be 25, exon cdna, three and then $3 55, and the new architecture can be to growing revenue and workload breath.

Speaker Change: Internally and externally at these existing customers as we think about growth into next year of the data center GPU side. Thank you.

Speaker Change: Yes sure Joshua Thanks for the question so.

Speaker Change: Well, maybe let me start again with this notion of we're very pleased with the progress that we've made in the datacenter GPU business I mean, if you think about when we started the year we were.

Speaker Change: We're just launching <unk> 300, we had talked about perhaps $2 billion of revenue in 2024 and as we've gone through the last few quarters. What we've done is we've successfully completed a number of customer milestones and those customer milestones include things like.

Speaker Change: Ensuring that we are at scale in data centers meeting all of the.

Speaker Change: The reliability requirements and so on and so forth as well as optimizing on specific workloads and ensuring that we have very very performance.

Speaker Change: The box performance. So I think we have gained a lot of confidence over the last couple of quarters, just seeing how the customers have ramped.

Speaker Change: Everyone would like it to go faster, we think is actually going really well and being able to talk about exceeding $5 billion of revenue in 2024, I think we feel really good about that.

Speaker Change: Going into 2025.

Speaker Change: We feel great about the market the market continues to be the place where there is a significant capex investments, we feel great about our product portfolio. It is getting stronger.

Speaker Change: With everything that we've learned off of the 300 ramp and then in particular on the software side.

Speaker Change: We have greatly increased.

Speaker Change: Increased our customer support customer engagements out of box performance open source ecosystem all of those components that are necessary to ensure that customers can run.

Speaker Change: At scale at performance a great.

Speaker Change: So all of those together I think we have a good opportunity to grow at our current customers with the.

Speaker Change: A number of workloads you heard meadow talking at our events about <unk>.

Speaker Change: Spending from inference on their large language.

Speaker Change: Models with with one with $3 one two some training workloads. Microsoft has also been a very very great.

Speaker Change: A great partner with that and then you should assume that we're working with all of the large customers out there and many of them are.

Speaker Change: Very.

Speaker Change: Deep engagements with us to continue to optimize their software to our to our hardware. So those are the opportunities in front of us.

Speaker Change: Thank you and congrats on the amazing decade at AMD.

Speaker Change: Thank you.

Speaker Change: And the next question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.

Timothy Arcuri: Hi, Thanks, a lot I had a quick one and then a more you know.

Timothy Arcuri: That's the question. So first one is I wanted to ask about the September actuals for datacenter GPU. It seems like it was in the $1 five range and that would put December and kind of the $2 billion range is that about right.

Speaker Change: So it's a pretty granular question Timothy but maybe.

Speaker Change: Maybe let me help you with this.

Speaker Change: We actually did better in the datacenter GPU business relative to.

Speaker Change: Our initial expectations. So you would imagine that.

Speaker Change: The business was actually greater than $1 5 billion and we're actually seeing now are.

Speaker Change: Our GPU business really approaching the scale of our CPU business.

Speaker Change: Great and then just kind of more broadly on the shape of next year I mean do you see that the market with these big customers, how do you see the shape of our.

Speaker Change: Revenue off of that to Q4.

Speaker Change: You know number could you continue to grow off of that level or do you see some risk maybe of a pause next year and I ask because my 355 is dropping into the existing infrastructure and I think you did say youll have a liquid cooled option, but.

Speaker Change: You do hear about some customers wanting rack scale. So I wonder if you worry a bit about there could be a pause before you get to rack scale in 2026.

Speaker Change: Yeah, I guess I would put it like this I mean look this business is.

Speaker Change: There's a lot of activity going on and we're spending time with customers as they're building out their data centers some preferred.

Speaker Change: Eric Wold environments liquid cooled environments somewhat rack scale. Some are perfectly happy to go into their existing data center infrastructure. So there are lots of different variance.

Speaker Change: What I would say about 2025 is we feel very good about the growth opportunities.

Speaker Change: I'd say that it might be lumpy in general these are large customer acquisitions and.

Speaker Change: It's not always predictable exactly which quarters you would expect the significant build out but I think overall, we feel good about the trajectory into 2025.

Speaker Change: That's helpful.

Speaker Change: And the next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

Speaker Change: Great. Thank you I.

Joe Moore: I Wonder if you could talk about.

The $5 billion of AI revenue, how that breaks down between training and inference, if youre able to assess that and just I know you sort of start off with most of the traction and influence, but you've seen some traction on the training side can you just talk about what that split looks like going forward as well.

Lisa Su: Sure Joe So.

Speaker Change: Certainly from the <unk> 5 billion that we're talking about the early traction has been primarily with inference just given the strength of the product portfolio 300 is like very very well optimized for inference, given the memory of capacity in memory bandwidth capabilities, but we have had.

Lisa Su: Some.

Lisa Su: Training adoption and we expect that that will continue to grow as we go through the next few quarters and so as we let's call. It fast forward a year I would say, we would have a fairly balanced portfolio between training and inference.

Speaker Change: Great. Thank you.

Speaker Change: And the next question comes from the line of Vivek Arya with Bank of America Securities. Please proceed with your question.

Vivek Arya: Alright, Thanks for taking my questions I had two so Lisa for the first one how do you address this.

Vivek Arya: Our argument that M&A is off to a great start but spec wise.

<unk> kind of one year behind the industry leader right.

Vivek Arya: Shipping something comparable to hopper, while they are starting to ship Blackwell next year. When you were at 350, there would be on micro ultra or Reuben. So how do you see AMD closing that gap and can you really gain share until that gap has closed.

Speaker Change: Yeah, Yeah, Vivek I actually don't see that so no.

Maybe let me state it in.

Speaker Change: And another way I think 300, when we launched it was.

Speaker Change: Behind <unk> hundred eight <unk> hundred was in the market for a much longer.

Speaker Change: <unk> time.

Speaker Change: We have.

Our accelerated roadmap actually closed a good part of that gap I think <unk> hundred 25 is a great product, it's going to compete very well with <unk> hundred and the $3 50 series will compete very well with Blackwell in the overarching view of the world.

Speaker Change: Frankly, the mark.

Speaker Change: The market continues to be constrained.

Speaker Change: Particularly in the newer.

Speaker Change: Generations. It takes a long time to go from lets call. It shifting your first samples.

Speaker Change: Actually ramping in volume production workloads, and I think one of the advantages that we have with the.

Speaker Change: With our portfolio is that from a data center retrofit standpoint, it's actually a much easier.

Speaker Change: Ramp just the infrastructure is the same so look there are lots of opportunities across.

Speaker Change: The set of AI workloads, we think this roadmap is actually strengthening over time and that's the feedback that we're getting from our customers.

Speaker Change: Okay.

Speaker Change: For my follow up Lisa back to the question on the PC market. So it was up or the client was up 26% sequentially I think you're guiding to some growth in Q4 as.

Speaker Change: How do you see the state of the channel and I ask that just because.

Speaker Change: So through in Q3 was not that great and I think until have guided down Q3 to be flat or down. So just how much of the growth that youre seeing is because of asps fees. How much of this is units and as you look out to 2025 do you think the ESP.

Speaker Change: The strength that we have seen this year can come back mix benefits continue for you in 25 or so.

Speaker Change: Yeah, Vivek the way I would say it is our client business has.

Speaker Change: A few factors that may be slightly different from the overall market. So let me start with our desktop channel I think our share is very high in the desktop channel.

Speaker Change: We've done very well there. So we saw strength across that portfolio in Q3, we actually saw some of our higher sell through so was the strong sell through quarter end, obviously it shows in the revenue results.

Speaker Change: On the on the notebook standpoint, our business tends to be more heavily consumer weighted and so that is more of a second half story.

Speaker Change: There is good momentum around <unk> I mean, we've looked at some of the activation rates of our newest horizon AI 300 processors and the activation rates are good it's still very early in the IPC cycle, but we are seeing.

Speaker Change: Some good momentum there so.

Speaker Change: I think we will see both units up in.

Speaker Change: The asps will depend a little bit on the mix between consumer and enterprise and desktop and notebooks.

Speaker Change: But my earlier comments about the client segment I think it is an opportunity for US we are underrepresented in the client segment.

Speaker Change: And we see an opportunity to grow both in consumer as well as enterprise.

Speaker Change: And the next question comes from the line of Harlan sur with Jpmorgan. Please proceed with your question.

Good afternoon. Thanks for taking my question, we saw on your core.

Speaker Change: You did start to see recovery in enterprise last quarter. It was broad base across many verticals you've got you've also got a growing share dynamic blue alright, and sounds like that trend continued in the September quarter.

You may continue.

Speaker Change: Continued follow through in terms of quarter on quarter growth this quarter for enterprise and then maybe what sort of enterprise in general cloud demand trends are you seeing out of China.

Speaker Change: Sure. So harlan thanks for the question, we did see positive growth momentum here in the third quarter in enterprise, we are getting broader adoption.

Speaker Change: Seeing that growth both in on Prem deployments as well as cloud third party deployments and so we're very happy with sort of the adoption of our cloud instances. When people are doing migrations are migrating from on prem to cloud, they're migrating to AMD or they're migrating from older cloud instances to newer cloud instances we're seeing.

Speaker Change: Gracious to AMD, So I think that that helps us in both the enterprise segment as well as the cloud segment as we go forward into the fourth quarter I think we are expecting.

Speaker Change: Another quarter of growth on a sequential basis for our server business and strength in both enterprise and cloud.

Speaker Change: And I think.

Speaker Change: As we think about our opportunities going forward.

The enterprise business is a place where we have been underrepresented I think our portfolio has strengthened so the platforms that are being offered by the Oems have broadened.

Not.

Speaker Change: Not just <unk>.

Speaker Change: <unk> four but also with Zen five capability.

Speaker Change: Portfolio launch and so I think those are opportunities for us in 2025.

Speaker Change: Yes on your China question.

Speaker Change: We are.

Speaker Change: Underrepresented in China market in the service CPU side, So as Lisa said, that's another opportunity for us to continue to gain share.

Speaker Change: Perfect. Thank you.

Speaker Change: And the next question comes from the line of Stacy Raskin with Bernstein Research. Please proceed with your question.

Stacy Raskin: Hi, guys. Thanks for taking my question.

Stacy Raskin: First one I wanted to go back to what you said about the size of the data center Gpus in accordance that it was approaching the size.

Speaker Change: Of your of your business would you put around water and the $1 7 billion, maybe a little more than.

Speaker Change: Number one is that why that is why it would imply a <unk> 5 billion for the year, you would actually be down.

Speaker Change: In Q4, so I, probably going to be five to $5 3 billion for the full year and flat sequentially.

Speaker Change: More than that to get growth. So I guess the question number one is that the size of the business and you're talking about in Q3 and is that kind of level of growth you're thinking into Q4 and kind.

Speaker Change: I forgot about that right.

Speaker Change: Alright, Stacy so first a couple of things you have to remember that in our data set our segment and we have some other revenue that is not Cpus and Gpus right. We have some <unk>.

Speaker Change: And other things but.

Speaker Change: The question earlier was was the revenue $1 5 million I said.

Speaker Change: That it was greater than one five so take that as a as a fundamental and then as we talked about we didn't guide an exact number for the datacenter GPU, we said exceed $5 billion and so you should assume that it exceeds $5 billion.

Speaker Change: Okay. Thanks.

Speaker Change: For my follow up you talked a little bit about Lumpiness next year.

Speaker Change: Is there any kind of seasonality or something that ought to be thinking about specifically into Q1 for data Center GPU. I know you have like the 300, I guess ramping into production of ethylene, but should I be thinking about the seasonal <unk>.

And all of that into Q1, given the general statement on Lumpiness.

Speaker Change: I wasn't implying something about seasonality of the datacenter GPU business I was implying more of that if you think about.

Speaker Change: The evolution of the business it depends quite a bit on.

Speaker Change: The specific number of customers. So these are large customers that drive.

Speaker Change: Deployments like for example, the third quarter was a bit higher than we expected that was driven by by some additional customer to customer demand and we may see that type of lumpiness. So that was what I was implying.

Speaker Change: And we'll have to see how things evolve as we get into 2025.

Speaker Change: We have time for two more questions. The next question comes from the line of harsh Kumar with Piper Sandler. Please proceed with your question.

Speaker Change: Yeah, Hey, Lisa first of all congratulations on your 10 year anniversary I just spoke to the 10 year chart. The stock was around $3. So a heck of a job here and also congratulations on $5 billion.

Speaker Change: <unk> revenues.

Speaker Change: So I wanted to ask the first question just wanted to get from investors all the time.

Speaker Change: In the coming year, let's say 2025, your key competitor will take most of the Tam of the AI market the GPU market rough count.

Speaker Change: In something like 50, 60 billion Youll get another five to 10 billion call. It. So the question is where do you think is the major hindrance, you've got chip level compatibility. So does it boil down to the fact that Youre just earlier and again <unk> been doing this just 12 months and a serious manner or is there still a rack level of disparity. If you could just help us think about.

Speaker Change: What the hindrances or to you, becoming a major player here.

Speaker Change: Yes sure harsh thanks for the question and for the comments.

Speaker Change: Maybe let me say I view them as opportunities.

You remember harsh I think you do.

Speaker Change: Our epic ramp from Zen ones, and twos and threes and four.

Speaker Change: We had extremely good product even back in the room days, but it does take time to ensure that there is trust built there is familiarity with.

Speaker Change: The product set there are some differences although.

Speaker Change: We're both Gpus there are some differences obviously in the software environment and people want to get comfortable with the workload Ram so from a ramp standpoint, I'm actually very positive on the.

The ramp rates, it's the fastest product ramp that ive seen overall and.

Speaker Change: My view is this is a multi generational journey, we've always said that we feel very good about the progress.

Speaker Change: Next year is going to be about expanding both customer set as well as workload and as we get into the 400 series, we think it's an exceptional product so.

Speaker Change: All in all the ramp is going well and we will continue to.

Speaker Change: <unk> and <unk>.

Speaker Change: The trust and the partnership of these large customers what I will say.

Speaker Change: <unk> customers are very very open to AMD and we see that everywhere we go.

Speaker Change: One is giving us a very fair shot at earning their business and that's what we intend to do.

Speaker Change: Very helpful. Lisa for my follow up and.

Speaker Change: And maybe gene can help out here, it's kind of well understood that your gross margin for mm $302 25 will be below corporate margins.

Speaker Change: Could you help us maybe think of some framework on how those gross margins for instinct might get to parity with your corporate business. I know you probably won't give us the revenue level or a timeframe, but maybe you could help us frame.

Speaker Change: Amanda that we could try and understand it.

Yeah, we are very pleased with our overall revenue ramp.

Speaker Change: Our data center GPU business and our team not only support the revenue ramp and continue to improve the gross margin overall it still below corporate average and when you think about it going into next year of course, our top priority right now is really focused on to address customer demand.

Speaker Change: And to provide the tcl benefited really.

Speaker Change: <unk> increased significantly our market presence and drive with substantial revenue growth.

Speaker Change: On the gross margin side once we continue to ramp the revenue. We do think we will have the opportunity to continue to improve gross margin.

Speaker Change: When you think about it that this is the data center business over the in the longer and longer term it tend to be better than corporate average it will take us.

Speaker Change: Some time to get there.

Speaker Change: When you look at that our data center segment performance.

Speaker Change: We more than doubled the revenue year over year, but we tripled our operating income year over year, So I think that Thats <unk>.

Speaker Change: How we are thinking about it <unk> to drive the long term growth and get market presence at the same time driver gross margin up.

Speaker Change: And our final question comes from the line of Thomas O'malley with Barclays. Please proceed with your question.

Thomas O'malley: Hey, guys. Thanks for letting me on I really appreciate it Lisa I just wanted to ask on mix.

300, <unk> into Q4, obviously youre launching through 25 series.

Thomas O'malley: Should we expect a significant contribution of the new products in Q4 or is this a situation in which its margin rate mirror and most of the impact into Q1.

Thomas O'malley: I guess, that's the first one and then the second one is just if you look into next year could you talk about where the end markets are in embedded for Xilinx you gave some color on com.

Thomas O'malley: <unk>.

Thomas O'malley: Just real there, but just where we're at in terms of starting kind of Q4 into Q1 are there any that are outperforming underperforming any color there would be helpful. Thanks for sneaking me in.

Speaker Change: So back to your first question in terms of the mix in Q4, we would expect.

Speaker Change: Majority of the mix will still be on <unk> 300, <unk> hundred 25, it is going into production late in the quarter and it will be more of a first quarter ramp.

Speaker Change: So that's that question and then in terms of the embedded business going into 2025.

Speaker Change: I'd say that the trends that we see are similar to what I mentioned for.

Speaker Change: The Q3 Q4 timing.

Speaker Change: We do expect that.

Speaker Change: Some of the markets will recover we're expecting that it will be a gradual recovery. So.

We see that and the strength that we see in some of the test and emulation segment, we see some strength.

Speaker Change: Certainly in aerospace and defense there was a little bit of recovery in automotive that we started to see.

Speaker Change: We're still waiting for comps and.

Speaker Change: In industrial so we'll get more color more visibility on that as we go through.

Speaker Change: Sort of the end of this year, but thats, what we see currently.

Speaker Change: Thanks Lisa.

Speaker Change: And at this time, we have reached the end of the question and answer session and I would like to turn the floor back over to Mitch haws for any closing comments.

Mitch Haws: That concludes today's call. Thanks to all of you for joining us today.

Speaker Change: Thank you that does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.

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Speaker Change #100: Greetings and welcome to the a M D third quarter 'twenty 'twenty four conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad and as a reminder, this conference is being recorded.

Speaker Change #101: It is now my pleasure to introduce to you Mitch Haws, Vice President of Investor Relations. Thank.

Speaker Change #102: Thank you Mitch you may begin.

Mitch Haws: Thank you and welcome to Amd's third quarter 2024 financial results Conference call.

Mitch Haws: Now you should have had the opportunity to review a copy of our earnings press release and the accompanying slides. If you have not had the chance to review. These materials 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. The full non-GAAP to GAAP reconciliations are available in today's press release and the slides posted on our website.

Speaker Change #103: Participants on today's conference 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 #103: This is a live call and will be replayed via webcast on our website.

Speaker Change #103: Before we begin I would like to note that force know Rod Executive Vice President and General manager datacenter business solutions.

Speaker Change #103: We'll attempt to UBS annual Technology conference on Tuesday December <unk> and.

Speaker Change #103: And Jane who will attend the Barclays Global TMT Conference on Thursday December 12.

Speaker Change #103: 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 #103: Please refer to the cautionary statement in our press release for more information on factors that could cause actual results to differ materially.

That I will hand, the call over to Lisa.

Lisa Su: Thank you Mitch and good afternoon to all those listening today.

Lisa Su: We delivered strong top and bottom line growth in the third quarter with revenue coming in above expectations, driven by record instinct and epic product sales and robust demand for our ryzen PC processors.

Lisa Su: Third quarter revenue increased 18% year over year to a record $6 8 billion, a significantly higher data center and client processor sales more than offset declines in gaming and embedded product sales.

Lisa Su: We expanded gross margin by two five percentage points and increased earnings per share by 31% year over year as datacenter segment revenue more than doubled.

Lisa Su: Turning to the segments.

Lisa Su: Data Center segment revenue increased 122% to a record $3 5 billion.

Lisa Su: We believe we gained server CPU share in the quarter as enterprise wins accelerated cloud providers expanded their use of epic Cpus across their infrastructure and we began the initial ramp of fifth Gen epic processors.

Lisa Su: <unk> has become the CPU of choice for the modern data center and our multi generation product portfolio delivers leadership performance and significant tcl advantages across virtually every enterprise and cloud workload.

Lisa Su: In cloud epic Cpus are deployed at scale to power many of the most important services, including office 365, Facebook teams Salesforce SAP zoom, Uber Netflix and many more.

Lisa Su: Metal alone has deployed more than one 5 million FX Cpus across their global data Center fleet to power their social media platforms.

Lisa Su: Cloud flares selected general X processors, with our industry, leading <unk> chip stacking technology to power. Their next generation servers that support twice as many requests per second and deliver 60% higher performance per watt versus their prior generation.

Lisa Su: Public cloud instances increased 20% year over year to more than 950, as Microsoft AWS and others launched or expanded their epic processor powered offerings in the quarter.

Lisa Su: Epic instance, adoption with enterprise customers also grew in the quarter highlighted by wins with Adobe Boeing Micron, Nestle slack Synopsys, Tata and others.

Lisa Su: In the enterprise sales grew by a strong double digit percentage year over year for the fifth straight quarter as epic CPU adoption accelerated and sell through momentum grew.

Lisa Su: Dell HPE, Lenovo and others have expanded the number of fourth Gen epic platforms. They offered by 50% in the last year. There are now more than 200 different epic solutions available that are optimized for a broad range of enterprise and edge workloads.

Lisa Su: We are building strong momentum with large enterprise customers highlighted in the third quarter by wins with large technology energy financial services and automotive companies in the quarter, including Airbus Daimler truck, Fedex, HSBC, Siemens Walgreens and others.

Lisa Su: We launched our next generation turn family earlier this month that delivers absolute performance and Tcl leadership across both enterprise scale up and cloud native scale out workloads.

Lisa Su: <unk> has already said more than 130 performance records for virtualization database AI. This is applications and energy efficiency with the full epic portfolio accounting for more than 500 performance World Records.

Lisa Su: More than 130, <unk> epic enterprise platforms are in development from all the leading server Oems and Oems. These new servers complement existing fourth gen epic platforms, providing a top to bottom stack of platforms optimized for a broad range of business applications.

Lisa Su: In cloud, Google and OCI announced plans to launch fifth Gen. Epic instances early next year, and we expect broad adoption with our largest cloud customers based on the significant performance and efficiency advantages of churn.

Lisa Su: As an example, oracle's turn instances delivered 35% higher performance per core, 33% faster memory speeds and double the networking bandwidth delivering a level of compute performance and capability that is only possible with epic Cpus.

Lisa Su: Looking ahead, we are very well positioned for continued growth and share gains based on the strength of our broad epic portfolio and the momentum we have built with cloud and enterprise customers.

Lisa Su: We also took a major step in the quarter to advance the X 86 architecture, forming an ecosystem advisory group with Intel several industry luminaries and the largest cloud PC and enterprise leaders to accelerate innovation by driving consistency and compatibility across both the X 86 instruction set and architectural.

Lisa Su: Interfaces and ensuring we evolve X 86, as a compute platform of choice for developers and customers.

Lisa Su: Turning to our data center AI business datacenter GPU revenue ramped as <unk> 300, ex adoption expanded with cloud Oems and AI customers.

Lisa Su: Microsoft and meta expanded their use of <unk> 300, ex accelerators to power their internal workloads in the quarter.

Lisa Su: Microsoft is now using <unk> 300 ex broadly for multiple co pilot services powered by the family of GPT for models.

Lisa Su: Meta announced they are optimized and broadly deployed mid 300 <unk> to power their inferencing infrastructure at scale, including using <unk> 300 ex exclusively to serve all live traffic for the most demanding Lama <unk> frontier model.

Lisa Su: We are also working closely with meta to expand their instinct deployments to other workloads, where <unk> offers tcl advantages including training.

Lisa Su: <unk> 300, <unk> public cloud instance, availability expanded in the quarter with Microsoft Oracle cloud and multiple AI specialized cloud providers now offering instinct instances with leadership performance and Tcl for many of the most widely used models.

Lisa Su: Instinct Cloud instance, adoption is strong with multiple startups and industry leaders adopting <unk> 300 instances to power their models and services, including our central AI fireworks AI Luma AI and data bricks.

Lisa Su: Okay.

Lisa Su: On the AI software front since launching <unk> 310 months ago, we have expanded functionality at every layer of the <unk> stack and increase the number of models that run out of the box on instinct accelerators to more than $1 million, enabling customers to get up and running as fast as possible with maximum out of the box performance.

Lisa Su: With the release of rock in the $6 two last quarter and <unk> 300, <unk> inference and performance has improved to four times since launch and trading performance has increased 80%.

We are working closely with a growing number of marquee cloud and enterprise customers to fine tune their specific inferencing workloads for <unk> 300, with many customers seeing 30% higher performance compared to competitive offerings and we continue to expand our work with the open source community broadening support for key frameworks like jacks.

Lisa Su: Libraries, like BLM and hardware agnostic compilers like Triton.

Lisa Su: At our advancing AI event earlier. This month, we were excited to be joined by the creators and leaders of some of the most important AI software technologies, who have added foundational support for rocket into Triton, The Lama stack SG Lang BLM and tensor flow and are working to enable broader open source Committee community.

Lisa Su: Work with existing platforms.

Lisa Su: With this growing support from the broader AI software ecosystem and the significant advances we have made in our software stack. Rocco now provides AI developers with a truly open software alternative that has been deployed and validated at scale.

Lisa Su: To expand our AI systems capabilities, we announced the definitive agreement to acquire <unk> systems, one of the leading providers of AI infrastructure to the world's largest hyperscale computing companies.

Lisa Su: The <unk> team complements our silicon and software capabilities with critical systems expertise needed to deliver a rack and cluster level solutions.

With <unk>, we will be able to design and validate our nexgen AI silicon and systems in parallel greatly accelerating time to deploy instinct accelerators at data center scale.

Lisa Su: Customer feedback has been very positive as the <unk> acquisition enables hyperscale customers to rapidly deploy AMD AI infrastructure at scale and provides Oems and Oems with optimized board and module designs for a wide range of differentiated enterprise solutions.

Lisa Su: On the regulatory front, we made good progress as we recently passed the HSR waiting period required for U S approval, we remain on track to close the acquisition in the first half of 2025.

Lisa Su: As a reminder, we plan to divest <unk> industry, leading U S based datacenter infrastructure manufacturing business at the close of the transaction and are pleased that we have received significant interest from a number of parties to date.

Lisa Su: Looking ahead, we launched our Nexgen <unk> hundred 25 X GPU earlier this month that extends our memory capacity and bandwidth advantages and delivers up to 20% higher inferencing performance compared to <unk> 200, and competitive trading performance.

Lisa Su: Customer and partner interest for <unk> hundred 25 X as high production shipments are planned to start this quarter with widespread system availability from Dell HPE, Lenovo supermicro and others starting in the first quarter of 2025.

Longer term, we have successfully accelerated our product development pace to deliver an annual cadence of new instinct products.

Our Nexgen <unk> 350 series Silicon is looking very good and is on track to launch in the second half of 2025 with the largest generational increase in AI performance, we have ever delivered.

Lisa Su: Development on our 400 series based on the Cdna next architecture is also progressing very well towards a 2026 launch.

Lisa Su: Okay.

Lisa Su: We have built significant momentum across our data center AI business with deployments increasing across an expanding set of cloud enterprise and AI customers. As a result, we now expect datacenter GPU revenue to exceed $5 billion in 2024 up from $4 5 billion, we guided in July and our expectation of two <unk>.

Lisa Su: When we started the year.

Lisa Su: Turning to our client segment revenue was $1 9 billion, an increase of 29% year over year, driven by strong demand for our latest generation Zen five notebook and desktop processors.

Lisa Su: Desktop channel sales grew by a significant double digit percentage led by the launch of our Ryzen 9000 series processors that deliver leadership productivity gaming and content creation performance.

Lisa Su: We are seeing strength across our ryzen desktop portfolio and are on track to launch our next Gen. Ryzen 9000 extra <unk> processors in November with leadership gaming performance.

In mobile Ryzen, AI 300 series sales ramped significantly from the prior quarter as Acer HP, Lenovo, a sushi and others announced new consumer and commercial notebooks with leadership compute and AI performance.

Lisa Su: We made good progress expanding our presence in the commercial PC market in the quarter closing multiple large deals with Astrazeneca Bayer.

Lisa Su: We made good progress expanding our presence in the commercial PC market in the quarter closing multiple large deals with Astrazeneca Bayer.

Lisa Su: Mazda shell Volkswagen and other enterprise customers.

Lisa Su: We also launched our ryzen AI Pro 300 series family. The first Cpus with Enterprise class security Manageability and AI capabilities for Copilot plus Pcs.

Lisa Su: HP and Lenovo are on track to more than triple the number of ryzen AI pro platforms. They offer in 2024, and we expect to have more than 100 ryzen pro commercial platforms in market next year positioning us well for share gains as businesses refresh the hundreds of millions of Windows 10, Pcs that will no longer receive.

Lisa Su: Croissant technical support starting in 2025.

Lisa Su: Now turning to our gaming segment revenue declined 69% year over year to $462 million.

Lisa Su: Semi custom sales declined as Microsoft and Sony reduced channel inventory.

Lisa Su: Sony announced the PS five pro with significant increases in graphics, and Ray tracing performance and AI, driven upscaling, featuring our new AMD semi custom Soc that extends our multi generational partnership.

Lisa Su: And gaming graphics revenue declined year over year as we prepare for a transition to our Nextgen Radeon Gpus based on our DNA for architecture.

Lisa Su: In addition to a strong increase in gaming performance rdna, four deliver significantly higher rate rates in performance and adds new AI capabilities. We are on track to launch the first rdna for Gpus in early 2025.

Turning to our embedded segment third quarter revenue decreased 25% year over year to $927 million.

Lisa Su: Embedded demand continues to recover and gradually led by strength in test and emulation offset by ongoing softness in the industrial market.

Lisa Su: Momentum continues building for our differentiated Versal family of adaptive Soc fees led by strong demand for our Versal premium VP $19, two which is the world's largest adaptive Soc an FPGA that is power and multiple platforms for all three of the largest EDA vendors.

Lisa Su: Our virtual portfolio is also being adopted broadly across multiple aerospace customers. As one example space <unk> recently launched their latest generation broadband satellites powered by Versal AI core adaptive Soc.

To build on this momentum we taped out Telluride last quarter. The first product in our second Gen vessel family that delivers up to <unk> more compute and enables AI application acceleration on a single chip.

Lisa Su: Design win momentum is very strong across our portfolio tracking to grow more than 20% year over year in 2024, and positioning us well to grow our embedded business faster than the overall market in the coming years.

Lisa Su: In summary, the business accelerated in the third quarter, and we expect strong demand for our instinct epic and ryzen processors to result in another quarter of significant year over year growth.

Lisa Su: Taking a step back this month marks my 10th anniversary as <unk> CEO.

Lisa Su: In the last 10 years, we have successfully completed multiple arcs first by turning the company around and setting the solid financial and operational foundation required for sustained growth.

Lisa Su: And then by transforming AMD into the high performance and adaptive computing leader.

Lisa Su: While I'm incredibly proud of what we've accomplished I'm, even more excited about the unprecedented growth opportunities in front of us.

Lisa Su: Looking out over the next several years, we see significant growth opportunities across our data center client and embedded businesses driven by the nearly insatiable demand for more compute.

Lisa Su: Each of these opportunities is amplified exponentially by the rapid adoption of AI, which is enabling new experiences that will make high performance computing and even more essential part of our daily lives.

In the data center alone, we expect the AI accelerator Tam will grow at more than 60% annually to $500 billion in 2028.

Lisa Su: To put that in context. This is roughly equivalent to annual sales for the entire semiconductor industry in 2023.

Lisa Su: Beyond the data center, we are adding leadership AI capabilities across our product portfolio and partnering deeply with a broad ecosystem of partners to deliver differentiated AI solutions at scale.

Lisa Su: This is an incredibly exciting time for AMD as the breadth of our technology and product portfolios combined with our deep customer relationships and diversity of markets. We address provide us with a unique opportunity as we execute our next arc and make AMD. The end to end AI leader now.

Speaker Change #104: Now I'd like to turn the call over to Jim to provide some additional color on our third quarter results Jean.

Jim: Thank you Lisa and good afternoon, everyone I'll start with the review of our financial results and then provide our current outlook for the fourth quarter of fiscal 2024.

Jim: We're very pleased with our strong third quarter financial results.

Jim: Year over year basis, datacenter segment revenue more than doubled and clay on the segment revenue grew 29%.

Jim: We expanded gross margin by 250 basis points and they drove earnings per share growth of 31%.

Jim: For the third quarter of 2024 revenue was six 8 billion up 18% year over year and the revenue as revenue growth in our datacenter and cloud segment was partially offset by lower revenue in our gaming and embedded in this segment.

Jim: Revenue increased 17% sequentially, primarily driven by growth in our data center and client segment.

Jim: Gross margin was 54% up 200, and a 50 basis point year over year, primarily driven by higher datacenter segment revenue.

Operating expenses were 196 billion, an increase of over 15% year over year as we continue to invest in R&D and go to market activities.

Jim: Operating income was $1 7 billion, representing a 25% operating margin.

Jim: Taxes interest expense and other was 211 million and diluted earning per share was <unk> 92, an increase of 431% year over year and a 33% sequentially.

Jim: Now turning to our reportable segments.

Jim: Starting with the datacenter datacenter delivered record quarterly segment had revenue of $3 5 billion up one countries and the 22% nearly a 2 billion increase year over year, and an increase of 25% sequentially.

Jim: Growth in revenue was led primarily by the strong ramp of AMD instinct, Gpus shipment and the growth of E. M D at Pecos CPO sales.

Jim: The data center segment accounted for 52% of total revenue in the third quarter.

Jim: Data Center segment operating income was one BV at 29% of revenue compared to $300 6 million or 19% a year ago.

Jim: Data Center segment operating income more than tripled compared to the prior year driven by higher revenue and operating leverage.

Jim: <unk> segment revenue was $1 9 billion up 29% year over year, and 26% sequentially driven primarily by strong demand for our Zen five AMD ryzen processors.

Jim: Client segment operating income was 276 million or 15% of revenue.

Jim: <unk> operating income all for one country, and a $40 million a year ago or 10% of revenue.

Jim: <unk> driven by higher revenue, partially offset by higher operating expenses.

Jim: Gaming segment revenue was $406 2 million down 69% at year over year, and 29% sequentially, primarily due to a decrease in semi customer revenue.

Jim: Gaming segment operating income was $10 million or 2% of revenue compared to 208 million or 14% a year ago.

Jim: In fact, our segmented revenue was 927 million down 25% a year over year as customers continue to normalize their inventory levels.

Revenue increased 8% sequentially as demand improved in several end markets.

Jim: Embedded segment operating income was 372 million or 40% of revenue compared to 600, and <unk>, all 49% a year ago.

Jim: Turning to the balance sheet and the cash flow during the quarter. We generated a 600 to end of 2008 media in cash from operations and free cash flow was 496 million.

Jim: Excluding certain non recurring payments related to acquisitions from operating cash flows our free cash flow was 600 and a $19 million.

Jim: Inventory increased sequentially by 383 million to $5 4 billion, primarily to support the continued ramp of the data center segment of products.

Jim: At the end of the quarter cash cash equivalents and the short term investment was $4 5 billion.

Jim: In the third quarter, we returned 250 <unk> cash to shareholders repurchasing one 8 million shares and that we have a $4 9 billion of authorization remaining.

Jim: Now turning to our fourth quarter of 'twenty 'twenty four outlook.

Jim: We expect revenue to be approximately seven 5 billion plus or minus 300 million.

Jim: 22% year over year, driven by strong growth in our data center and client segments more than offset decline in the gaming and the embedded segment.

Jim: Okay.

Jim: We expect revenue to be up approximately 10% sequentially driven primarily by growth across data center client in the gaming segment.

Jim: In addition, we expect our fourth quarter non-GAAP gross margin to be approximately 54%.

Jim: non-GAAP operating expenses to be approximately 2.05 BB&T noncash.

Jim: non-GAAP other net income to be 17 million non-GAAP effective tax rate to be 13% and the diluted share count is expected to be approximately $1 64 billion shares.

Jim: In closing, we're pleased with our strong execution in the third quarter, we delivered record revenue along with the strong year over year expansion in gross margin and earnings per share growth.

Jim: Looking ahead, we are very well positioned to deliver another record quarter for revenue in the fourth quarter driven by continued momentum in our data center and client segments.

Jim: Importantly, we are making a strategic investment at the position of MD <unk> end to end AI infrastructure leader and to drive long term profitable growth with that our trying to back to <unk> for the Q&A session.

Speaker Change #105: Thank you Jean John let's pull the audience for questions.