Q3 2025 Advanced Micro Devices Inc Earnings Call

Speaker #1: Greetings and welcome to the AMD Third Quarter 2025 conference call . At this time , all participants are in a listen only mode .

Speaker #1: A question and answer session will follow the formal presentation . If anyone should require operator assistance , please press Star Zero on your telephone keypad .

Speaker #1: As a reminder , this conference call is being recorded . It is now my pleasure to introduce to you , Matt Ramsay VP Financial Strategy and Investor Relations .

Speaker #1: Thank you , Matt . You may begin .

Speaker #2: Thank you and welcome to AMD's third quarter 2020 financial Results conference call . By now , you should have had the opportunity to review a copy of our earnings press release and the accompanying slides .

Speaker #2: If you have not had the opportunity to review these materials , they can be found on the Investor Relations page of AMD . Com .

Speaker #2: 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 #2: Participants in today's conference call are Doctor Lisa Su , our chair and CEO , and Jean Hu , our executive Vice President , CFO and treasurer .

Speaker #2: This is a live call and will be replayed via webcast on our website . Before we begin the call , I would like to note that Doctor Lisa Su , along with members of AMD's executive team , will present our long term financial strategy and our financial Analyst Day next Tuesday , November 11th in New York .

Speaker #2: Doctor Lisa Su will present at the UBS Global Technology and AI conference on Wednesday , December 3rd . And finally , Jean Hu will present at the 23rd annual Barclays Global Technology Conference on Wednesday , December 10th .

Speaker #2: Today's discussion contains forward looking statements based on our current beliefs , assumptions and expectations . Speak only as of today and as such , involve risks and uncertainties that could cause results to differ material to differ materially from our current expectations .

Speaker #2: Please refer to the cautionary statement in our press release for more information on these factors that could cause actual results to differ materially .

Speaker #2: And with that , I will hand the call over to Lisa .

Speaker #3: Thank you , Matt , and good afternoon to all those listening today . We delivered an outstanding quarter with record revenue and profitability reflecting broad based demand across our data center .

Speaker #3: AI server and PC businesses . Revenue grew 36% year over year to 9.2 billion . Net income rose 31% and free cash flow more than tripled , led by record epic , Ryzen and Instinct processor sales .

Speaker #3: Our record third quarter performance marks a clear step up in our growth trajectory , as the combination of our expanding compute franchise and rapidly scaling data center AI business drives significant revenue and earnings growth .

Speaker #3: Turning to our segments . Data center segment revenue increased 22% year over year to a record 4.3 billion , led by the ramp of our instinct MI 350 series GPUs and server share gains .

Speaker #3: Server CPU revenue reached an all time high as adoption of fifth gen Epyc turn processors accelerated rapidly , accounting for nearly half of overall Epyc revenue in the quarter .

Speaker #3: Sales of our prior generation Epyc processors were also very robust in the quarter , reflecting their strong competitive positioning across a wide range of workloads .

Speaker #3: We expect cloud demand to remain very In as hyperscalers are significantly increasing their general purpose compute capacity as they scale their AI workloads .

Speaker #3: Many customers are now planning substantially larger CPU build outs over the coming quarters to support increased demands from AI . Serving as a powerful new catalyst for our server business .

Speaker #3: Turning to enterprise adoption . Epic Server sell through increased sharply year over year and sequentially , reflecting accelerating enterprise adoption . More than 175th gen Epic platforms are in market , from HPE , Dell , Lenovo , Supermicro and others .

Speaker #3: Our broadest portfolio to date with solutions optimized for virtually every enterprise workload . We closed large new wins in the quarter with leading fortune 500 technology , telecom , financial services , retail , streaming , social and automotive companies .

Speaker #3: As we expand our footprint across major verticals The performance . gains . Looking ahead , we remain on track to launch our next generation two nanometer Venice processors in 2026 .

Speaker #3: Venice Silicon is in the labs and performing very well , delivering substantial gains in performance , efficiency and compute density . Customer pull and engagement for Venice are the strongest we have seen , reflecting our competitive positioning and the growing demand for more data center compute .

Speaker #3: Multiple cloud OEM partners have already brought their first Venice platforms online , setting the stage for broad solution availability and cloud deployments . At launch .

Speaker #3: Turning to data center AI , our instinct GPU business continues to accelerate . Revenue grew year over year , driven by the sharp ramp of Mi3 50 series GPU sales and broader MI300 series deployments .

Speaker #3: Multiple MI3 50 series deployments are underway with large cloud and AI providers, with additional large-scale rollouts on track to ramp up over the coming quarters.

Speaker #3: Oracle became the first hyperscaler to publicly offer my 355 instances , delivering significantly higher performance for real time inference and multimodal training workloads on OCI zettascale Supercluster .

Speaker #3: Neil cloud providers Crusoe , DigitalOcean , Tensor Wave , Vultr and others also began ramping availability of their Mi3 50 series public cloud offerings in the quarter .

Speaker #3: MI300 series GPU deployments with AI developers also broadened in the quarter . IBM and Zephra will train multiple generations of future multimodal models on a large scale MI300x cluster and cohere is now using MI300x at OCI to train its command family of models .

Speaker #3: For inference , a number of new partners , including character , AI and Luma AI , are now running production workloads on MI300 series , demonstrating the performance and TCO advantages of our architecture for real time AI applications .

Speaker #3: We also made significant progress on the software front in the quarter . We launched ROCm seven , our most advanced and feature rich release to date , delivering up to 4.6 x higher inference and three x higher training performance compared to ROCm six ROCm seven .

Speaker #3: Also introduces seamless distributed inference , enhanced code portability across hardware and new enterprise tools that simplify the deployment and management of instinct solutions .

Speaker #3: Importantly , our open software strategy is resonating with developers hugging face Vilhelm Lange and others contributed directly to ROCm seven . As we make ROCm the open platform for AI development at scale .

Speaker #3: Looking ahead , our data center AI business is entering its next phase of growth , with customer momentum building rapidly ahead of the launch of our next gen mi 400 series accelerators and Helios ROCm scale solutions in 2026 , the mi 400 series combines a new compute engine with industry leading memory capacity and advanced networking capabilities to deliver a major leap in performance for the most demanding AI training and inference workloads .

Speaker #3: The MI 400 series brings together our silicon, software, and systems expertise to power Helios, our rack-scale AI platform designed to redefine performance and efficiency at data center scale.

Speaker #3: Helios integrates our Instinct mi 400 series GPUs . Venice Epic CPUs , and pensando NICs in a double wide rack solution optimized for the performance power , cooling and serviceability required for the next generation of AI infrastructure and supports Meta's new open rack wide standard development of both our mi 400 series GPUs and Helios Rack is progressing rapidly , supported by deep technical engagements across a growing set of hyperscalers , AI companies and OEM and ODM partners to enable large scale deployments next year .

Speaker #3: The ZT Systems team we acquired last year is playing a critical role in Helios development, leveraging their decades of experience building infrastructure for the world's largest cloud providers to ensure customers can deploy and scale Helios quickly within their environments.

Speaker #3: In addition , last week we completed the sale of the ZT manufacturing business to Samena and entered a strategic partnership that makes them our lead manufacturing partner for Helios .

Speaker #3: This collaboration will accelerate large customer deployments of our rack scale AI solutions on the customer front , we announced a comprehensive multi-year agreement with OpenAI to deploy six gigawatts of instant GPUs with the first gigawatt of mi 450 series accelerators scheduled to start coming online in the second half of 2026 .

Speaker #3: The partnership establishes AMD as a core compute provider for OpenAI , and underscores the strength of our hardware , software , and full stack solutions .

Speaker #3: Strategy moving forward , AMD and OpenAI will work even more closely on future hardware , software , networking , and system level roadmaps and technologies .

Speaker #3: OpenAI's decision to use AMD Instant platforms for its most sophisticated and complex AI workloads sends a clear signal that our instinct GPUs and ROCm open software stack deliver the performance and TCO required for the most demanding deployments .

Speaker #3: We expect this partnership will significantly accelerate our data center AI business, with the potential to generate well over $100 billion in revenue over the next few years.

Speaker #3: Oracle announced they will also be a lead launch partner for the mi 450 series , deploying tens of thousands of mi 450 GPUs across Oracle Cloud Infrastructure , beginning in 2026 and expanding through 2027 and beyond .

Speaker #3: Our instinct platforms are also gaining traction with sovereign AI and national supercomputing programs in the UAE . Cisco and G42 will deploy a large scale AI cluster powered by instinct MI250 X GPUs to support the nation's most advanced AI workloads in the US .

Speaker #3: We are partnering with the Department of Energy and Oak Ridge National Labs to build AI . The first AI factory dedicated to scientific discovery .

Speaker #3: Together with our industrial partners , OCI and HPE , powered by our instinct MI 350 series GPUs , Epyc CPUs and pensando networking , Linux AI will provide a secure , open platform for large scale training and distributed inference .

Speaker #3: When it comes online . In early 2026 , the US Department of Energy also selected our upcoming mi 430 X GPUs and Epyc CPUs to power discovery .

Speaker #3: The next flagship supercomputer at Oak Ridge . Designed to set the standard for AI driven scientific computing and extend us high performance computing leadership , our mi 430 X GPUs are designed specifically to power nation scale AI and supercomputing programs , extending our leadership , powering the world's most powerful computers to enable the next generation of scientific breakthroughs .

Speaker #3: In summary , our AI business is entering a new phase of growth and is on a clear trajectory towards tens of billions in annual revenue in 2027 , driven by our leadership skill solutions , expanding customer adoption , and an increasing number of large scale global deployments .

Speaker #3: I look forward to providing more details on our data center AI growth plans at our Financial Analyst Day next week. In the client and gaming segment, revenue increased 73% year over year to $4 billion.

Speaker #3: Our PC processor business is performing exceptionally well, with record quarterly sales. The strong demand environment and breadth of our leadership Ryzen portfolio are accelerating growth.

Speaker #3: Desktop CPU sales reached an all time high with record channel sell in and sell out , led by robust demand for our Ryzen 9000 processors , which deliver unmatched performance across gaming productivity and content creation .

Speaker #3: Applications . OEM sell through of Ryzen powered notebooks also increased sharply in the quarter , reflecting sustained end customer pull for premium gaming and commercial AMD PCs .

Speaker #3: Commercial momentum accelerated in the quarter , with Ryzen PC sell through up more than 30% year over year . As enterprise adoption grew sharply , driven by large wins , with fortune 500 companies across healthcare , financial services , manufacturing , automotive and pharmaceuticals .

Speaker #3: Looking ahead , we see significant opportunity to continue growing our client business faster than the overall PC market . Based on the strength of our portfolio , broader platform coverage and expanded go to market investments in gaming revenue , increased 181% year over year to 1.3 billion .

Speaker #3: Semicustom revenue increased as Sony and Microsoft prepare for the upcoming holiday sales period in gaming , graphics revenue and channel sellout grew significantly , driven by the performance per dollar leadership of our Radeon 9000 family FSR for our machine learning upscaling technology that boosts frame rates and creates more immersive visuals , saw rapid adoption .

Speaker #3: This quarter with the number of supported games doubling since launch to more than 85 . Turning to our embedded segment , revenue decreased 8% year over year to 857 million sequentially .

Speaker #3: Revenue and sell through increased as the demand environment strengthened across multiple markets , led by test and emulation , aerospace and defense , and industrial vision and healthcare .

Speaker #3: We expanded our embedded product portfolio with new solutions that extend our leadership across adaptive and x86 computing . We began shipping industry leading Versal Prime Series , Gen two adaptive SoCs to lead customers , delivered our first virtual RF development platform to support several next generation design wins and introduced the Ryzen Embedded 9000 series with industry leading performance per watt and latency for robotics .

Speaker #3: Edge computing , and smart factory applications . The design momentum remains very strong across our embedded portfolio . We are on track for a second straight year of record design wins already totaling more than $14 billion year to date , reflecting the growing adoption of our leadership products across a broad range of markets and expanding set of applications .

Speaker #3: In summary , our record third quarter results and strong fourth quarter outlook reflect the significant momentum building across our business , driven by sustained product leadership and disciplined execution .

Speaker #3: Our data center AI server and PC businesses are each entering , entering periods of strong growth led by an expanding Tam , accelerating adoption of our instinct platforms and Epic and Ryzen CPU share gains .

Speaker #3: The demand for compute has never been greater , as every major breakthrough in business , science and society now relies on access to more powerful , efficient and intelligent computing .

Speaker #3: These trends are driving unprecedented growth opportunities for AMD . I look forward to sharing more on our strategy , roadmaps , and long range financial targets at our financial analyst meeting next week .

Speaker #3: Now , I'll turn the call over to Gene to provide additional color on our third quarter results . Gene . Thank you .

Speaker #4: , Lisa , and good afternoon , everyone . I'll start with the review of our financial results . And then provide our outlook for the fourth quarter of fiscal 2025 .

Speaker #4: We're pleased with our strong third quarter financial results . We delivered record revenue of 9.2 billion , up 36% year over year , exceeding the high end of our guidance , reflecting strong momentum across our business .

Speaker #4: Our third quarter results do not include any revenue from shipments of the MI300 eight GPU products to China . Revenue increased 20% sequentially , driven by strong growth in the data center and client and gaming segment and modest growth in the embedded segment .

Speaker #4: Gross margin was 54% , up 40 basis points year over year , primarily driven by product mix , operating expenses were approximately 2.8 billion , an increase of 42% year over year .

Speaker #4: As we continue to invest aggressively in R&D to capitalize on significant AI opportunities and go to market activities for revenue growth , operating income was 2.2 billion , representing a 24% operating margin .

Speaker #4: Texas interest expense and other totaled 273 million for the third quarter of 2025 . Diluted earnings per share were $1.20 , compared to $0.92 a year ago .

Speaker #4: An increase of 30% year over year . Now , turning to our reportable segments . Starting with the data center datacenter segment , revenue was a record of 4.3 billion , up 22% year over year , primarily driven by the strong demand for fifth generation Epyc processors and instinct mi 350 series GPUs are sequential basis datacenter revenue , increased 34% , primarily driven by strong ramp of our AMD instinct MI 350 series GPUs .

Speaker #4: The data center segment operating income was 1.1 billion , or 25% of revenue , compared to 1 billion a year ago , or 29% of revenue , driven by higher revenue , partially offset by higher R&D investment to capitalize on significant AI opportunities , client and gaming segment revenue was record of 4 billion , up 73% year over year and 12% sequentially , driven by strong demand for the latest generation of client and graphics processors and stronger sales of console gaming products in the client business .

Speaker #4: Revenue was a record 2.8 billion , up 46% year over year and 10% sequentially , driven by record sales of our Ryzen processors and richer product mix .

Speaker #4: Gaming revenue rose to 1.3 billion , up 181% year over year and 16% sequentially , reflecting higher semi-custom revenue and strong demand for our Radeon GPUs .

Speaker #4: Client gaming segment operating income was 867 million , or 21% of revenue , compared to 288 million , or 12% , a year ago , driven by higher revenue , partially offset by increase in go to market investments to support our revenue growth .

Speaker #4: Embedded segment revenue was 857 million , down 8% year over year . Embedded was up 4% sequentially , as we saw certain end market demand strengthen in that segment .

Speaker #4: Operating income was 283 million , or 33% of revenue , compared to 372 million , or 40% , a year ago . The decline in operating income was primarily due to lower revenue and end market mix .

Speaker #4: Before I review the balance sheet and the cash flow as a reminder , we closed the sale of ZT system manufacturing business to seminar last week .

Speaker #4: The third quarter financial results of the ZT manufacturing business are reported separately in our financial statements . As discontinued operations , and I excluded from our non-GAAP financials .

Speaker #4: Turning to the balance sheet and cash flow during the quarter , we generated $1.8 billion in cash from operating activities of continuing operations and free cash flow was a record of 1.5 billion .

Speaker #4: We returned $89 million to shareholders through share repurchases, resulting in $1.3 billion in share repurchases for the first three quarters of 2025.

Speaker #4: Exiting the quarter , we have 9.4 billion authorization remaining under our share repurchase program . At the end of the quarter . Cash , cash equivalents and short term investments were 7.2 billion .

Speaker #4: Our total debt was 3.2 billion . Now turning to our fourth quarter 2025 outlook . Please note that our fourth quarter outlook does not include any revenue from AMD .

Speaker #4: Instinct MI300 eight shipment to China for the fourth quarter of 2025 . We expect revenue to be approximately 9.6 billion plus or minus 300 million .

Speaker #4: The midpoint of our guidance represents approximately 25% year over year revenue growth , driven by strong double digit growth in our data center and client and gaming segment .

Speaker #4: And the return to growth in our embedded segment . Sequentially , we expect revenue to grow by approximately 4% , driven by double digit growth in the data center segment .

Speaker #4: With a strong growth in server and continued ramp of our mi 350 series GPUs , a decline in our client gaming segment with client revenue increasing and gaming revenue down .

Speaker #4: Strong double digits , and double digit growth in our embedded segment . In addition , we expect fourth quarter non-GAAP gross margin to be approximately 54.5% , and we expect non-GAAP operating expenses to be approximately 2.8 billion .

Speaker #4: We expect net interest and other expenses to be a gain of approximately 37 million . We expect our non-GAAP effective , effective tax rate to be 13% .

Speaker #4: And diluted share count is expected to be approximately 1.65 billion shares . In closing , we executed very well , delivering record revenue for the first three quarters of the year .

Speaker #4: The strategic investment we are making positioned us well to capitalize on the expanding AI opportunities across all our end markets , driving sustainable long term revenue growth and earnings expansion for compelling shareholder value creation .

Speaker #4: With that , I'll turn it back to Matt for the Q&A session .

Speaker #5: Thank you very much , Jean . John , we can go ahead and pull the audience for questions now . Thank you .

Speaker #1: Thank you . 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 .

Speaker #1: A confirmation tone will indicate that your line is in the queue . You may 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 key's .

Speaker #1: We ask that you please limit yourself to one question and one follow up . Thank you . One moment while we pull for questions .

Speaker #1: And the first question comes from the line of Vivek Arya with Bank of America Securities . Please proceed with your question .

Speaker #6: Thank you for the question . I had a near-term and a medium term question for the near term . At least . I was hoping if you could give us some sense of the CPU , GPU mix in Q3 and Q4 and just tactically , how are you managing this transition from your MI 355 towards mi 400 in second half of next year ?

Speaker #6: Can you continue to grow in the first half of next year from these Q4 levels, or should we expect some kind of pause or digestion before customers get on board the MI 400 series?

Speaker #7: Sure . Vivek , thanks for the question . So a of comments . We had a very strong Q3 for the data center business .

Speaker #7: I think we saw a strong outperformance in both the server as well as the data center AI business , and reminder that that was without any MI300 sales .

Speaker #7: The mi 355 has ramped really nicely . We expected a sharp ramp into the third quarter , and that proceeded well . And as I mentioned , we've also seen some strengthening of the server CPU sales .

Speaker #7: And not just let's call it near-term , but we're seeing our customers are giving us some visibility in the next few quarters that they see elevated demand , which is which is positive going into the fourth quarter .

Speaker #7: Again , strong data center performance , you know , up double digits sequentially . And , you know , up in both server and data center AI .

Speaker #7: Again , on the strength of those businesses . And to your question , I mean , we're not guiding into 2026 yet .

Speaker #3: Obviously . But given you know , what we see today , you know , we see a very , you know , good demand environment into 2026 .

Speaker #3: So we would expect that MI 355 continue to ramp up in the first half of 26 . And then we mentioned , you know , MI 450 series comes online in the second half of 2026 .

Speaker #3: And we would expect a sharper ramp as we go into the second half of 2026 of our data center AI .

Speaker #8: Business . Got it .

Speaker #6: And if my follow up , you know , there is some industry debate , Lisa , about OpenAI's ability to kind of simultaneously engage with all three merchants and and the ASIC suppliers , just given the constraints around power and CapEx .

Speaker #6: And their existing kind of CSC partners and so forth . So how are you thinking about that ? Like what is your level of visibility in the initial engagement ?

Speaker #6: And then more importantly , how it kind of broadens out into into 27 ? Is there a way that one can model what the allocation would be , or just how should we think about the level of visibility in this very important customer ?

Speaker #6: Thank you .

Speaker #9: Yeah , absolutely . Vivek , look , you know , we're , you know , very obviously very excited about our relationship with OpenAI .

Speaker #9: It's a very significant relationship . You know , think about it as , you know , it's a pretty .

Speaker #3: Unique time for AI right now .

Speaker #8: There's just .

Speaker #3: So much compute demand . across all of the workloads . I think in our work with OpenAI , we are we are planning .

Speaker #3: , you know , multiple quarters out ensuring that , you know , the power is available , that the supply chain is available , you know , the the key point is the first gigawatt we will start deploying in the second half of 26 .

Speaker #3: And you know , that work is well underway . And we continue , you know , just given where lead times are and things like that .

Speaker #8: We are .

Speaker #3: Planning very closely with OpenAI as well .

Speaker #8: As the CSP partners.

Speaker #3: To ensure that .

Speaker #8: We all prepared with Helios so that we can deploy the the technology as as we stated . So I think overall , we're working very closely together .

Speaker #8: I think we have good visibility .

Speaker #3: Into the MI250 ramp and , you know , things are progressing very .

Speaker #10: Well .

Speaker #1: And the next question comes from the line of Thomas O'Malley with Barclays . Please proceed with your question .

Speaker #11: Good morning. Thanks for taking my question, and congrats on the good results. I had a Helios. Obviously, with the announcement at OCP, customer interaction has to be growing.

Speaker #11: Could you talk about into next year what your view is on discrete sales versus system sales ? When do you see that crossover kind of happening ?

Speaker #11: And just what initial responses have been from customers ? After getting a better look at it at the at the show ?

Speaker #3: Yeah , sure . Tom , thanks for the question . There's a lot of excitement around me . 450 In Helios , I think the the OCP reception was phenomenal .

Speaker #3: We had , you know , numerous , you know , customers and frankly , bringing their engineering teams to understand more about the system , more about how it's built , you know , there's always been some discussion about just how complex these rack scale systems are .

Speaker #3: And they certainly are . And , you know , we are very proud of the Helios design . I think it has , you know , all .

Speaker #3: of the features , functions , reliability , performance , power , performance that you would expect . I think the interest in my 450 in Helios has just expanded over the last number of weeks , certainly with some of the announcements that we've made with open AI and OCI , as well .

Speaker #10: As .

Speaker #3: The the OCP show with meta , I think overall , you know , from our perspective , I think things are going , you know , really well in both the development as well as .

Speaker #3: the the customer engagement there . So in terms .

Speaker #10: Of .

Speaker #3: Scale solutions , we would expect that .

Speaker #10: The .

Speaker #3: Early customers for mi 450 will really be around the rack .

Speaker #10: Scale solutions .

Speaker #3: We will .

Speaker #10: We have other form factors as well for the MI 450 series, but there's a lot of interest in the full rack-scale solution.

Speaker #11: Super helpful . And then as my follow up , it's a it's a broader question as well . And similar to kind of what Vivek asked .

Speaker #11: But if you look at the power requirements that are out there for some of the early announcements into next year , they're pretty substantial .

Speaker #11: And then you also have component issues that you're seeing across interconnected memory . Just from your perspective as an industry leader , where do you think that the constraint will be ?

Speaker #11: Will it come first with components not being available ? Or do you think that both data center footprint in terms of infrastructure and or power , is the gating factor to some of these deployments into next year , just as we really see some larger numbers start to get deployed .

Speaker #11: Thank you .

Speaker #3: Yeah , sure .

Speaker #10: Tom ,

Speaker #3: I think what you're pointing out is what we as an industry have to do together , the entire ecosystem has to plan together .

Speaker #3: And that is exactly what we're doing . So we're working with our customers on their power plans over the next . Actually , I would say two years .

Speaker #3: You know , from a silicon and a memory and a packaging and a component supply chain . We're working with our supply chain partners to make sure all of that capacity is available .

Speaker #3: I can tell you from our visibility , we feel very good that we have a a strong supply chain that is prepared to deliver , you know , sort of these these very significant growth rates .

Speaker #3: And , you know , large amounts of compute that is out there . And I think all of this is , you know , going to be tight .

Speaker #3: I think there is a you can see from some of the CapEx spending that there's a desire to put on more compute . And we're working closely together .

Speaker #3: I will say that , you know , the ecosystem is very I would say works very hard when there are these types of , you know , let's call it , you know , tightness out there .

Speaker #3: And so we also see things , you know , open up as we're working , you know , getting more power , getting more supply .

Speaker #3: All of those things . So the net net is I think we are well positioned to grow significantly as we transition into the second half of 26 into 27 , with the mi 450 and Helios .

Speaker #1: And the next question comes from the line of Joshua Buckhalter with DD Cowan . Please proceed with your question .

Speaker #12: Hey guys . Thank you for taking my question . Actually , I wanted to start on the CPU side . So , you know , you and your largest competitor in that space have talked about near term strength , supporting AI workloads , general purpose servers from Agentic .

Speaker #12: Maybe you could speak to the sustainability of these trends and they called out supply constraints . Are you seeing any of those in your supply supply chain ?

Speaker #12: And are we in a period where we should think about the CPU business on the on the data center side as being a seasonal , or should we expect normal seasonality in the first half of next year ?

Speaker #12: Thank you .

Speaker #3: Sure . Josh . So a couple of comments on the CPU server side . I think we've been watching this trend for the last couple of quarters .

Speaker #3: And you know , we started seeing , let's call it some positive signs in CPU demand . Actually a couple quarters ago . And what's happened , as we've gone through 2025 is now we see sort of a broadening of that CPU demand .

Speaker #3: So we we have a number of our large hyperscale clients are now forecasting significant CPU build into into 2026 . And so from that standpoint , I think it's a positive demand environment .

Speaker #3: And it is because AI is requiring quite a bit of , you know , general purpose compute . And that's great . It catches our cycle as we're ramping turn .

Speaker #3: So the turn ramp has gone . You know , extremely fast . And we see , you know , good pull for that product as well as , you know consistent strong demand for our general product line as well .

Speaker #3: So you know back to seasonality as we go into 2026 , I think we expect that the CPU demand environment into 2026 is going to be , let's call it positive .

Speaker #3: And so , you know , we'll we'll guide more as we get into the end of the year . But I would expect a positive demand environment for CPUs as we as we see this demand , I do feel like it's durable .

Speaker #3: It is not a short term thing . I think it is a a multi-quarter phenomenon , as we're seeing just much more demand as these AI workloads really turn into you have to do real work .

Speaker #13: So , Josh , on the supply side , we have supplies to support our growth and especially in 2026 , where prepared for the ramp .

Speaker #12: Got it . Thank you both . And for my follow up . You know , at least in your prepared remarks , you highlighted progress you guys have made on on ROCm seven , I know this has been an area of focus and , you know , can you maybe spend a minute or two talking about where you feel you're at competitively with ROCm ?

Speaker #12: You know , how wide is the breadth of support you're able to offer to the developer community and what areas do you still have work to do to to close any potential competitive gap ?

Speaker #12: Thank you .

Speaker #3: Yeah . Josh , thanks for the question . Look , we've made great progress with ROCm . ROCm seven is a significant step forward in terms of performance .

Speaker #3: And , you know , sort of all the frameworks that we support . It's been really , really important for us to get sort of day zero support of all the newest models and native support for all the newest frameworks .

Speaker #3: I would say , you know , most customers who are starting with AMD now have a a very , you know , very smooth experience as they're bringing on their workloads to AMD .

Speaker #3: You know , there's obviously always more work to do . We're continuing to augment the libraries . And , you know , the overall environment that we have , especially as we go to some of the newer workloads where you see , you know , training and inference really coming together with reinforcement learning .

Speaker #3: But overall , I think very strong progress with ROCm . And by the way , we're going to continue to invest . You know , in this area because it's so important to really make our customer development experience , as you smooth as we can .

Speaker #1: And the next question comes from the line of C.J. muse with Cantor Fitzgerald . Please proceed with your question .

Speaker #14: Yeah . Good afternoon . Thank you for taking the question . I guess first question is , do you think about the 355 to 400 transition and moving to full rack scale ?

Speaker #14: Is there a framework that we should be thinking about for gross margins throughout calendar 26 ?

Speaker #13: Yes . Thanks for the question . I think in general , as we said in the past , for our data center GPU business , the gross margin continued to improve .

Speaker #13: When we ramp a new generation of products, typically at the beginning of the ramp, you go through a transition period. Then, you will normalize the gross margin.

Speaker #13: We're not guiding 2026 , but our priority in data center GPU business is to really expand the top line revenue growth and gross margin dollars .

Speaker #13: And of course , at the same time , it will continue to drive gross margin percentage up to .

Speaker #14: Very helpful . And I guess maybe Lisa , to kind of probe kind of your growth expectations through 26 and beyond . And you talked about tens of billions of dollars in 27 .

Speaker #14: Can you kind of speak at a high level how you're thinking about open AI and other large customers and how we should be thinking about the breadth of your customer kind of penetration throughout calendar 2627 .

Speaker #14: Any help on that would be super. Thank you.

Speaker #3: Sure . CJ , and you know , we'll certainly address this topic in more detail at our Analyst Day next week . But let some maybe higher level points .

Speaker #3: Look I think we're really excited about our roadmap . I think we have seen great traction amongst the largest customers . The OpenAI relationship is is extremely important to us .

Speaker #3: And , you know , it's great to be able to talk at the multi gigawatt scale because I think that , you know , really is what we believe we can deliver to the marketplace .

Speaker #3: But there are , you know , numerous other customers that we are in deep engagements with . We me give you about OCI .

Speaker #3: We also announced a couple of systems with the Department of Energy that are significant systems . And we have many other engagements . So the way you should think about it is , you know , there are multiple customers that we would expect to have , let's call it very significant scale in the MI .

Speaker #3: You know , 450 generation . And that's sort of the breadth of the the , you know , the customer engagements that we've built .

Speaker #3: And it's also how we're dimensioning the supply chain to ensure that we can supply , you know , certainly our open AI partnership as well as the numerous other partnerships that are well underway .

Speaker #1: And the next question comes from the line of Stacy Rasgon with Bernstein Research. Please proceed with your question.

Speaker #15: Hi , guys . Thanks for taking my questions . My first one for Data Center in the quarter . What grew more year over year on a dollar on a percentage basis ?

Speaker #15: The servers or the GPUs ? So I think .

Speaker #3: Yeah , Stacy , I think our commentary was , you know , data center , you grew nicely year over year in both of the the areas , both for servers as well as data .

Speaker #3: Data center , AI .

Speaker #15: Yeah . But could you I mean , just directionally did one which one grew more than the other ? I'm not even asking for numbers .

Speaker #15: Just directionally .

Speaker #13: Directionally there . Similar , but service a little bit better .

Speaker #15: Service a little bit better. Okay. And then on the guidance, so you said that servers, I mean data center overall up double digits.

Speaker #15: You said servers up strong double digits . What does that mean . Is that like like more than 20% or like like how do I how do I think about what you mean by strong double digits ?

Speaker #15: Again , I'm trying to like I mean , like for the GPUs for the year . Like do you think you're I mean , you were saying roughly like 6.5 billion or something last quarter for the year .

Speaker #15: Do you think it's still in that range ? It kind of feels like you're still there .

Speaker #13: Stacy . Here's what we guided . We guided sequentially . Data center will be up double digits . And we said server will go up strongly .

Speaker #13: And at the same time we also said that MI250 also going to ramp . So we did not I don't think what you just mentioned was what we guided .

Speaker #15: Okay . So I mean , if you say servers are up strongly , does that mean they're up more than the than the than the instinct because you didn't really make that commentary on instinct ?

Speaker #3: No . Look , Stacy , let me let me say it . So data center sequentially double digit percentage , both server and data center AI are going to be up as well .

Speaker #3: And you know , from the standpoint of , you know , where they are , I think we're we're pleased with how both of them are performing the strong double digit percentage comment , perhaps was applying to the year over year commentary .

Speaker #1: Thank you. And the next question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.

Speaker #16: Thanks a lot , Lisa . I know it's only been a month since you announced this deal with OpenAI , but can you give us maybe some anecdotes of how this has influenced your position in the market with other customers , like are you engaged with customers that you wouldn't have been engaged with if you hadn't done this deal ?

Speaker #16: That's the first part of the question . And then the second part relates to a prior question , which is that it looks like they could be something like half of your data center GPU revenue in the 2027 , 2028 timeframe .

Speaker #16: So how much risk in your mind is there around that single customer for you ?

Speaker #3: Sure . Tim . So let me say a couple of things . First of all , the OpenAI deal has been in the works for quite some time .

Speaker #3: We're happy to be able to talk about it broadly and also talk about the scale of the deployment and the scale of the engagement being , you know , multi-year , multi gigawatt .

Speaker #3: I think all those things were very positive . We've had a number of other engagements as well . I think over the last , you know , if you were asked to ask specifically over the last month , I would say that it's it's been a number of factors .

Speaker #3: I think the OpenAI deal was one of them . I think having , you know , being able to show the Helios rack in full force at open Compute was also a very important milestone because people could see the engineering and , you know , sort of the capabilities of the Helios rack .

Speaker #3: And if you're asking whether we've seen a increase of interest or an acceleration of interest , I think the answer is yes . I think customers are broadly engaged and perhaps broadly engaged at higher scale , which is a good thing .

Speaker #3: And then from the standpoint of customer concentration , I think , you know , a very key foundation for us in this business is to have a broad set of customers .

Speaker #3: We've always been engaged with a number of customers . I think we're dimensioning the supply chain in such a way that we would have ample supply to have multiple customers at similar scale .

Speaker #3: As we go into the 2728 timeframe . And that's certainly the .

Speaker #17: Goal .

Speaker #1: Thank you . And the next question comes from the line of Aaron Rakers with Wells Fargo . Please proceed with your . question .

Speaker #18: Yeah. Thanks for taking the questions. I'm curious about the server strength that you're seeing, if there's a way to unpack how we think about unit growth versus expansion as we move through the Turin product cycle.

Speaker #18: Yeah . Thanks for taking the questions . I'm curious on the server strength that you're seeing , if there's a way to unpack how we think about unit growth versus expansion as we move through the Turin ASP

Speaker #18: And how do you guys just kind of think about that going forward ?

Speaker #3: Yeah . So , Aaron , on the server CPU side , Turin certainly is more content . So we see , you know , ASPs grow as as Turin ramps .

Speaker #3: But I also mentioned in the prepared remarks that , we're actually seeing a very good mix of Genoa , you know , still there .

Speaker #3: So, Turin is ramping up very.

Speaker #17: Quickly .

Speaker #3: But we are also seeing , you know , general demand , continue . Well .

Speaker #17: As .

Speaker #3: The hyperscalers are not able to move everything to the latest generation immediately . So from our standpoint , I think it's broad based CPU demand across a number of different .

Speaker #17: Workloads .

Speaker #3: seems .

Speaker #17: Like .

Speaker #3: You know , from our customer conversations , the workloads are broadly due to , you know , the fact that AI workloads are spawning more traditional compute .

Speaker #3: So , you know , more build out is necessary . I think going forward , one of the things that we see is there is more of a desire for the latest generation .

Speaker #3: And so , you know , as much as we're happy with how Turin is ramping , we're seeing actually a strong pull on Venice and a lot of early engagement in Venice , which kind of says a lot about , you know , kind of the importance of general purpose compute .

Speaker #3: You know , at this point in time .

Speaker #18: Yeah . Thanks . As a quick follow up , I'm curious and not to steal , maybe , you know , the discussion from next week , but , you know , Lisa , you've been very consistent .

Speaker #18: Like , you know , 500 billion of total AI silicon Tam opportunity . And obviously progressing above that . I'm curious as we think about these large megawatt kind of deployments , how you think about , you know , the updated views on that AI silicon Tam , as we look forward ?

Speaker #3: Well , Aaron , as you said , not to not to take too much away from what we're going to talk about next week .

Speaker #3: Look , we're we're going to give you a full picture of how we see the market next week . But suffice it to say , you know , from everything that we see , we see the AI compute Tam just going up .

Speaker #3: So , you know , we'll have some updated numbers for you . But the view is , you know , whereas 500 billion .

Speaker #3: It sounded like a lot when we first talked about it. We think there is a larger opportunity for us over the next few years.

Speaker #3: And that's pretty exciting .

Speaker #1: Thank you . The next question comes from Antoine Jacobson with New Street Research . Please proceed with your question .

Speaker #19: Hi . Thank you so much for taking my question . So I'd like to ask about whether the developing relationship with OpenAI could be a tailwind to the development of your software stack .

Speaker #19: Can you maybe tell us about how the collaboration works in practice and whether the partnership contributed to making ROCm more robust?

Speaker #3: Yeah , Antoine , thanks for the question . I think the answer is yes . I think all of our large customers contribute to , let's call it a a broadening and deepening of our software stack .

Speaker #3: Overall , I think the relationship with OpenAI is certainly one where , you know , our plans are to work deeply together on , you know , hardware as well as software as well as systems and future roadmap .

Speaker #3: And from that standpoint , the work that we're doing together with them on Triton is , you know , is certainly very valuable .

Speaker #3: But I will say beyond OpenAI , the work that we do with all of our largest customers are super helpful to strengthening the software stack .

Speaker #3: And , you know , we have put significant new resources into not just the largest customers , but we are working with a broad set of AI native companies who are actively developing on the stack .

Speaker #3: We get lots of feedback . I think we've made significant progress in the , you know , training and inference stack , and we're going to continue to double down and triple down in this area .

Speaker #3: So the more customers that use AMD , I think all of that goes to enhancing the the ROCm stack . And you know , we're actually we'll talk a little bit more about this next week .

Speaker #3: But we're also using AI to to help us accelerate the rate and pace of some of the the ROCm , you know , kernel development .

Speaker #3: And , you know , just the overall ecosystem .

Speaker #19: Thanks . Thanks , Lisa . And maybe as a quick follow up , could you tell us about the the useful lives of GPUs ?

Speaker #19: I know that most CSPs depreciate them over , you know , five , six years , but in your conversations with them , I'm just wondering if you see or hear any early indication that in practice , they may be planning to to sweat those GPUs for for longer than that ?

Speaker #3: I think we have seen some early indications of that . Antoine . I think the key point being , you know , clearly there's a desire to get on the latest and greatest GPUs when you're building new data center infrastructure and , you know , certainly when we're looking at my 355 , they're often going into new liquid cooled facilities .

Speaker #3: My 450 series as well. But then we're also seeing the other trend, which is there's just a need for more AI compute.

Speaker #3: And from that standpoint , you know , some of the older generations , you know , MI300x is still doing , you know , quite well in terms of , you know , just where we see people deploying and using us , especially for inference .

Speaker #3: And from that standpoint, you know, I think you see a little bit of.

Speaker #20: Both .

Speaker #1: And the next question comes from the line of Joe Moore with Morgan Stanley . Please proceed with your question .

Speaker #21: Great . Thank you . You mentioned MI300A . I guess , what's your posture there ? To the extent that , you know , if there is some relief that you're able to ship , do you have readiness to do that ?

Speaker #21: Can you give us a sense for how much of a swing factor that could be ?

Speaker #3: Sure , Joe . So look , it's still a pretty dynamic situation with MI300 eight . So that's the reason that we did not include any MI300 eight revenue in the Q4 guide .

Speaker #3: You know , we have received some licenses for MI300 eight . So , you know , we're appreciative of the administration supporting some licenses for MI300 eight .

Speaker #3: We're still working with our customers on the demand environment . And , you know , sort of what , you know , what the overall opportunity is .

Speaker #3: And so , you know , we'll be able to update that more in the next couple of months .

Speaker #21: Okay . But you do have a product to support that market . If it does open up or does it are you going to have to start to kind of rebuild inventory for that ?

Speaker #3: We've had some work in process . I think , you know , we we continue to , you know , have that work in process .

Speaker #3: But we'll have to see sort of how the demand environment shapes up .

Speaker #21: Okay . Thank you very much .

Speaker #3: Thanks .

Speaker #5: Operator I think we might have time for just one more caller , please . Thank you very much .

Speaker #1: No problem . And the next and the final question comes from the line of Ross Seymore with Deutsche Bank . Please proceed with your question .

Speaker #21: Thanks for squeezing .

Speaker #22: Me in , Lisa . This might take longer than the amount of time you have left before the top of the hour , but there's been so many of these multi gigawatt announcements from OpenAI .

Speaker #22: How does AMD truly differentiate in there? When you see that big customer signing deals with other GPU vendors and ASIC vendors, etc.

Speaker #22: ? How do you attack that market differently than those competitors to not only get the six gigawatt of initially , but hopefully more after that ?

Speaker #3: Sure , Ros . Well , look , what I see is actually this environment where the world needs more AI compute and from that standpoint , I think OpenAI has kind of led in the quest for more AI compute , but they're not alone .

Speaker #3: I think when you look across the large customers , there is really a demand for more AI compute as you go forward over the next couple of years .

Speaker #3: I think we , each have our advantages in terms of , you , how we are positioning our products . I think MI for 50 series in particular , I think is extremely strong .

Speaker #3: Product ROCm scale solution . You know , overall , when we look at compute performance , when we look at memory performance , you know , we think it's extremely well positioned for both inference as well as training .

Speaker #3: I think the key here is time to market . It's total cost of ownership . It's deep partnership . And you know , thinking about not just MI for 50 series , but what happens after that .

Speaker #3: So we're deep in conversations on MI 500 and beyond . And you know we certainly think we're we're well positioned to not only participate , but participate in a very meaningful way across the , you know , sort of the demand environment here .

Speaker #3: And I think we have certainly learned a ton over the last couple of years with our AI roadmap . We've made , you know , significant inroads in terms of just what the largest customer needs from a workload standpoint .

Speaker #3: So I'm pretty optimistic about our ability to capture a significant piece of this market going forward.

Speaker #22: And I guess my follow up , it'll be a direct follow on to that . You did a unique structure by granting some warrants with this deal .

Speaker #22: And I know there they vest according to a price that would be very accretive and make everybody happy. Do you think that was a relatively unique agreement, or given that the world needs more processing power, that AMD is open to somewhat similar, conceptually similar creative ways to address that demand over time?

Speaker #22: With other equity vehicles, etc.?

Speaker #3: Sure , Ros . So I would say it was a unique agreement from the standpoint that , you know , unique time in AI .

Speaker #3: What we wanted, what we prioritized was really deep partnership and multiyear, multigeneration significant scale. And I think we got that. We got a structure that has extremely aligned incentives.

Speaker #3: Everybody wins , right ? We win . OpenAI wins . And you know , our shareholder win , you know , sort of benefits from this .

Speaker #3: And , you know , all of that accrues to the overall roadmap . I think , you know , as we look forward , I think we have a lot of very interesting partnerships that are developing , whether they're with the largest AI users or you think about sovereign AI opportunities .

Speaker #3: And we look at each one of these as a a unique opportunity where we're bringing sort of the whole of AMD , you know , both technically as well as , you know , all the rest of our capabilities .

Speaker #3: You know , to the party . So I would say OpenAI was pretty unique , but I would imagine that there are lots of other opportunities , you know , for us to to bring our capabilities into the ecosystem and participate in a , in a significant way .

Speaker #1: Ladies and gentlemen , that does conclude the question answer session . And that concludes today's teleconference . We thank you for your participation .