Advanced Micro Devices, Inc. (AMD) on Q1 2021 Results - Earnings Call Transcript
Operator: Hello, and welcome to the AMD First Quarter 2021 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Ruth Cotter, Senior Vice President, Worldwide Marketing, Human Resources and Investor Relations. Please go ahead, Ruth. Ruth Cotter: Dr. Lisa Su: Thank you, Ruth, and good afternoon to all those listening in today. Our business continued to accelerate significantly in the first quarter, driven by the best product portfolio in our history, strong execution and robust market demand. We delivered our sixth straight quarter of double-digit percentage year-over-year revenue growth and record quarterly revenue and profitability. First quarter revenue increased 93% year-over-year to $3.45 billion with growth in all of our businesses. Turning to our Computing and Graphics segment. First quarter revenue increased 46% year-over-year to $2.1 billion, led by growth in both Ryzen and Radeon processor sales. In client computing, revenue grew by a significant double-digit percentage year-over-year and increased sequentially as we set records for client processor revenue and ASP. Against the backdrop of strong overall PC demand, our revenue is growing significantly faster than the market, particularly in the ultrathin, gaming and commercial segments. Devinder Kumar: Thank you, Lisa, and good afternoon, everyone. AMD had excellent execution and very strong financial performance in the first quarter. Our multi-generation product roadmap is driving significant revenue growth, and we delivered record financial results and free cash flow. Driven by this momentum, we delivered first quarter revenue of $3.45 billion, up 93% from a year ago, and up 6% from the prior quarter. Year-over-year growth was driven by strong increases in sales across all businesses. Gross margin was 46%, flat from a year ago, despite significantly higher semi-custom product revenue. Operating expenses were $830 million, compared to $584 million a year ago, as we continue to invest in our business. Operating income was $762 million, up $526 million from a year ago, driven primarily by revenue growth. Operating margin increased from 13% a year ago to 22%. Net income was $642 million, up $420 million from a year ago, excluding $15 million of Xilinx acquisition-related costs. Diluted earnings per share was $0.52 per share, compared to $0.18 per share a year ago. Current quarter results include a 15% effective tax rate compared to a 3% tax rate a year ago. We continue to anticipate a cash tax rate of approximately 3% for 2021. Now, turning to business segment results. Computing and Graphics segment revenue was $2.1 billion, up 46% year-over-year due to the significantly higher client processor and graphics revenue. Computing and Graphics segment operating income was $485 million, or 23% of revenue compared to $262 million a year ago. Ruth Cotter: Thank you, Devinder. And operator, if you’d like to poll the audience for questions, please? Operator: Absolutely. We’ll now be conducting a question-and-answer session. Our first question today is coming from Vivek Arya from Bank of America Securities. Your line is now live. Vivek Arya: Thanks for taking my question. Lisa, you’re guiding -- you’re increasing the full-year guidance by almost $1.2 billion, $1.3 billion. Could you give us some sense of what has changed in the last three months? Because your competitor was recently talking about cloud digestion, and you’re raising guidance by $1.3 billion. So, I’m curious what changed in the last three months. And if you could help us parse, which products or end markets are contributing to this increase, how much from servers or PC or semi-custom, or if there is any crypto impact? So, any color on what’s driving this really strong guidance and increase for the year would be very helpful? Dr. Lisa Su: Yes, absolutely, Vivek. Thanks for the question. So, we are -- we started the year very strong, very pleased with the first quarter performance and what we see overall for the year. So, we are increasing our full-year guidance. We exceeded in the first quarter, we guided up in the second quarter, and then that’s carrying through to the second-half of the year. What we’ve seen is the following. We came into the year with an overall strong demand picture, and that was certainly true. What we’ve seen over the last 90 days is consistent strong demand, very strong visibility from our customers on what they need throughout the year. Particularly, you asked about data center. I think, we saw actually strong signals in the first quarter that it would be a strong data center year for us. We’re on a product ramp cycle. We launched new products in PCs on the mobile side with our Ryzen 5000. We launched new products on the graphics side with Radeon 6000. And then, the launch of the third-generation Milan has actually gone very, very well. So, in terms of what we see, we see very strong demand for our products. We see good customer ordering patterns and strong backlog. And then, we have also seen that the supply chain has been tight overall for the semiconductor industry. And we’ve been working very closely with our supply chain partners. And so, we also have good visibility to additional supply as we go throughout the year. So, with all of that in place, I would say, we feel very good about how the year is shaping up. In terms of where you see the strength overall, I would say it’s strength across all businesses, but particularly the strength in data center is good, and we also see just, again, very good visibility and very close working relationships with our customers. You asked about crypto. We do not -- we have negligible crypto in here. So, this is really the foundational business, really the new products and just seeing the customers adopt and ramp quickly. Vivek Arya: Got it, very helpful. And Lisa, for my follow-up, should we assume that now you are getting adequate supply, so you’re kind of caught up from a supply perspective and supply is no longer a constraint, or is that still a constraint? And if it is, in which end market? Because you’re keeping full-year gross margins steady at 47%. So, I was curious if there is any impact from supply or rising input costs that could be impacting your gross margins, which you decided to keep to kind of flat versus your last outlook? Thanks. Dr. Lisa Su: Yes. I would say, Vivek, it’s still early in the year. So, the entire semiconductor supply chain is very, very tight. I think, you hear that from all of our peers in the marketplace. That being said, we’ve been working very closely with our supply chain partners. We have seen improvements that have led to the improved full-year guide. We’re going to continue to work on that because right now, I would say the channel -- the inventories are very low throughout the entire supply chain, whether you talk about at our customers or in the channels. And so, there’s quite more that we would like to be able to do. That being the case, I think, we continue to work well with our partners and take lots of actions there. As it relates to overall costs and things like that, we are watching those things, I think, from logistics and some of the component costs and things like that. So, there’s – mostly, the gross margin guidance is reflective of the fact that we do have ramping of our new products. And we also have some ramp of the gaming products, which are a little bit below corporate average. But we’ll see how things progress as we go throughout the year. Vivek Arya: Thank you, Lisa. Dr. Lisa Su: Thanks, Vivek. Operator: Thank you. Our next question is coming from Blayne Curtis from Barclays. Your line is now live. Blayne Curtis: Hey. Thanks for taking the question and nice results. Maybe just following up on Vivek’s question. I was just curious, the semi-custom business obviously is not following any sort of seasonality, but there’s a lot of talk about supply constraints there as well. You basically saw no seasonality in March, and it seems like it’s not growing much in June. So, just maybe just, is that still impacted by maybe not your shortages, but other shortages, and just any perspective on that business for the year? Dr. Lisa Su: Yes. So thanks, Blayne, for the question. I think, the semi-custom business, if you look at the console launches that happened last year, I mean, they were phenomenally good launches, right, very, very good products. So, you’re right. Seasonality is completely different this year than sort of a typical year. We had a strong first quarter better than seasonal. We were down, but down single digits. There’s a bit of growth as we go through the year, but it’s just starting from such a high point in the first-half of the year. So, the way I would say it is, I think there is a strong secular demand for gaming. And whether you’re talking about consoles, or you’re talking about PC gaming, or you’re talking about the overall sort of gaming ecosystem, there’s a significant demand. And so, we believe there’s strong demand, and we’re continuing to ramp supply to meet that. Blayne Curtis: Thanks. And then, I just want to ask you on the competitive landscape on the client side. You clearly gained a couple of points of share in March. Intel was talking about they’re being more aggressive on their percent of 10-nanometer product. Maybe just talk about the competitive landscape as you look through the rest of the year? And are you seeing any change to that landscape as they ramp 10-nanometer? Dr. Lisa Su: Yes. So, Blayne, I think, the PC business has certainly -- had a very strong second-half of last year and is strong this year. I think, within that, we feel very good about our progress, particularly in notebooks and particularly in the premium segments of notebooks. So, we had a strong record quarter for our notebook business. Our ASPs were up sequentially and year-over-year. I think, we’re seeing traction in sort of the premium ultrathin, gaming and commercial. We feel very good about the platforms that we have and the platforms that we have throughout the year. Ryzen 5000 is a very competitive product. I will say that there are lots -- a bit of low-end units have come into the market, but our focus on the premium segments have done very well. So overall, pleased with the PC environment and feel that we’re very competitive. Blayne Curtis: Thanks. Operator: Thank you. Our next question is coming from Aaron Rakers from Wells Fargo. Your line is now live. Aaron Rakers: Yes. Thanks for taking the question, and congratulations on the quarter. I wanted to ask a little bit about the server CPU cycle. I know, you’ve talked about kind of an expanding footprint with the cloud guys. But I was curious of where we stand today, as far as more of the traditional OEMs, the progression of their systems. I think you said 100-plus systems. When do you think that those will all be shipping in the market? And how would you put the context of Milan relative to Rome on that front? And I have a follow-up. Dr. Lisa Su: Sure. So, Aaron, the data center business obviously is a very strategic focus for us. And with EPYC with each generation, we’ve really tried to expand the reach. I think, here in the first quarter, what we saw is very strong results, doubling year-over-year. It is on the strength of cloud. But what we saw was both Rome ramping, so we saw Rome units up sequentially, and we also saw Milan ramping. And what that says, this is what we expected. We actually expected that we had a good footprint in Rome and that that would continue to be well deployed as we come into the first half of this year, and that’s played out. And then, Milan is just a very, very good product. I mean, it’s extremely well positioned. Not only do we have per-socket leadership, but we have per-core leadership, which again expands the footprint. So, in terms of your question about cloud versus enterprise, we were more cloud weighted in the first quarter as some of those instances, both internal and external, ramped. We would expect that enterprise, both enterprise as well as HPC deployments will increase as we go through the next couple of quarters. But we’ll see Rome and Milan in the market together all through this year, and we expect strong adoption on the enterprise side. Aaron Rakers: Yes. And then, the other question kind of dovetailing off that is, you talked in response to a couple of different questions. You talked about visibility. Our visibility is very strong. It’s improved, et cetera. So, how would you characterize your visibility today relative to, let’s say, what it was three months ago? And what gives you the confidence? Has there been something that’s happened as far as discussions with the cloud guys, that’s given you more confidence in the visibility of the growth through the remainder of this year? Dr. Lisa Su: Yes. So, Aaron, I mean we -- when we started this year, we expected to have a strong product cycle, just given everything that we saw in terms of platforms, design wins, sort of customer engagements and process. But, in the last 90 days, I think we’ve seen that really firm up. So, from the standpoint of just the consistency in all of the schedules that were supposed to be met, I think customers are liking what they see. We are having multi-quarter conversations. Just given the tightness overall in the supply chain, I think everyone is wanting to be clearer and more transparent about their needs. And that’s very helpful for us, frankly. That’s very helpful for us in a tight environment. It gives us the ability to plan several quarters out. And so, I think that’s the differences. We have strong visibility into what customers want and what we can deliver. And so, that gives us confidence that we have the right signals in place. Operator: Our next question today is coming from Matt Ramsay from Cowen & Company. Your line is now live. Matt Ramsay: Lisa, I wanted to ask a question about the enterprise notebook business. And I noticed you highlighted in the release and in the slides where you are in several different verticals in design wins on enterprise notebook in the Fortune 500. And I wonder if you might speak a little bit about the relationships that you’re building with the big enterprise customers? Do you have FAE support, software support, firmware support, et cetera? Do you have the right people in place to really ramp that business more materially going forward? Thanks. Dr. Lisa Su: Yes, definitely, Matt. It’s been a high focus for us to ramp our enterprise notebook business as well as the enterprise server business. And they actually share many of the same customers and IT departments. And so, yes, we’ve made very good progress on the enterprise notebook business. I think, we have a great set of platforms with our OEM partners. We’ve also ramped up our field application support and our customer engagement models for deployment. Overall, I think, we’ve gotten some very nice commercial notebook design wins. And again, in this environment, for us, the important thing is to stay very focused on the longevity of the business that we win. And so, a lot of focus is on those commercial pipelines and how they develop, both on the notebook side as well as on the server side. And I think we’ve made good progress, but we still have a lot of opportunity to grow as we go through the coming quarters. Matt Ramsay: Thanks for that. For my follow-up, it’s a bit unrelated. One of the businesses that maybe you’ve not had supply or there’s been other parts of the business growing much more quickly, I wanted to ask a bit about gaming. The new RDNA 2 architecture I think brings some new features, but obviously there’s a strong incumbent competitor in the gaming market. Maybe you could just talk about where you are competitively right now, how you see supply coming online that might support that gaming franchise a bit better, and just maybe the lay of the land in gaming right now? Because it’s one piece of the business that everything else is going so well, I think there are some opportunities there. Dr. Lisa Su: Yes. So, the consumer graphics or the gaming graphics business, as you talk about, has actually done well for us. It grew double digits this past quarter. We had a very deliberate strategy here with the launch of RDNA 2. We started at the top of the stack with our big Navi product. And then, we’ve now introduced a couple of additional products. And you’ll see that both from the channel, sort of adding board cards into more OEM systems and notebook business as well as additional variants. So, it’s an important market segment for us. We’re happy with the progress. I think, gamers really appreciate the product. It’s fair to say that the graphics demand is very high across the marketplace. So, we’ve actually put quite a bit of product into the market, but the demand still exceeds supply. You’ll see that increase as we go through the second half of the year. And overall, I think, the progress that we’ve made with RDNA 2 is fantastic, and we continue to believe that gaming overall is a great secular growth story. Operator: Our next question today is coming from Toshiya Hari from Goldman Sachs. Your line is now live. Toshiya Hari: Lisa, I wanted to ask about the data center GPU business. I realize it’s still a relatively small percentage of the overall business. You talked about production ramping in the second half of this year. You talked a little bit about Frontier as well. But what kind of customer pull are you seeing in your data center GPU business? And then, I got a quick follow-up. Dr. Lisa Su: Yes, Toshiya, thanks for the question. We’re making very nice progress in the data center GPU business. It’s in the investment mode now, so we’re investing heavily in the business. We launched the CDNA architecture or the compute optimized architecture last year. You’ll see updates to that this year as we bring out the next generation with our Frontier systems. The revenue is, albeit, on the lower side in terms of just size of the business relative to the rest of the business, but we will see growth into the second half of the year. And the business here is actually very strategic, right? It’s the idea of really putting together heterogeneous systems and bringing our CPU technology with EPYC together with our GPU technology with Instinct with the software capabilities that we have been investing in, and really getting strong HPC systems as well as AI and machine learning capabilities. So, we will see growth in the second half this year. It will still be a smaller business, but we see it growing in this strategic time frame over the next couple of years. And it is very much that end-to-end story of what you need to really satisfy sort of the key workloads in the data center. Toshiya Hari: Great. And then, as my follow-up, I wanted to ask about the potential threat from ARM longer term. Within x86, obviously you’ve got significant runway from a market share perspective. But how are you thinking about the potential threat from ARM-based processors, both in your client business as well as your server business? You’ve got Apple obviously internalizing some of their CPUs on the client side, hyperscalers talking about internal solutions. And your closest GPU competitor launched -- or introduced rather ARM-based CPU multiple years out. So any thoughts on ARM versus x86 and how you address that would be helpful. Dr. Lisa Su: Yes, so, absolutely. I think the key point here is you really have to have a very, very strong product roadmap, and that is really what we’re focused on. I think the overarching trend that computing is becoming very important. And so, there are additional entrants trying to address different aspects of computing, I think is to be expected. And when you look at the data center in particular, I think the trend that computing is becoming more workload optimized is also an important trend. These are the things that we’ve been thinking about for a long time, and we’ve been looking at ensuring that we address that in our roadmap. So, our focus is to continue to optimize solutions across the data center and across the PC ecosystem, make sure that what we have is very competitive, addressing what customers’ needs are. And we also have the ability to customize solutions as well with our strong IP portfolio. So, all that being the case, I think the answer is very competitive market, but we feel very good about the roadmap that we have in front of us. Operator: Our next question today is coming from John Pitzer from Credit Suisse. Your line is now live. John Pitzer: Congratulations on the solid result. Lisa, maybe another way to ask that last question of x86 versus ARM. I’m wondering if you could address it from the perspective of general purpose compute versus semi-custom and ASIC. Because clearly, as Moore’s Law is coming up with some issues the move towards semi-custom and ASIC is much more prevalent. I know to the answer to Toshiya’s question, you said that you’re doing -- or you have the ability to do semi-custom. Do you actually have engagements? And how do you see sort of general purpose compute versus semi-custom ASIC playing out over time? Dr. Lisa Su: Yes. So John, the way I would address that is I think there’s a whole range of computing solutions that you need. And this is back to a few years ago, our conversations about heterogeneous compute being you need to have the right compute for the right workload. I think that’s the overarching aspect of it. No question that for our business, general purpose compute is the largest piece of our business and will continue to be so. We are doing -- we certainly do optimizations for specific customers today. And I think that’s -- that for large cloud customers, they expect that, and we are doing that. We do have the ability to optimize on a more specific basis. And if you look at the evolution of our architecture, I think that when we do these chiplet architectures and things like that, it really allows that. So, lots of good engagements going on with customers overall, and I think the key is to be able to have the right IP building blocks. And that’s what we’re focused on, right, having the best CPU cores, the best GPU capability, having great interconnect, and then, with the bringing on of Xilinx, having the adaptive computing solutions there as well, gives us a lot of options to optimize solutions with customers. John Pitzer: That’s helpful. And Lisa as my follow-up, you’re still relatively early in this new gaming console cycle. And typically through those cycles, your products gross margins had some pretty good uplift. I’m wondering if you can just help characterize where you think you are in sort of the gross margin cycles for the gaming console business. And if you want to tell us kind of how dilutive you think it is to overall margins and where that might go by the end of the year. That would be helpful. Dr. Lisa Su: Yes. John, I would say that we’re still very early in the console cycle. And from -- if you think about it, we’re only a couple of quarters into it. So, I think this is a big cycle, and there’s a lot of momentum in the cycle. We’re going to continue to work on improving costs and improving margins and things like that. But, I would say that we still have a ways to go and lots of opportunity there as we go through the next couple of years. Operator: Our next question today is coming from Mark Lipacis from Jefferies. Your line is now live. Mark Lipacis: Lisa, I guess, you had indicated you believe -- I believe you said you thought you gained share in the server market. My back of the envelope calculation suggests you gained at least 2 points of share in service, which is an acceleration on my estimate of about 1% share gain a quarter over the previous four quarters. So, I guess, can you tell me if my math is materially off? And if not, what is -- is this a new higher rate of share gains? And what would you chalk this up to? Are you guys at a tipping point? Are your customers at a tipping point for embracing AMD as a supplier? Do they have increased comfort, or is your ecosystem for support? Can you just maybe just give us the higher-level picture about where you think your customers are and really embracing and ramping up your server offerings at a higher rate. And I have a follow-up, if I may. Dr. Lisa Su: Yes, sure. So, in terms of our data center performance in the first quarter, it was quite strong. And when I look at the drivers of that, we saw cloud in particular quite strong. And when I look at the drivers underneath that, there are a couple of things that have come together. I mean, first of all, I mean we’ve been very, very deeply engaged with our customers the last number of quarters in qualifying new instances, qualifying new internal workloads, really expanding the regional capability of our coverage. And so, all of those things, I think, have led to some lift overall in the data center business. And then, going forward, I think the other piece of it is, if you recall when we did the Naples to Rome transition, that transition was pretty much people switched from Naples to Rome. What we’re seeing in this cycle is a bit different. What we’re seeing is that Rome has a set of very strong coverage in terms of applications that they’re in, that are ramping very nicely, that are having good demand. And then on top of that, we’re adding Milan, which is just a very strong product on top of that. So, I think those are some of the things that are perhaps a bit different about what we’re seeing right now. That being this case, things move around from quarter to quarter. So, I would say that the data center signals that we’re seeing are positive. We’re excited about what we’re seeing. It’s a lot of engagements with customers. And the main thing for us is as important as the current year is we’re also very focused on the long-term road map. And so, we’re engaging now on Zen 4 and beyond. So, it really is a multigenerational discussion with our top customers. Mark Lipacis: Great. That’s very helpful. And then, a follow-up on -- just coming back to ARM, you answered the previous questions with kind of talking about embracing the idea of having heterogeneous architectures in semi-custom and working with your customers to develop solutions. If I go back, AMD had an ARM server offering before. Can you give us an update on the state of that ARM server IP? Is that something that you can resurrect, or have you been keeping it, the development, working on that? And can you discuss -- are your customers asking for your help in delivering semi-custom solutions that have an ARM component to it? Because from what I can tell, it looks like three cloud service providers have ARM server offerings in their platform, and -- but there’s a lot that don’t and don’t have quite the development capabilities. So, I was hoping if you could just talk more specifically about the IP that you had? And are you bringing that back if your customers are asking for it? Dr. Lisa Su: Yes. Sure, Mark. So, look, we know the ARM architecture well. Certainly, our engineers know it well. And we consider ARM a partner in many respects. We use ARM IP in various aspects of our devices. In terms of that specific custom ARM design, we don’t have that in plans right now. In terms of whether we would do custom ARM designs, I think the answer is yes. That’s the whole idea of the semi-custom business. And so, I think it’s less about ARM versus x86 and much more about having the right IP in the right sort of combination to satisfy sort of the customer solutions. And that’s the way we look at it. It’s really what problem are you trying to solve? And let’s look at sort of the collection of IP that we have and the capabilities that we have to help address that set of sort of issues. Operator: Our next question is coming from Ross Seymore from Deutsche Bank. Your line is now live. Ross Seymore: Hi. Thanks for letting me ask the question and congratulations on the strong results and guide. Lisa, I wanted to ask you a little bit of a conceptual question. In your full-year guidance, you clearly raised the revenues to a very strong number, but you kept the margins the same. I think, people understand the operating margin side of it that you have an opportunity to invest and great opportunities in front of you to grow. But, on the gross margin side of things, I’m just a little surprised, given the strength that you’re talking about in the data center business, the HPC, Frontier, those things kicking in the back half of the year. I’m a little surprised that it didn’t go up. Now, you’ve delivered very consistent guidance and increases improvements over time, and I can’t recall the last time you missed your gross margin guidance. But, I’m just wondering what the puts and takes are that would keep that gross margin guidance flat for the year. Dr. Lisa Su: Yes, Ross, sure. So, let me perhaps start, and then Devinder may have a few comments. So, I think from an overall revenue standpoint, I think we are very comfortable with the guide up, just given the visibility that we have on the customer demand front and on the supply front. On the overall margins, we are guiding up sequentially as we go from Q1 to Q2. And then, I think for the second half of the year, what we would say is look, it’s early in the year. And it’s a very dynamic environment, Ross, I mean a very dynamic environment. And so, we’re watching the puts and takes, and there’s always product mix things that come into play in terms of the puts and takes. But, I think we’re confident that we’re in a good place. And as we go through the year, we’ll give you more updates on that. But, there isn’t anything more than that. I think, it’s just where we are in the year. And given the dynamic environment we have in the marketplace, that’s what gives us approximately the 47% guide. I don’t know, Devinder, you want to add to that? Devinder Kumar: The only thing I’ll add, Ross, I think as you know, the situation is pretty tight, as we talked about the overall global supply situation in semiconductors. So, we are seeing some increases in component costs, but overall we are managing it. On the higher revenue by more than $1 billion, we are maintaining the 47% guide for 2021, which is up from last year. And last quarter was 45, this quarter 46, guiding 47. The trend is very good, and we are very, very happy with that. Ross Seymore: Thanks for the detail. That’s really helpful. For my follow-up, I want to be a little more tactical, but it will somewhat fold into your answer to the first question. That is for your second quarter guide from the midpoint of up roughly 4%, could you give us a little bit of puts and takes between your two main segments? And I guess, the slightly longer-term question part of that would be, data center being high teens in the first quarter was great sequential growth, doubling year-over-year. Any sort of color on how you think that percentage changes throughout the rest of the year, given your 50% growth guidance for the entirety of the year? Dr. Lisa Su: Sure, Ross. So, in terms of the second quarter, as we look at sequential growth, we do see sequential growth in the data center business, so on the server side as well as on the data center graphics side as well as some growth on the gaming side. As we look at the full-year, our expectation is that the percentage of the company that is sort of the data center percentage of the company will increase as we go through the next couple of quarters. And that’s just the dynamic of some of the strength in the consumer businesses in the first half. So, that’s not normal seasonality. And just the acceleration or some of the growth that we see in the data center business as we go throughout the year would lead to a higher percentage of revenue in data center on higher revenue. Operator: Next question is coming from Stacy Rasgon from Bernstein Research. Your line is now line. Stacy Rasgon: I first had a question on data center in the quarter. So, the EESC was up almost 100 million. EPYC was up, and semi-custom was down, which means EPYC was up even more than that. Can you -- I know it was both Rome and Milan grew. But how much of the actual growth -- the 100 million plus sequentially that must have been EPYC, how much of that growth, how did that split out between Rome and Milan? Was it like the majority of the growth of that was Milan? And how do you see Milan as a percentage of a data center CPU mix in Q2? Dr. Lisa Su: Sure, Stacy. So, if I look at the first quarter, we shipped Milan as well in the fourth quarter, right? So, we shipped a good amount of Milan in fourth quarter, a good amount in the first quarter. I would say, in terms of growth, it was probably more Rome weighted in the first quarter compared to Milan, but there was good growth in both. And then, as we go into the second quarter, we would still expect to see growth in both Rome and Milan, with Milan growing faster, as that ramps. And we would expect by the third quarter that it would cross over and Milan would perhaps be higher than Rome. Now, obviously, these things change a little bit as customers go through their ramps, but that’s sort of what we see. So, the meta point is Rome demand is robust and will stay a good part of the revenue for this year in its entirety. And then, Milan is ramping quickly, and customer adoption is strong. And so, we expect it will ramp quickly as we go through the next couple of quarters. Hopefully, that answers your question. Stacy Rasgon: That does. Thank you. I have a follow-up, if you don’t mind. I actually do want to ask a question about OpEx. So, I know, the model you gave at the Analyst Day had a midpoint for OpEx revenue of 26.5%. And I know you’re running ahead of revenue and everything right now. But, if I sort of back out the second half implied guidance for OpEx, it actually is at that 26.5% run rate in the second half, to get to 26% for the full-year. Should we think about -- I guess, it’s like as we go into 2022, do you think you’re sort of at the model OpEx run rate, that sort of like more than 26%, 26.5% on whatever the revenue is? Is that the right way to think about the OpEx trajectory going forward? And I guess, like -- do you think you’re actually spending enough at this point, given where you’re taking the roadmap? Are you spending at the right levels right now to ensure that, that roadmap is actually cemented and firm? Dr. Lisa Su: Yes. Stacy, very good question. I think we are -- the revenue is well above our long-term model. And certainly in this year, it’s well above our long-term model. Last year, it was well above our long-term model. And we’re taking the opportunity to invest. And from that standpoint, our investments in R&D really, as you say, cementing roadmap, our investments across sales and field support and all of the customer-facing support. And frankly, we’re making investments in sort of some of the infrastructure surrounding the company as well since it’s just a much larger company than it was a few years ago. So, I think the answer is yes. We’re investing enough. And I think we’re taking the opportunity to be very aggressive with those investments to -- given the strength of the revenue growth. Maybe, Devinder, you want to add to that or... Devinder Kumar: No, I think that’s good. I think you covered it. We’ve been very disciplined, as you know, Stacy, over the years about managing the OpEx. It does scale with revenue. But, OpEx is growing lower than -- lower rate than revenue. And obviously, that shows up in the financial results from a model standpoint. The leverage, as you mentioned, the operating margin is going up for the Company. Operator: Our next question is coming from Timothy Arcuri from UBS. Your line is now live. Timothy Arcuri: Lisa, I wanted to ask also about share gains. You’ve done a great job this year in both, client and in data center. At the same time as was referenced before, Intel’s tone is definitely changing. They use the word leveraging relationships. And they talked about other tactics to sort of stem or arrest some of their share losses. And they’re now offering x86 cores via foundry and things like that. So, I guess, the question is sort of beyond this year, because the competitive environment this year is pretty much set. So, do you think we can extrapolate the success you’ve had this year into ‘22 and ‘23, or do you think the competitive environment will intensify in the next few years? Thanks. Dr. Lisa Su: Well, Tim, I would say that we have always expected the competitive environment to be very strong, and we still do. So, by the way, there are lots of competitors out there. From our standpoint, I think over the past few years and the past few generations, I think we’ve built a track record with customers, and we’ve built a set of deep relationships. And we’ve learned a ton about what’s important to customers, where to spend the time, the effort, and where we need a close partnership. So, I feel very good about where we’re positioned this year, but I feel very excited about what we have in the road map going forward. And I mean we’re not slowing down. So, there’s a lot in the roadmap. And we have more resources and more capabilities to bring to the market. And I think we’re going to be very competitive going forward. Timothy Arcuri: Totally, thanks. I guess, as my follow-up then, can you give just -- Devinder, maybe give some sense of what the loading is for semi-custom first half to back half? It seems like it’s going to be about even back half versus front half this year. Is that correct? Devinder Kumar: We’re slightly up in the second half. Because the launch of product in the second half of last year started out strong because it’s a new console generation. And then, maybe slightly up in the second half as well I would say. Operator: Our final question today is coming from Joe Moore from Morgan Stanley. Your line is now live. Joe Moore: You talked a little bit about the supply constraints that you’ve been dealing with. Can you talk about where those are coming from? Is that a wafer constraint, substrate constraint, both or other stuff? And where -- when you talk about making progress and kind of getting more supply out, what’s the source of that progress? Dr. Lisa Su: Yes. So, I think, Joe, I would say overall, the demand if we look at coming into this year, the demand has been sort of higher than our expectations. And there are sort of industry-wide types of things that are going on. We work very closely with our supply chain partners. So, whether it’s wafers or back-end assembly test, capacity or substrate capacity, we work it on a product line by product line level. So, I don’t know that there is a single thing that I would point out. I would say that on a product line level what we’ve done and what we’ll continue to do is ensure that there are multiple sources for things, particularly in the back end, that gives us flexibility to move things back and forth. We continue -- on the substrate side in particular, I think, there has been underinvestment in the industry. And so, we’ve taken the opportunity to invest in some substrate capacity dedicated to AMD, and that’ll be something that we continue to do going forward. We’re also -- I mean we also have fantastic engineering teams that are just looking at how we, together in the ecosystem, just get more productivity into the system. And we work very closely with TSMC to make sure that we’re forecasting well and getting the right support. So, I think, it’s all of the above in terms of making sure that we have the capabilities. And the other thing I’ll mention, Joe, is just it’s not just about processors, but it’s included -- it’s also ensuring that they’re matched sets in the ecosystem. And so, our teams are also working very closely with our OEMs to make sure that we’re together ensuring that they’re the full system components necessary. So, it is a complex supply chain environment. And I will tell you, given everything that I’ve seen, it is a complex environment because all markets are so hot. But I’m happy that we’ve been able to make progress. And by the way, we’re not done, right? There’s plenty more that we would like to do to get more capability in the supply environment. And so, we’re working closely with our partners across the board. Joe Moore: Great. Well, definitely very impressive results in the context of everything going on. Thank you. Operator: Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back for any further or closing comments. Ruth Cotter: Thank you, Kevin. We would like to thank everybody for joining today’s call, and we’ll look forward to engaging with you throughout the quarter. Thank you, everyone. Operator: Thank you. That does conclude today’s teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
AMD Reports In Line Q1 Earnings, But Shares Drop 6%
Shares of Advanced Micro Devices (NASDAQ:AMD) fell by more than 6% in pre-market today after the company reported fiscal Q1/24 earnings per share (EPS) that were in line with expectations. The company achieved an EPS of $0.62, matching analyst predictions, while revenue slightly exceeded estimates, reaching $5.5 billion compared to the expected $5.48 billion.
The non-GAAP gross margin for the quarter improved by 2 percentage points from the previous year, reaching 52%. AMD's CEO Lisa Su highlighted strong growth in the Data Center and Client segments, both increasing by over 80% year-over-year due to the rise in MI300 AI accelerator shipments and the adoption of Ryzen and EPYC processors.
Looking ahead, AMD expects second-quarter 2024 revenue to range between $5.4 billion and $6 billion, with a midpoint representing an estimated 6% year-over-year growth and about a 4% sequential increase. The non-GAAP gross margin for the quarter is projected to be around 53%.
Additionally, the company revised its 2024 revenue outlook for its Data Center GPU segment upward to $4 billion, from the previous forecast of $3.5 billion.
AMD Receives Bullish $250 Price Target from Rosenblatt Securities
Advanced Micro Devices, Inc. (AMD) Receives Bullish Price Target from Rosenblatt Securities
Hans Mosesmann of Rosenblatt Securities has recently put forward an optimistic price target of $250 for Advanced Micro Devices, Inc. (AMD:NASDAQ), suggesting a substantial potential increase of about 56.29% from its current trading price of $159.96. This bullish stance, revealed on Monday, April 29, 2024, reflects a strong confidence in AMD's future performance. The analysis, as detailed in the report by Benzinga, points towards a bright horizon for AMD, backed by solid fundamentals and market positioning.
The optimism surrounding AMD's stock is further bolstered by the company's anticipated first-quarter 2024 earnings. According to Zacks Investment Research, these earnings are expected to show growth, fueled by an improving PC market. This is particularly good news for AMD's Client segment, which stands to gain significantly from this trend. Moreover, AMD's efforts to expand its presence in the datacenter market are expected to pay off, contributing to the company's overall growth. This aligns well with Mosesmann's bullish outlook, as both analyses highlight key areas of potential for AMD.
Adding to the positive sentiment, AMD is on the verge of releasing its first-quarter earnings report, with a spotlight on its data center segment and the impact of artificial intelligence (AI) demand on its business. The focus on these areas is crucial, given the growing importance of AI and data center capabilities in today's technology landscape. The anticipation surrounding this report underscores the market's interest in AMD's strategic moves and its ability to capitalize on emerging tech trends.
Moreover, the projection that the market for data center AI chips will reach $400 billion by 2027 presents a golden opportunity for AMD. This forecast, shared by The Motley Fool, suggests that AMD's data center solutions could be a key driver of substantial earnings growth in the coming years. Such projections lend credence to Mosesmann's bullish price target, suggesting that AMD is well-positioned to benefit from these lucrative market trends.
The current market performance of AMD, with its stock price experiencing a rise and showcasing a significant recovery from its yearly low, further supports the optimistic outlook. With a market capitalization of approximately $258.29 billion and a trading volume that reflects active investor interest, AMD stands as a strong contender in the semiconductor industry. The company's strategic focus on AI and data center markets, coupled with the improving PC market, sets the stage for potential growth that aligns with Mosesmann's bullish forecast.
Amazon and AMD Earnings Reports: A Market Watch
Amazon and AMD Earnings Reports: A Market Watch
Amazon (AMZN:NASDAQ) and Advanced Micro Devices (AMD:NASDAQ) are gearing up to release their earnings reports this Tuesday after the market closes, an event that investors and market watchers are keenly anticipating. For Amazon, expectations are set for an adjusted earnings per share (EPS) of $0.81, alongside revenue forecasts of about $142.55 billion, as highlighted by the Schwab Network. This projection sets a significant benchmark for Amazon, indicating the market's anticipation of its financial performance amidst a dynamic retail and cloud computing landscape.
On the other hand, AMD's stock performance leading up to the earnings announcement has been noteworthy. The stock is currently priced at $157.4, reflecting a recent uptick of $3.64 or approximately 2.37%. This movement is within a trading range observed today between $153.43 and $158.63, showcasing the stock's volatility and investor interest. Over the past year, AMD has experienced a wide price range, hitting a low of $81.02 and reaching a high of $227.3. This volatility underscores the tech sector's dynamic nature and AMD's position within it. With a substantial market capitalization of around $254.33 billion and a trading volume of 42.4 million shares, AMD stands as a significant player on the NASDAQ, reflecting its importance to investors and its impact on the market.
The financial metrics and stock performance of both companies provide a backdrop for their upcoming earnings reports. For Amazon, the focus will be on whether it can meet or exceed the adjusted EPS of $0.81 and revenue projections of $142.55 billion. These figures are crucial for investors as they gauge Amazon's ability to navigate the competitive retail and cloud computing environments, especially considering the broader economic context. Similarly, for AMD, the recent stock price increase and its performance over the past year will be under scrutiny. Investors will be looking to see if AMD's financial results can justify its current market valuation and if its strategic initiatives are driving growth.
As both companies prepare to unveil their earnings, the market's attention will be fixed on their financial health and future prospects. For Amazon, the key question revolves around its revenue growth and profit margins, particularly in its cloud computing division, which has been a significant growth driver. For AMD, the focus will be on its ability to sustain momentum in the semiconductor industry, where competition is fierce and innovation is critical. The earnings reports of AMZN and AMD will not only reflect their current financial status but also provide insights into their strategic directions and potential challenges ahead.
In summary, the upcoming earnings announcements from Amazon and AMD are pivotal moments that will offer a glimpse into the companies' operational and financial health. With Amazon's revenue and EPS projections setting high expectations and AMD's stock performance indicating investor optimism, the market awaits to see if these tech giants can deliver on their promises. The outcomes of these reports will have implications not just for the companies themselves but also for the broader tech sector and stock market dynamics.
AMD Earnings Season Outlook: Surpassing Expectations?
Advanced Micro Devices (AMD) Earnings Season Outlook
Advanced Micro Devices (AMD:NASDAQ) is gearing up for its earnings season with a wave of optimism, as indicated by the positive adjustments in earnings estimate revisions. This optimism is further supported by the Zacks Earnings ESP (Earnings Surprise Prediction), which hints at AMD potentially surpassing earnings expectations in its forthcoming announcement. Such a positive outlook is crucial for investors and analysts alike, as it provides a glimpse into the company's financial health and future prospects. The anticipation of a favorable earnings report, as reported by Zacks Investment Research on April 26, 2024, sets a bullish tone for AMD's stock performance in the near term.
The company's stock, trading at $157.89 with a significant uptick of $4.13 or 2.68%, reflects the market's positive reception to AMD's financial trajectory. The day's trading showed AMD's stock moving between a low of $153.43 and a high of $158.63, demonstrating the volatility and investor interest surrounding the stock. Over the past year, AMD's shares have oscillated between a low of $81.02 and a high of $227.3, showcasing the stock's dynamic range and the substantial growth potential it holds. With a market capitalization of approximately $255.11 billion and a trading volume of 17.86 million shares, AMD stands out as a heavyweight on the NASDAQ exchange, attracting significant investor attention and trading activity.
The positive momentum in AMD's earnings estimate revisions, coupled with its current stock performance, paints a promising picture for the company as it heads into earnings season. The anticipation of an earnings surprise, as suggested by the Zacks Earnings ESP, could serve as a catalyst for further stock appreciation, should AMD manage to exceed market expectations. The company's robust market capitalization and the healthy trading volume underscore its significance in the market and the high stakes associated with its upcoming earnings announcement.
Investors and analysts are closely watching AMD's financial indicators and stock movements, as these factors are instrumental in assessing the company's market position and growth prospects. The combination of a favorable earnings outlook and strong stock performance positions AMD as a compelling entity in the financial markets, with the potential to deliver significant returns to its shareholders. As the earnings season approaches, all eyes will be on AMD, awaiting the results that could either validate the current optimism or recalibrate expectations based on the company's financial performance.
AMD Stock Analysis: AI Expansion and Market Resilience
Advanced Micro Devices (AMD) Stock Analysis: A Buying Opportunity Amid Market Volatility
Advanced Micro Devices (AMD) has seen a significant drop in its stock price by 20% over the past month, which might seem alarming at first glance. However, this decline is largely due to broader market volatility and a pullback in the semiconductor sector, rather than any direct negative news about AMD itself. This situation presents a potential buying opportunity for investors who are looking at the long-term growth prospects of AMD, especially considering its ambitious expansion into the artificial intelligence (AI) market. Over the past five years, AMD's stock has impressively surged by 452%, demonstrating its capacity for substantial growth and resilience in the face of market fluctuations.
On April 16, AMD made a strategic move to bolster its position in the AI market by announcing the launch of new semiconductors specifically designed for AI-enabled business laptops and desktops. This initiative is expected to be a game-changer, with major companies like HP and Lenovo planning to incorporate these advanced chips into their products by the end of the second quarter. The introduction of these semiconductors is aimed at capturing a larger share of the burgeoning AI personal computer market, enabling PCs to run sophisticated AI models directly on the device without the need for cloud computing. This development is anticipated to significantly boost the laptop and desktop market in the years to come, highlighting AMD's proactive approach to leveraging AI technology for growth.
AMD's aggressive push into the AI space is a clear effort to compete with giants in the industry, such as Nvidia and Intel. The company has unveiled several innovative products, including the Ryzen 8040 microchips, which promise to enhance AI applications by up to 60%, and the MI300X accelerator microchip, designed for use in data centers and servers. These technological advancements have garnered attention from leading tech companies, including Meta Platforms and Microsoft, resulting in substantial orders. Such endorsements from major players in the tech industry underscore AMD's growing influence and competitiveness in the AI market.
Financially, AMD has demonstrated strong performance, with fourth-quarter earnings per share of 77 cents, aligning with analysts' expectations, and revenue of $6.17 billion, slightly surpassing the forecasted $6.12 billion. The company's optimistic revision of its AI chip sales forecast for 2024 from $2 billion to $3.5 billion reflects the increasing demand for its AI products. This financial health and upward revision in sales forecast provide a solid foundation for AMD's continued success and attractiveness to investors.
Encouragement for investors to buy AMD stock comes from the company's robust strategy and innovation in the AI sector, positioning it as a formidable competitor against industry leaders like Nvidia and Intel. Despite the recent dip in its share price, AMD's focused expansion and technological advancements in AI signal a promising future. This optimism is further supported by TD Cowen's decision to maintain a buy rating on AMD and raise its price target from $185 to $200, suggesting a potential upside of 29% within the next year. This positive outlook is driven by the anticipated success of AMD's new MI300 AI chip and the early positive response from key customers, including Microsoft's use of the MI300X chip. With such strong fundamentals and strategic positioning, AMD appears well-set for continued growth and success in the competitive AI market.
China's Tech Shift: A Blow to AMD and Intel's Market Position
Impact of China's Tech Shift on Advanced Micro Devices, Inc. (AMD:NASDAQ) and Intel Corporation (INTC:NASDAQ)
Shares of Advanced Micro Devices, Inc. (AMD:NASDAQ) and Intel Corporation (INTC:NASDAQ) have recently faced a downturn, a situation exacerbated by China's decision to move away from Western technology. This strategic shift by Chinese officials, directing telecom carriers to phase out foreign chips, poses a significant challenge for both tech giants. For Intel, which regarded China as its most crucial market in 2023, and AMD, with China being its third-largest market, the implications of this directive are far-reaching. This development, as discussed by Renita Young, underscores the escalating tensions between China and Western technology companies, potentially altering the landscape of global tech trade.
AMD's stock performance offers a tangible glimpse into the immediate financial repercussions of these geopolitical tensions. The company's shares dropped to $162.62, marking a decrease of $7.88 or about 4.62%. This decline is a direct reflection of investor concerns over AMD's ability to maintain its growth trajectory amidst the changing dynamics in China. The trading session saw AMD's stock fluctuating between $161.83 and $165.70, indicating a volatile response to the news. Over the past year, AMD's shares have oscillated between a low of $81.02 and a high of $227.3, showcasing the stock's potential for wide-ranging fluctuations influenced by both market forces and geopolitical developments.
The market capitalization of AMD, standing at approximately $262.76 billion, alongside a trading volume of 49.46 million shares on the NASDAQ exchange, underscores the company's significant presence in the tech industry. However, the recent developments in China could impact AMD's market position and financial health, given the size and importance of the Chinese market to its overall business strategy. The directive from Chinese officials not only affects immediate sales and revenue prospects for AMD but also raises questions about long-term strategic adjustments the company might need to undertake to navigate the evolving geopolitical landscape.
For Intel, with China as its largest market in 2023, the situation presents similar challenges. The company's reliance on the Chinese market for a substantial portion of its revenue makes it particularly vulnerable to the country's shifting policies towards foreign technology. As both AMD and Intel grapple with these challenges, the broader implications for the global tech industry and for Western technology firms operating in China become increasingly significant. The move by China to reduce its dependence on foreign chips is indicative of a larger trend towards technological self-sufficiency, which could redefine competitive dynamics and trade relationships in the tech sector worldwide.
Citi Remains Bullish on AMD
Citi reaffirmed its Buy rating on AMD (NASDAQ:AMD) with a target price of $192, following an assessment of US Semiconductor stocks, focusing on February's notebook shipments, which exceeded projections. February saw a modest 2% month-over-month decrease in notebook shipments, outperforming expectations, thanks to a spike in demand for Dell's commercial PCs. This contrasts with January's less favorable outcome, where shipments fell below forecasts.
Adjusting to recent developments, Citi improved the Q1/24 forecast for notebook shipments from an initial 14% quarter-over-quarter decline to a 12% reduction. This adjustment is an improvement over the usual seasonal drop of 17%, spurred by new product launches.
Despite February's positive data, it came after a disappointing January. Citi expects the pattern of varying monthly notebook shipment figures to persist throughout 2024 as the PC market's recovery phase reaches a steadier pace.
