Advanced Micro Devices, Inc. (AMD) on Q3 2021 Results - Earnings Call Transcript
Operator: Hello, and welcome to the AMD Third Quarter 2021 earnings call and webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Laura Graves, Corporate Vice President Investor Relations. Please go ahead, Laura. Laura Graves: Thank you and welcome to AMD's Third Quarter 2021 financial results conference call. By now, you should have had the opportunity to review a copy of our earnings press release and accompanying slideware. If you have not reviewed these documents yet, they can be found on the Investor Relations page of amd.com. Participants on today's conference call are Dr. Lisa Su, our President and Chief Executive Officer, and Devinder Kumar, our Executive Vice President, Chief Financial Officer, and Treasurer. This is a live call and will be replayed via webcast on our website. Before we begin, I would like to note that we will host our accelerated datacenter premier virtually on November 8th, with feature presentations by Dr. Lisa Su and datacenter executives and Dan Mcnamara. This event will also be available on amd.com. Dr. Su will also attend Credit Suisse 25th Annual Technology Conference on Tuesday, November 30th. Ruth Cotter, Senior Vice President Worldwide Marketing, Human Resources, and Investor Relations will attend the Barclays Global Technology, Media and Telecom Conference on Tuesday December, 7th. And our Fourth Quarter 2021, quiet time is expected to begin at the close of business on Friday, December 10th. Today's discussion contains forward-looking statements based on current beliefs, assumptions, and expectations. Speak only as of today, and as such involve risks and uncertainties that could cause actual results to differ materially, from our current expectations. Please refer to the cautionary statement in our press release for more information on factors that could cause actual results to differ. We will refer primarily to non-GAAP financial measures during this call. The full non-GAAP to GAAP reconciliations is available in today's press release and in the slides posted on our website. And with that, I'll turn the call over to Lisa. Lisa. Lisa Su: Thank you, Laura. And good afternoon to all those listening in today. Our business performed extremely well in the third quarter as our leadership product portfolio and strong execution drove record quarterly revenue, operating income, net income, and earnings per share. We delivered our fifth straight quarter of greater than 50% year-over-year revenue growth. With each of our businesses growing significantly year-over-year, and data center sales more than doubling. Third Quarter revenue grew 54% to 4.3 billion. Gross margin expanded by more than four percentage points and operating income doubled year-over-year. Turning to our computing and graphics segment, Third Quarter revenue increased 44% year-over-year to 2.4 billion driven by our latest-generation rising Radeon and AMD instinct processors. In client computing, sales grew by a strong double-digit percentage year-over-year and declined slightly sequentially. Rise in 5,000 processor shipments increased by a double-digit percentage sequentially, resulting in a richer product mix as we believe we gained revenue share for the 6th straight quarter. In desktops, we launched our rising 5,000 processors with integrated Lyon graphics for the channel to strong demand as third-party reviews highlighted the leadership computing and graphics capabilities, and energy efficiency of these processors. In notebooks, Acer, Asus, HP and Lenovo, all expanded their mobile offerings powered by rising 5,000 mobile processors, as we continue gaining momentum in the premium consumer, gaming and commercial markets. Commercial client growth year-over-year was based on new deployments across public sector and fortune 1,000 technology, energy and automotive customers as the number of AMD-based commercial notebook designs available from the largest OEMs increased significantly year-over-year. We're also seeing strong growth in the workstation market. According to IDC, drug repro processors now powered the bestselling workstations in their category in both North America and EMEA as we continue winning high-volume deployments across key verticals including media and entertainment, engineering, architecture, and automotive. In graphics, revenue more than doubled year-over-year and grew by a strong double-digit percentage sequentially driven by shipments of our next-generation AMD CDNA 2 datacenter GPUs, and demand for Radian 6,000 GPUs in the channel. AMD RDNA 2 GPU sales grew significantly in the quarter as we ramp production and expanded our top to bottom portfolio with the launch of the mid-range Radeon RX 6600 XTCards that delivered leadership 10 ADP gaming performance at their price point. Data center graphics revenue more than doubled year-over-year and quarter-over-quarter led by shipments of our new AMD CDNA 2 GPUs for the Frontier Exascale supercomputer at Oak Ridge National Laboratory. Laura Graves: Frontier was architected specifically to deliver breakthrough HPC and AI compute performance and provide a blueprint for how super-computing enterprise and cloud customers can enable Exascale level performance over the coming years by combining AMD CPUs, GPUs, and software. We are very pleased with the performance of our AMD's CDNA2 GPUs, and look forward to providing more details on their leadership performance next month. Turning to our enterprise embedded in semi-custom segment, revenue increased 69% year-over-year to 1.9 billion driven by strong growth in epic processor and Semi-Custom sales. Lisa Su: Semi-Custom revenue grew sequentially and year-over-year as demand for the latest Microsoft and Sony consoles remains very strong. We expect semi-custom revenue to increase sequentially in the Fourth Quarter as we further ramp supply to address the ongoing game console demand. Turning to server, we delivered our sixth straight quarter of record server processor revenue, as sales more than doubled year-over-year and grew by a significant double-digit percentage sequentially. Third - gen Epic processors continue ramping faster than the prior generation, and contributed the majority of our server CPU revenue in the quarter. In Cloud, multiple hyperscalers expanded their third-gen Epic processor deployments to power their internal workloads. And both Microsoft Azure and Google announced multiple new AMD powered instances. Cloudflare, Vimeo, and Netflix also all recently announced new deployments powered by Epic processors. With Netflix highlighting how they doubled their streaming throughput per server, while also reducing their TCO. Enterprise growth was particularly strong in the quarter as the more than 100 third-gen Epic processor platforms from Dell, HPE, Lenovo, Supermicro, Cisco, and others ramp into broader end customer deployments. We expanded our wins in the quarter with Fortune 1000 financial services, automotive, and aerospace companies, and see significant ongoing growth opportunities as our enterprise server pipeline has more than doubled year-over-year. In super computing, we won multiple installations in the quarter highlighted by Argonne National Laboratory selecting 3rd gen EPYC processors, to power the new Polaris supercomputer, that will be used to test and optimize software in preparation for future Exascale class systems. Overall, we're very pleased with the momentum we have built in our data center business. As server, CPU and GPU revenue grew to a mid-20s percent of overall revenue in the quarter. Turning to our Xilinx acquisition, we are making good progress towards securing the required regulatory approvals, and remain on track to close by the end of the year. This Xilinx acquisition provides significant benefits to AMD, including expanding our product portfolio with leadership, adaptive computing, and AI solutions. And further diversifying our customer base into complementary markets, including wired and wireless communications, industrial, and automotive. In closing, our record third quarter results and the significant acceleration of our business in 2021 demonstrates that we have the right products and strategies to drive best-in-class growth and significant shareholder returns. We continue growing faster than the market, driven by our consistent execution and the investments we have made to build leadership products. Our supply chain team has executed extremely well in a challenging environment, delivering incremental supply throughout the year, supporting our strong revenue growth. We're also investing significantly to secure additional capacity to support our long-term growth. Our product portfolio and roadmaps have never been stronger, and I look forward to sharing more details about our next-generation servers, CPUs, and GPUs at our accelerated datacenter premier on November 8th. Now, I'd like to turn the call over to Devinder to provide some additional color on our Third Quarter financial performance. Devinder? Devinder Kumar: Thank you, Lisa, and good afternoon, everyone. AMD had another excellent quarter. Our leadership products and growing datacenter momentum are driving record revenue, record profitability, and significant cash flow generation. Third-quarter revenue was 4.3 billion up 54% from a year-ago, driven by strong revenue increases across all businesses and up 12% from the prior quarter. Gross margin was 48% up 440 basis points from a year ago, driven by strong revenue mix and competitive products. Operating expenses were 1.04 billion compared to 706 million a year ago as we continue to invest in our long-term product road-maps and scaling our business. Operating income more than double to 1.06 billion up 530 million from a year ago, driven primarily by revenue growth. Operating margin was 24%, up from 19% a year ago. Net income grew to 893 million, up 392 million from a year ago. Diluted earnings per share was $0.73 compared to $0.41 per share a year ago. This includes 15% effective tax rate compared to 3% a year ago. Now turning to the business segment results, computing and graphics segment revenue was 2.4 billion up 44% year-over-year, driven by significantly higher client and graphics processor revenue. Computing and graphics segment operating income was 513 million or 21% of revenue compared to 384 million or 23% a year ago. The increase in operating income was primarily driven by higher revenue, which more than offset higher operating expenses. Operating margin was slightly lower year-over-year, primarily due to investments in R&D and go-to-market. Enterprise embedded and semi-custom segment revenue was 1.9 billion, up 69% from 1.1 billion the prior year. The strong revenue increase was primarily driven by significantly higher Epic processor and Semi-Custom sales. EESC operating income was up significantly at 542 million or 28% of revenue, compared to 141 million or 12% a year ago. Operating income growth was primary driven by higher revenue and richer product mix, partially offset by higher R&D and go-to-market expenses. Turning to the Balance Sheet, cash, cash equivalents, and short-term investments were 3.6 billion. We utilized 750 million to repurchase more than 7 million shares of common stock in the third quarter of 2021 as part of our ongoing stock repurchase program. Free cash flow was 764 million compared to 265 million in the same quarter last year. and 888 million in the prior quarter. On a quarter-over-quarter basis, free cash flow was lower as we made strategic investments in long-term supply chain capacity to support future revenue growth. Inventory was 1.9 billion, up 137 million from the prior quarter in support of continued revenue growth. Let me now turn to the Fourth Quarter Outlook. Today's outlook is based on current expectations and contemplates the current global supply environment and customer demand signals. We expect revenue to be approximately 4.5 billion, plus or minus 100 million, an increase of approximately 39% year-over-year and approximately 4% sequentially. The year-over-year increase expected to be driven by growth across all businesses. The quarter-over-quarter increase is expected to be driven by higher server and Semi-Custom sales. In addition, for Q4 2021, we expect non-GAAP gross margin to be approximately 49.5%. Non-GAAP operating expenses to be approximately, 1.15 billion. Non-GAAP interest expense, taxes, and other, to be approximately 170 million, and the diluted share count to be approximately 1.22 million shares. For the full-year 2021, we now expect revenue to increase approximately 65% over 2020, driven by growth across all businesses, up from the prior guidance of 60%. In addition, we continue to expect gross margin to be approximately 48% for the full year. In closing, we delivered another outstanding quarter with very strong year-over-year revenue growth, significant financial momentum, and record profitability. Our leadership products position us well to drive future growth, significant cash generation, and strong shareholder returns. With that, I'll turn it back to Laura for the question-and-answer session. Laura. Laura Graves: Thank you. Devinder, operator, we're ready for our first question. Operator: Thank you. We'll now be conducting your question-and-answer session. One moment please, while we poll for questions, and our first question today is coming from Blayne Curtis from Barclays. Your line is now live. Blayne Curtis: Hey, good afternoon and great results. Thanks for taking my questions. Just kind of curious the overall outlook for Q4. So computing graphics being down, I was just curious if that was more the supply, you're still growing sequentially and obviously, I would assume you prioritize servers, just curious what you're seeing in the computing graphics market. And is it anything related to supply constraints? For you there will be down sequentially or maybe downstream constraints and then maybe for , you're still growing Gross margin. I'm assuming how the Semi-Custom and service than offset each other just walk us through the nice increase in Gross margin for Q4. Lisa Su: Sure, Blayne. Thanks for the question. So, as it relates to the fourth quarter and where we are look, we're overall very pleased with our performance in terms of the second half of the year. It's playing out about what we expect it to be in the PC market. So, as you're asking about computing and graphics, we had seen that the PC market end-user demand is strong overall, but there are some match set constraints in the PC market. And so, for that reason, we've called the PC market, really flattish. I would not have said down, I would've called it flattish as we look into the Fourth Quarter. However, as we look overall at the business, I think the data center business has performed very well and we see strong demand there and we're continuing to see that. And as well, the console business, overall gaming is also quite strong. And so, we see growth in servers and Semi-Custom as we go into the Fourth Quarter and then on the margin dynamics, Devinder, you want to cover that? Devinder Kumar: For Q4? Yeah, so Q4, it is up slightly puts on a guidance one point from Q3. And that's really product mix, higher margin from server offset by Semi-Custom revenue also being higher going from Q3 to Q4. So very pleased with the progress in the gross margin as you look at the Q3, results up 440 basis points from last year, up 80 basis points last quarter. And the progression into Q4, obviously driven by the server, our revenue growing is very pleased with that also. Blayne Curtis: Thanks. Lisa Su: Thanks, Blayne. Operator: The next question today is coming from Vivek Arya from Bank of America. Your line is now live. Vivek Arya: Thanks for taking my question, and congratulations on the strong results and the consistent execution. Lisa, how are you feeling about the spending environment in the datacenter? As we look over the next several quarters, and especially your server roadmap versus the competition because they are planning to launch several new and important products already next year. So, I was just wondering how you're thinking about the competitive landscape and the spending landscape over the next year? Lisa Su: Sure. So, thanks for the question. I think overall, we're feeling very very good about the server business or the datacenter market. I think from a market standpoint, we've seen a strong market here in 2021 in both cloud and enterprise, and we see that continuing into 2022. I think from a competitive position standpoint, I think Milan is extremely well-positioned, so we were very pleased with sort of the adoption rate of Milan. We said that we expected it to grow faster than Rome, and it has. And so, the crossover with Milan enrollment, the Third Quarter, is an important metric for that. Going into the fourth quarter, we continue to see a strong environment. And then as the competitive environment goes into 2022, we always expect the competition to be strong, but our focus has been consistent execution of our roadmap and we feel very good about the Zen 4 in general. In 2022, I think we feel very good about the competitive positioning there and we continue to believe that datacenters are most strategic part of our business, and we're making good progress with our customers and partners. Vivek Arya: And for my follow-up, Lisa, AMD has done very well in terms of gaining share at the hyperscalers. Where are you in that journey? Is there still a lot of share gains to be had at hyperscalers then importantly, can you repeat that in the enterprise or do you think your competitor's incumbency limit the share gain opportunity in the enterprise? Thank you. Lisa Su: Yeah so, Vivek, what I would say there is, our business has been more cloud-weighted with the hyperscalers than enterprise that continued here in this Third Quarter. I do believe that there is a significant additional opportunity for us in the Cloud. So, as we work with these partners, it is it is about expansion of workloads. Really, there's more tailoring of workloads as well as we go forward. And then, there's also just more customers and and broader penetration in both Tier 1 and Tier 2 Cloud, guys. So, I think that's a good market for us. On the enterprise side, I would say we saw a very strong enterprise quarter here in the third quarter. I think the strength of Milan with our OEMs in terms of the breadth of the platforms is very good, and we're seeing a good traction with sewer Fortune 1000 companies. So, I would say, overall, I think we see a growth trajectory for both our cloud and enterprise business. I think in the enterprise, the key thing has been to get more familiarity with Epic. And we've made very good progress there. And so, I feel very good about where that's going. Vivek Arya: Okay. Thank you, Lisa. Lisa Su: Thanks. Operator: The next question is coming from Matt Ramsay from Cowen. Your line is now live. Matt Ramsay: Thank you very much. Good afternoon, everyone. Obviously, Lisa, some really strong progress with datacenter crossing, I guess a quarter of the business here with the results. I did want to ask a question specifically on your server business in China. Your competitor called out China and some of the turmoil that's gone over there as a reason why some of their cloud business had some headwinds in the Third Quarter, and maybe you could comment on how you see spending over the last quarter. And then in the next couple of quarters, specifically in that end market in China. And then I have follow-up. Thanks. Lisa Su: Sure, Matt, so again, what I would say is our datacenter business performed very well in the third quarter. That was across both Cloud and enterprise. And in Cloud that was across geographies. So, we haven't seen anything particular as it relates to China or there. What I would say is, we continue to work with the breadth of customers and we're in the process of really rolling out broader adoption across the customer set. So, I think we saw a pretty normal environment for demand. Matt Ramsay: Thanks for clearing that up. As my follow-up kind of unrelated. You guys mentioned in the comments still plans to get the Xilinx deal closed by the end of the year, and I think that's important as there's a lot of things that you can talk about more, maybe more openly about the heterogeneous compute strategy for the business over the long term. Lisa, maybe you could walk us through to the extent that you can talk about it. Obviously, there's some things that you can't talk about, but the extent you can, what milestones you've achieved behind the scenes that make you feel confident and what hurdles are still there to have the confidence. I mean, I guess we got 6 weeks till we get into the month of December and things slow down a little bit regulatory-wise. So, I just wonder what gives the confidence that we can get there and what we should expect. Thank you. Lisa Su: So, look, we've been working diligently on the closure of the Xilinx acquisition. I would say we are through the vast majority of what we need to do in the regulatory front. We're finishing up here and there's a -- there's very good progress on the integration side. So, we've done a lot on the integration. I think we're excited with the plans that we have, and then on the regulatory front, again as I said in the prepared remarks, we've made good progress and we believe we're on track to close at the end of the year. Operator: Thanks. To our next question -- Lisa Su: Operator. Go ahead. Operator: Certainly. Our next question is coming from Toshiya Hari from Goldman Sachs. Your line is now live. Toshiya Hari: Hi, good afternoon. Thank you so much for taking the question and congrats on the strong results. Lisa, I had two questions as well. First, on your outlook for 2022, I realize it's early and I certainly don't expect you guys to provide a point estimate. But I think people are kind of concerned that you've been sort of over growing if you will, relative to your long-term growth rate, you grew 45% last year, you are on track to grow 65% this year. Given your long term through-cycle growth target of 20%. Again, there is concerned that you could decelerate going into next year given PC dynamics and competitive dynamics and so on and so forth. So again, I don't expect you to give any quantification of next year, but if you could describe the year qualitatively, what are the potential pluses and minuses at this point? That would be super helpful, and then I've got a quick follow-up. Lisa Su: Sure. So, look, as you said, it's a little bit early to talk about 2022 quantitatively. I'll say qualitatively, what we see is -- look, we see a positive demand environment, and that's a market statement, but that's also an AMD statement, right? I think the strength of our product portfolio has multiple growth vectors. Datacenter continues to be a very important one for us. I think where we continue to make progress in the graphics market, and we think graphics is a good growth vector. Our console business we would expect would be -- I had mentioned earlier that it'd be up in the Fourth Quarter and then we would expect it to be up in 2022, just given the strength of the demand environment there. And so, on the PC side, the comments I'll make on the PC side are, the end-user demand appears to be strong. So, there's -- there's a good amount of Refresh going on, whether you're talking about consumer, high-end consumer, or commercial, or gaming. There are some supply constraints around match sets that we believe will continue into the first half of the year. That being the case, what we're using from a planning assumption standpoint is that the PC market maybe flattish as we go from 2021 into 2022. But even within that environment, we think there are opportunities for us to continue to grow. So overall, I think we were very focused on execution, very focused on working with our customers to make sure that we're aligned with what they need, and overall, I feel very good about our product portfolio going into 2022. Toshiya Hari: Got it. That's super helpful. Thank you. And then as my quick follow-up, similar question on gross margin, I'm not sure if this is fully for Devinder. You're guiding Q4 to 49.5%, which is obviously significant progress from a year ago. Given some of the dynamics you've talked about, whether it be the growth potential and server CPU, the mix within server CPU and I'm sure the mix dynamics on the client side. I think most of us do expect a pretty nice some positive trajectory into 2022 potentially with a five handle in terms of again, gross margins. But any risks or any headwinds that we should be aware of? I think your foundry partner is raising pricing, there's cost inflation generally across the board, but any risk items that we should think about at this point? Thank you. Devinder Kumar: I wouldn't say it's like that, but I think is about managing the situation. As Lisa said in over the growth sectors that we have, we expect to continue making progress from where we are currently, and especially predicated on the competitive leadership products we have. We're very pleased with the progress we've made over the last few years. But without getting into specifics, I think you can assume that we continue to make progress with the mix of revenue, mix of products, and the competitive products that we're introducing also into 2022. Toshiya Hari: Thank you. Operator: Thanks. Our next question is coming from Stacy Rasgon from Bernstein Research. Your line is now live. Stacy Rasgon: Hi, guys, thanks for taking my questions. My first one I wanted to ask about Datacenter GPU, I know you said it more than doubled. But can you give us an approximate feeling for how big that is, are we still talking like tens of millions of dollars or is it larger than that? And what are your expectations for how that's going to ramp as Frontier and some of the other supercomputers that a lot of that stuff is going into our ramping over the next couple of years. Lisa Su: Sure. So, Stacy, on the Datacenter GPU side, the Third Quarter was a larger quarter for the Datacenter GPU. This is where we shipped the Frontier shipments that are now in the build cycle. It is still a relatively small business compared to the CPU site. So, our expectation is that going into the Fourth Quarter, it's a lumpy business for us. So Q3 was a strong quarter given the shipments for Frontier, we would expect as we go into the Fourth Quarter that it'll be down sequentially quarter-on-quarter, but still, it's a strong growth year overall for a business that we think is a significant strategic growth driver for us over the next few years. Laura, thank you. For my follow-up I just wanted to ask you about Q4. Obviously, you had given implied guidance for Q4 last quarter. The guidance now is obviously decently . Can you just talk a little about what is driving that upside relative to where your expectations were last quarter? Devinder, you want to talk about that or. Devinder Kumar: On the revenue, I think -- go ahead, please. Lisa Su: I'm sorry. Were you asking about revenue or margin, Stacy? Stacy Rasgon: Well, both if you're willing to answer both. Lisa Su: Okay. All right. Let me start and then let's -- I want to make sure I answer all your questions. How is that? So, look, on the revenue side. When we look at the sequential growth, we have been able -- look the supply chain -- this is about really supply chain optimization. And we have been able to secure some additional supply given some of the work that we've been doing. And we see strong demand across the board. But sequentially, what we're guiding to is stronger server demand as well as gaming. And gaming includes the semi-custom game consoles, as well as our graphics business is doing quite well as well. And then in terms of the sequential margin, it's similar. I mean, we're having servers, some improved mix and graphics driving upside. And that's partially offset by the consoles which are below corporate average, but net-net, I think it's a positive sequential both on revenue and margin. Stacy Rasgon: I guess what I'm asking is, for example, are your expectations for servers into Q4 now, higher than they were three months ago when you gave implied guidance for Q4? Lisa Su: Yes. Yes, it is. Stacy Rasgon: Got it. Okay. Thank you very much. Lisa Su: Sure. Operator: Thanks. Your next question today is coming from Joe Moore from Morgan Stanley. Your line is now live. Joe Moore: Thank you. I'm wondering if you could talk about graphics a little bit. It seems like that's the business that's probably struggled the most to get silicon. And yet you've shown some pretty nice growth there. What's the prognosis for that business going forward? And in the past, you've said you're comfortable that there's relatively low crypto currency exposure there. Is that still the case? Lisa Su: Yes, sure Joe. Look, the graphics business did have a strong third quarter. I think that's true for graphics, gaming, as well as datacenter, GPU. I think the portfolio that we have there with RDNA 2 had turned out really well, so we're pleased with how it's positioned competitively in the marketplace and overall, gaming has been a secular trend that has continued with very strong demand. In terms of Crypto, our view is that it's really negligible revenue for us in the Third Quarter, it's not a segment that we have been servicing. We've tried very much to try to keep our gaming graphics focused on gamers. And we were able to increase some of the supply for our graphics and that's one of the reasons that we saw the sequential growth that we saw and going into the Fourth Quarter next year again, I think we see gaming overall as a strong segment for us, and the product set is very good. So, we feel good about it. Joe Moore: Great. Thank you very much. Lisa Su: Thanks. Operator: Thank you. Next question is coming from Aaron Rakers from Wells Fargo. Your line is now live. Aaron Rakers: Yes. Thanks for taking the question. I've two quick questions if I can as well, just stick on the expectations in the next year, appreciating that you're not going to give a full guide. I'm just curious how we should think about the Semi-Custom business, given how sizable that's been to the overall growth in 2021? Any framing of how you expect 2022 to shape up at this point? Lisa Su: Sure, Aaron. So again, if you Look at the overall growth that we had in 2021, I would say was actually quite balanced across all of our businesses. The Semi-Custom business was in the second year of ramp and demand has exceeded supply. We've been unable to ramp that as we've gone through the year. As we look in to 2022, the historical view of game consoles has been a year four is the peak, at least that's what it was in the last generation. What we expect in this generation is again, very strong demand going into 2022. So, we would expect it to grow into 2022, which would be the third year of the cycle, and then we'll see what happens after that. But overall, I think our view is we have a very balanced business with multiple growth drivers across datacenter PCs, graphics, as well as consoles. That's very helpful. And then the follow-up question is on your own supply chain side, I know in a preferred comments you said, working on securing, adequate supply given your growth trajectory. Are you currently able to meet all of the demand that you currently see and can you give any color of what -- how we should think about the supply situation on your end? So, I mean, we've been working on ramping the supply chain really for more than a year if you think about the dynamics here. What I'd like to say is, overall, the demand has been very, very high. So, the fact that we can grow revenue this year, 65% year-on-year, I think is a testament to the supply chain work. I think, if we had more supply, we could certainly ship more. That being the case, I think we're prioritizing in the most strategic segments, and we have invested significantly in capacity for additional capabilities. And we will see some of that come online as we go through 2022. And we're going to continue to be aggressive to secure additional capacity because we believe our product portfolio will enable that growth. Aaron Rakers: Thank you. Lisa Su: Thanks. Operator: Thanks. Our next question today is coming from John Pitzer from Credit Suisse. Your line is now live. John Pitzer: Good afternoon, guys. Congratulations, Lisa. Lisa, my first question is back on the supply side of things. I'm just wondering if you can help me better understand, was it more of an issue when your PC business or your server business, and I guess, especially as we look into next year, supply begins to loosen up. This year given how tight the overall ecosystem was, competing on price didn't make a lot of sense. As supply begins to accelerate across the ecosystem, how are you thinking about pricing, especially in lieu of your large competitor resetting their gross margins for next year. In your view, does that give them more wiggle room or do you think that they're being pretty benign on the pricing side of things on that gross margin reset? Lisa Su: Yeah, so maybe let me -- there's a lot of various aspects to that, John so let us let me try to take it in pieces. As it relates to current supply, I want to make sure that we're clear. I mean, we have brought on a tremendous amount of additional supply and that's part of the reason that we overachieved the Q3 results and then we guided higher in Q4. So, I do think that we have done a lot of work on our supply chain. In the PC market in particular, I think the market is not necessarily constrained on CPUs but more constrained on matched sets. And so, we're trying to ensure that we're not building inventory in the channel. And that's part of the optimization that we do, is to ensure that as we ship selling processors that we see matched sets to sell-through. From that standpoint, we think inventory is very healthy at the OEMs and that's an important factor as we go into 2022. As it relates to what happens with the pricing environment as supply eases up. I think, right now what we see is again, it's an environment where most people are prioritizing supply. As we go into 2022 though, I think this is all about the product and what we view is our focus in our product line, has been moving up the stack, ensuring that we're providing significant value to our customers in terms of total cost of ownership on the server side, and innovative features and capabilities on the PC side and the graphics side. And we're going to continue to do that. I mean, we're excited about our product portfolio into 2022. We're going to continue to be very aggressive on the overall roadmap. And with that, I think our game plan is exactly what it was -- what always has been, which is lean into the product cycle, and the deep customer relationships and continue to build that out over time. John Pitzer: That's all for me. And then as my follow-up Devinder, you did a good job explaining the year-over-year changes in operating margins in the computing graphics business. I'm wondering if you could talk a little bit about sequentially what happened? Revenue was up and margins were down a little bit. Is that just the influence of the very strong growth in GPUs going into the datacenter, because it sounds like in the core compute business mix probably got better sequentially for you. So, I'm just trying to make sure I understand all the dynamics in play. Devinder Kumar: If you're talking about the CG segment, its investments. So, I come investments did R&D and go-to-market. And also, we have a lot of new products coming into 2022. There's expenditure involve ahead of the curve before you introduce the products in the next year. And that's really what happened in the transition quarter-over-quarter. Stacy Rasgon: Perfect. Thank you. Operator: Our next question today is coming from Chris Caso, (ph.), from Raymond James. Your line is now live. Chris Caso: Yes. Thank you. Good evening. First question is about the supply constraints and how that affects seasonality as we go into the beginning of next year. And you obviously, you're making efforts to bring on more supply. You spoke out pc, these current strengths with regard to map sets. I'm sure at this point you don't want to provide guidance for Q1, but how should we be thinking about seasonality for Q1 as we contemplate this supply can trains. Lisa Su: Yeah, Chris, I think it's a little bit early to talk about Q1. I mean, I think, let's see what would we say about seasonality. I don't have a lot to say other than, typically, Q1 is down from Q4. That's typically what the pattern is given the consumer related businesses. It might be a little bit sub-seasonal as we go into this first quarter, just given the demand environment, but we'll have to see how things play out over the next couple of months. Chris Caso: All right. Thank you. A little bit of a bigger picture question for my second question. And we've heard and seen from some of the hyperscalers is a trend of, in some cases, doing some custom designs, doing it on their own, often with ARM-based designs. Do you consider that an opportunity or a threat for AMD, and to what extent are you engaged with some of those hyperscalers on some of these custom designs because you do have IP portfolio yourself? Lisa Su: Yeah. Chris on that, we definitely view it as an opportunity. Right? So, I think what's happening in the datacenter market is that as the need for compute gets larger, sort of this tailoring of compute for the various workloads is an important trend. I think our IP portfolio today is a very strong, I think it will even be stronger given some of the things that we have in plan to allow more tailoring. And we are working very closely with a number of hyperscalers on the vision of compute over the next few years and how we might put together some different solutions between our CPU, GPU, interconnect capability, and then with the addition of Xilinx as well coming into our portfolio. So, lots of opportunity there for customization, I think that's a key trend that we are certainly going to lean into. Chris Caso: Thank you. Laura Graves: Thank you, Chris. Operator, two more questions, please. Operator: Certainly. Our next question is coming from Ross Seymore from Deutsche Bank. Your line is now live. Ross Seymore: Thanks for letting me ask a question. I also congrats of other people on the strong results. Lisa, I just wanted to ask about the comparison on your C&G side between the C and the G. And specifically on the client graphic side of things. Clearly this year has been a really strong year for AMD. Can you just talk about the go-forward on the client side and that I think we're all pretty well aware what's going to happen on the Datacenter GPU side. But how do we reconcile your commentary on where you think the PC market would be in the flattish area versus the strength you've had in GPUs this year and a strong GPU market, do you think that continues next year? How much of it is AMD specific or if the PC market is weaker, is that something that's a little bit of a headwind for AMD? Lisa Su: So again, what I would say is our market share is still, I would say underrepresented, whether you're talking about the client CPU or APU side, or the GPU side. I think what we have seen here in the third quarter and then into the second half of the year is, our graphics business has performed quite well. It is channel driven in the sense that there's still strong demand amongst gamers for GPUs. As we go into 2022 though, I don't view the PC market as a headwind for the Company. I think as we look at all of these markets, of course we do a bunch of scenario planning of the market is up or if it's down. I think there are many -- many who think that the market maybe up, there's some who think that market maybe down. And that's why we're choosing to model the base case is flattish. But even within that market, whether you're talking about client CPUs or client GPUs, we think we have opportunities to gain share and grow in that business. Just given the strength of our product portfolio and the fact that we are underrepresented to think the what we can expect given those products. Ross Seymore: Thanks for that. And I guess as my follow-up, just one for Devinder on the OpEx side. And I'll give the same disclaimer that I know you're not going to give any specifics about next year, but you guys have done a great job of lowering your OpEx intensity throughout this year. I think you're going to be closer to 24% versus your 26 to 27 entering the year in 25 as of last quarter. So great expansion there and margins and better leverage. As we look forward, though, I think the third quarter was the first time where you guys spent enough that it actually impacted a segment where the operating margin fell a little bit. And I think we all understand why you're doing that and it feeds great growth so it's not a negative. But as I look into '22, do you think next year can be another year where you're operating leverage is positive, or do you expect to be able to spend closer to your former targets in the 25% to 27% of sales range? Devinder Kumar: I think fundamentally, and what you observed is right, very disciplined from an OpEx standpoint. Investing in the growth is important. Many of the things that Lisa talked about earlier is all about growth in many different vectors. And obviously, that requires funding from an OpEx standpoint. Whether it's R&D, go-to-market, hiring, which we're doing from a viewpoint of the dot in the Company. And I think from a modeling standpoint on our guidance stand point you can assume that the growth in OpEx will be lower in revenue. Margin continues to expand, OpEx flattens even down. I mean, you can model it, but very disciplined on that standpoint. And making sure that we're investing for the growth is a top priority for us. Ross Seymore: Thank you. Operator: Thank you. Our final question today is coming from Timothy Arcuri from UBS. Your line is now live. Timothy Arcuri: Thank you for fitting me in. I had two, I guess first, Lisa, no invest about software yet I was wondering if you can update us on your software efforts. And maybe as you get close to closing Xilinx, how much that changes things for you on the software side, and maybe how your search for software talents been, and then I had a follow-up. Lisa Su: Sure, Tim. So yes. We continue to invest heavily in software, particularly on the Datacenter GPU side. With our next-generation GPU architecture, MI200, which we will be talking a little bit about in next few weeks. We have made significant investments and progress. Our focus has been using the Frontier beachhead with high-performance computing and expanding that into AI and working with our partners on that software development. So overall, continue to make good progress there. I think the Xilinx acquisition and bringing in that software talent also provides opportunities to optimize across the overall portfolio in terms of just the software infrastructure that people want in an overall ecosystem. So very strategic area that we're making good progression. Timothy Arcuri: Thanks a lot. And I guess just last question for me. So, server share, if I look at your guidance for Q4, it looks like you're going to be in the 12.5-13% share if I use the entire TAM. And that's up like 500 basis points versus last year Q4. So, I guess the question is that a reasonable trajectory into next year as if we're sitting here 12 months from now, would you be surprised if you gain another 500 basis points next year. Where do you think about where that share can go next? Lisa Su: Well, I think overall our server trajectory has been very strong. I mean, I think we're very pleased with the trajectory here in 2021. I think having a number of quarters where we're doubling the revenue year-on-year speaks to the progress there. As we go into 2022, we still believe we are a share gainer in that environment just given the strength of our portfolio and that's called platforms that are still yet to launch across our customer set. So, we're continuing to play out the strategy of a datacenter being a place where our technology is very differentiated. And we think that's true in the third-generation with Epic and we certainly are very focused on ensuring that the next-generation with Zen 4 and are similarly well-positioned in the marketplace. Timothy Arcuri: Thanks a lot. Laura Graves: Thank you, Tim. Operator: Thank you. We reached end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Laura Graves: No, we're good. Thank you very much, Operator. And thank you to everyone for joining us today. We appreciate your time and participation and your support of AMD. Have a good afternoon. Operator: Thank you. That does conclude today's teleconference and 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.
