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Advanced Micro Devices, Inc. (AMD) is a global semiconductor company specializing in the development and sale of microprocessors, graphics processing units, and other semiconductor products. AMD operates through four primary segments: Data Center, Client, Gaming, and Embedded, each contributing significantly to its overall revenue. The company also engages in the sale or licensing of its intellectual property portfolio .
- Data Center - Develops and sells server microprocessors (CPUs), graphics processing units (GPUs), accelerated processing units (APUs), data processing units (DPUs), Field Programmable Gate Arrays (FPGAs), Smart Network Interface Cards (SmartNICs), AI accelerators, and Adaptive System-on-Chip (SoC) products.
- Gaming - Offers discrete GPUs and semi-custom SoC products tailored for gaming applications.
- Embedded - Provides embedded CPUs, GPUs, APUs, FPGAs, and Adaptive SoC products, with growth driven by the acquisition of Xilinx.
- Client - Focuses on CPUs, APUs, and chipsets designed for personal computers.
What went well
- AMD's Data Center GPU business is exceeding expectations, with revenue now expected to exceed $5 billion in 2024, up from prior guidance of $4.5 billion, driven by strong customer milestones, ramping of the Instinct product portfolio, and broadening customer engagements.
- AMD is closing the competitive gap in AI accelerators with a strengthening product roadmap, including the MI325X and upcoming MI350 series, receiving positive customer feedback and expected to compete well with the latest offerings from competitors.
- AMD's Data Center business now accounts for over 50% of their revenue, with continued sequential growth expected, driven by strong momentum in both Enterprise and Cloud segments, and opportunities to gain market share, including in underrepresented regions like China.
What went wrong
- Competitive concerns over AI GPU development timeline: Investors are worried that AMD's MI series GPUs remain approximately one year behind the industry leader's products, which may hinder AMD's ability to gain market share until this gap is closed .
- Underrepresentation in the Chinese server market: AMD admits being underrepresented in the China server market, potentially impacting their ability to capture growth opportunities in this significant market .
- Modest growth expected in Gaming and Embedded segments: AMD anticipates only modest sequential growth in their Gaming and Embedded segments, indicating potential slower performance compared to their Data Center and Client segments .
Q&A Summary
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Data Center GPU Revenue Growth
Q: What drove the $500 million increase in 2024 Data Center GPU outlook?
A: AMD raised its 2024 Data Center GPU revenue guidance from exceeding $4.5 billion to exceeding $5 billion due to strong Q3 performance in the Instinct product portfolio, completion of important customer milestones, and ramping above initial expectations. -
2025 Data Center GPU Outlook
Q: How is AMD thinking about Data Center GPU growth in 2025?
A: AMD is optimistic about 2025, citing significant investment in AI infrastructure and a strengthening product portfolio, including launching MI325 later this quarter and MI355 in the second half of next year. Customer engagements are broadening with both existing and new cloud and enterprise customers optimizing workloads on AMD Instinct. -
Gross Margin Outlook
Q: What are the factors impacting gross margin into 2025?
A: Gross margins are expected to improve driven by the Data Center business, which accounted for over 50% of revenue in Q3. The recovery in Embedded will also aid margins. However, expansion in the Client business, focused on consumer, which is below corporate average margins, poses a headwind. Operational efficiency and economies of scale are expected to further enhance gross margins. -
Supply Chain Capacity for GPUs
Q: How is AMD managing supply for MI300 and MI325 GPUs into 2025?
A: AMD has effectively ramped its supply chain, ensuring capacity despite tight market conditions, contributing to higher Q3 revenue in the Instinct business. The company has planned for significant growth in 2025 and feels confident in its overall supply chain capabilities. -
Data Center Segment Growth
Q: What is driving sequential revenue growth in Q4?
A: The largest contributor to sequential revenue growth is the Data Center business, now over 50% of AMD's revenue in Q3 and expected to continue growing in Q4. The Client segment is also performing well, driven by desktop Zen 5 and notebook AI PC launches. Other segments like Gaming and Embedded are expected to be more modest. -
Competitive Position in AI GPUs
Q: How does AMD address the perception of being behind competitors in AI GPUs?
A: AMD believes it has closed much of the gap with competitors. MI325 will compete well with H200, and the MI350 series will compete with Blackwell. The company emphasizes that market constraints in new product generations impact all players and that its portfolio allows for easier data center integration. Customer feedback is positive on AMD's strengthening roadmap. -
EPYC and Server CPU Growth
Q: How is AMD's EPYC server CPU business performing?
A: The EPYC business is strong, with improved market conditions and large cloud customers adding capacity. The Zen 4 portfolio was very strong in Q3, and the ramp of Zen 5 Turin has begun. AMD has a robust product stack and sees strength in the server market, enhancing AI opportunities. -
PC Market Outlook
Q: What is AMD's outlook on the PC market and potential risks?
A: AMD expects some seasonality into the first half of next year but feels positive about the PC market in 2025, anticipating mid-single-digit growth. Catalysts include AI PCs and Windows 10 end of support. The company has its strongest PC portfolio ever and sees opportunities for growth in both consumer and enterprise segments. -
Customer Ramp and Revenue Lumpiness
Q: Should we expect lumpiness in Data Center GPU revenue next year?
A: Revenue may be lumpy due to the timing of large customer deployments, which vary by quarter based on customer build-outs and infrastructure preferences. Despite this, AMD feels good about the overall growth trajectory into 2025. -
Data Center GPU Gross Margins
Q: How will gross margins from Data Center GPUs improve?
A: Currently, gross margins on Data Center GPUs are below corporate average, but as revenue ramps, AMD expects margins to improve. In the longer term, the data center business tends to exceed corporate average margins. The focus is on driving long-term growth and market presence while enhancing gross margins over time.
Guidance Changes
Quarterly guidance for Q4 2024:
- Revenue: Approximately $7.5B plus or minus $300 million, up 22% year-over-year (raised from $6.7B plus or minus $300 million )
- Non-GAAP Gross Margin: 54% (raised from 53.5% )
- Non-GAAP Operating Expenses: $2.05B (raised from $1.9B )
- Non-GAAP Other Net Income: $17 million (no prior guidance)
- Non-GAAP Effective Tax Rate: 13% (no change from prior guidance )
- Diluted Share Count: Approximately 1.64B shares (no change from prior guidance )
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The Embedded segment revenue decreased 25% year-over-year to $927 million, with ongoing softness in the industrial market ; what specific strategies are you implementing to return the Embedded segment to growth, and when do you anticipate a meaningful recovery?
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While your Data Center GPU business is approaching the scale of your CPU business and delivered better-than-expected results , how are you addressing potential supply chain constraints to meet the robust demand, and what risks do you foresee in sustaining this growth into 2025 ?
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Given that you're seeing lumpiness in the Data Center GPU business due to dependency on a specific number of large customers , how does this affect your revenue predictability, and what measures are you taking to diversify your customer base to mitigate this volatility?
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With the AI accelerator TAM expected to grow at more than 60% annually to $500 billion in 2028 , how does AMD plan to capture a significant share in this rapidly expanding market, and what competitive advantages differentiate your AI solutions from those of established competitors?
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Despite strong top and bottom-line growth driven by record Instinct and EPYC product sales , the Gaming and Embedded segments experienced declines ; how do you plan to address the weaknesses in these segments to ensure balanced and sustainable growth across your entire portfolio?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024
- Guidance:
- Revenue: Approximately $7.5 billion, plus or minus $300 million, up 22% year-over-year .
- Non-GAAP Gross Margin: Approximately 54% .
- Non-GAAP Operating Expenses: Approximately $2.05 billion .
- Non-GAAP Other Net Income: $17 million .
- Non-GAAP Effective Tax Rate: 13% .
- Diluted Share Count: Approximately 1.64 billion shares .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Q3 2024
- Guidance:
- Revenue: Approximately $6.7 billion, plus or minus $300 million, with sequential growth of approximately 15% and year-over-year growth of approximately 16% .
- Non-GAAP Gross Margin: Approximately 53.5% .
- Non-GAAP Operating Expenses: Approximately $1.9 billion .
- Non-GAAP Effective Tax Rate: 13% .
- Diluted Share Count: Approximately 1.64 billion shares .
- Segment Revenue Expectations:
- Data Center and Client Segment: Expected to drive strong growth .
- Embedded Segment: Expected to be up .
- Gaming Segment: Expected to decline by a double-digit percentage .
- Acquisition: Expected to close the acquisition of Silo AI for approximately $665 million in cash during the third quarter .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: Q2 2024
- Guidance:
- Revenue: Approximately $5.7 billion, plus or minus $300 million .
- Non-GAAP Gross Margin: Approximately 53% .
- Non-GAAP Operating Expenses: Approximately $1.8 billion .
- Non-GAAP Effective Tax Rate: 13% .
- Diluted Share Count: Approximately 1.64 billion shares .
- Data Center Segment Revenue: Expected to increase by double-digit percentage sequentially .
- Client Segment Revenue: Expected to increase sequentially .
- Embedded Segment Revenue: Expected to be flat sequentially .
- Gaming Segment Revenue: Expected to decline by significant double-digit percentage sequentially .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: Q1 2024
- Guidance:
- Revenue: Approximately $5.4 billion, plus or minus $300 million .
- Data Center Segment Revenue: Expected to be flat sequentially, with a seasonal decline in server sales offset by a strong Data Center GPU ramp .
- Embedded Revenue: Expected to decline as customers continue to work down their inventory levels .
- Client Segment Revenue: Expected to decline seasonally .
- Gaming Segment Revenue: Expected to decline by a significant double-digit percentage year-over-year .
- Non-GAAP Gross Margin: Approximately 52% .
- Non-GAAP Operating Expenses: Approximately $1.73 billion .
- Non-GAAP Effective Tax Rate: 13% .
- Diluted Share Count: Approximately 1.63 billion shares .
Competitors mentioned in the company's latest 10K filing.
- Intel: Expanding its position in integrated graphics for the PC market with high-end discrete graphics solutions for a broad range of computing markets, which may negatively impact AMD's ability to compete in these computing markets .
- Nvidia: Added an ARM CPU offering which adds competition in the CPU market; expected intense competition from Nvidia in the supply of GPUs and other accelerators for the AI market .