Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Advanced Micro Devices Inc (AMD, Financial) reported a record third-quarter revenue of $6.8 billion, an 18% increase year-over-year, driven by strong data center and client processor sales.
- The data center segment revenue increased by 122% year-over-year to a record $3.5 billion, with significant growth in EPYC CPU and Instinct GPU sales.
- Gross margin expanded by 2.5 percentage points, and earnings per share increased by 31% year-over-year.
- AMD's client segment revenue grew by 29% year-over-year, driven by strong demand for Zen 5 notebook and desktop processors.
- The company raised its 2024 data center GPU revenue guidance from $4.5 billion to over $5 billion, reflecting strong customer demand and supply chain improvements.
Negative Points
- Gaming segment revenue declined by 69% year-over-year to $462 million, primarily due to decreased semi-custom sales as Microsoft and Sony reduced channel inventory.
- Embedded segment revenue decreased by 25% year-over-year to $927 million, with ongoing softness in the industrial market.
- Despite strong growth in data center and client segments, AMD's gaming and embedded segments experienced revenue declines, partially offsetting overall growth.
- The company faces a tight supply environment, which could impact its ability to meet growing demand, particularly in the data center GPU business.
- AMD's client business remains more consumer-weighted, which could present challenges in balancing ASPs and unit growth amid market fluctuations.
Q & A Highlights
Q: Lisa, you took up your '24 outlook by $500 million for the data center GPU business. What drove this change, and how are you thinking about growth in 2025 for Instinct between cloud and enterprise customers?
A: We had a strong quarter for the data center, especially for the Instinct product portfolio, completing important customer milestones and ramping above expectations. We raised guidance for the year to exceed $5 billion. For 2025, we see significant investment in AI infrastructure, with our product portfolio strengthening and customer engagements broadening, particularly with cloud and enterprise customers.
Q: Can you explain the factors affecting Q4 gross margin guidance and potential headwinds for 2025?
A: Our Q3 gross margin was 53.6%, and we're guiding approximately 54% for Q4. The improvement is driven by data center business growth. For 2025, data center growth, enterprise server expansion, and embedded business recovery will be tailwinds, while client business expansion, which is below corporate average, is a headwind. Operational efficiency improvements will also help.
Q: How has AMD's supply chain evolved to support the growth in data center GPUs, and what should we expect for 2025?
A: Our supply chain has ramped well, ensuring capacity across the board, contributing to higher-than-expected revenue in Q3. We anticipate a tight supply environment but have planned for significant growth in 2025, feeling confident in our supply chain capabilities.
Q: What are the expectations for the embedded business in Q4 and 2025?
A: We saw some improvement in Q3 and expect modest growth in Q4. The embedded business is mixed, with strength in test and emulation and aerospace and defense, while communications and industrial remain softer. We anticipate modest growth in 2025, with variations across subsegments.
Q: How do you view the competitive landscape for MI300 and future AI products?
A: MI300 has closed much of the gap with competitors, and MI325 and MI350 will compete well with upcoming products. The market is constrained, and our data center retrofit advantage aids ramping. Our roadmap is strengthening, and customer feedback is positive, indicating opportunities across AI workloads.
Q: How is AMD addressing the perception of being behind the industry leader in AI GPUs?
A: MI300 was initially behind H100, but we've closed much of the gap with our accelerated roadmap. MI325 and MI350 will compete well with upcoming competitive products. The market remains constrained, and our infrastructure compatibility aids ramping. Our roadmap is strengthening, and customer feedback is positive.
Q: Can you discuss the growth potential for AMD's data center GPU business in 2025?
A: We feel good about growth opportunities, though it may be lumpy due to large customer acquisitions. The third quarter exceeded expectations due to additional customer demand, and we anticipate similar dynamics in 2025.
Q: What is the outlook for AMD's client segment, considering potential consumer weakness?
A: Our client business is consumer-weighted, with a stronger second half due to product launches. We expect seasonality in the first half of 2025 but are optimistic about mid-single-digit market growth, AI PC catalysts, and Windows 10 end-of-support refreshes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
