AMD - Earnings call transcript Q4 2017 | Advanced Micro Devices, Inc.

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Operator

Greetings, and welcome to the Advanced Micro Devices Fourth Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Laura Graves. Please go ahead, Laura.

Laura Graves

and conference AMD’s call. much, fiscal quarter very XXXX year you welcome fourth to and Thank and and By opportunity copy release to you review CFO now, should a of have our slides. had the the commentary earnings

This Treasurer. website. If Senior Participants found is live page President, to the be they Chief Su Executive on President and conference today’s Vice at and not call via you dates our Kumar, website Lisa Officer will Investor Officer; will www.amd.com. and Su, reviewed our have AMD’s and on documents, highlight can important the replayed Lisa I a be you. these of of Financial call on like Relations Dr. for present a our are webcast couple Devinder Dr. Chief would Those Morgan statements on XX, Telecom Media quarter on time materially on will it. and could of XXth Today’s speak current at date, XXXX. beliefs, current as the involve and discussion Friday based quiet February statements current our to as on expectations, based business such, of our the the as results differ actual and forward-looking and close environment first begin uncertainties only cause we risks assumptions currently that from expectations. March Stanley and are see Technology, Conference contains

today’s on a in the which on financials call, refer our for and commentary, except GAAP are this are and both most cautionary earnings during for referenced posted to CFO basis. CFO note please release to measure information. financial non-GAAP commentary financial their release segment be we Please that press operational press and more to comparable Additionally, reconciled directly statements The measures in results, the referring website. will again, revenue non-GAAP GAAP

AMD’s September risk the discussions XXXX. our Form report and the with SEC, in detailed in XX, find for quarter also You’ll ended filings quarterly our particular, on factors about XX-Q

over call will hand that, with to the Lisa. Now, I Lisa?

Dr. Lisa Su

out And plan Three Thank reshape those and inflection great simplified computing to all XXXX customer a in AMD Laura. point a through key and relationships, strategic afternoon good to high-performance of listening product focused a strategy. set marked to financial business leader a deep products, today. you, for we ago, AMD. years and become

wave expanded newest products created profitability. XX% of significant of $X.XX for Fourth period, execution revenue the high-performance business our momentum last and Our margin over from consistent and gross improved ago we the quarter significantly grew and billion year our year.

resulting growth. full increased the billion, We For annual XX% by and full achieved $X we expanded revenue year, gross over in margin profitability. annual revenue year

the revenue CPU Zen the power fastest industry year-ago into our on consumer CPU family and in Vega AMD Ryzen the ultrathin market for of of with season. mobile Vega sales and holiday and growth, we notebooks. We Vega very In sellout GPU strength new into unit the Acer, We entire straight increased improved graphics, with portfolio. combining all strong the with our driven expanded product Computing at of throughout the the further Ryzen the continued increased Vega in increased seasonality a from and expected HP GPU significantly by both and year-over-year very in significantly outperformed XX% quarter available of delivered manufacturers ago. graphics income GPU we multiple quarter, five across year. Looking our systems double-digit top both graphics, than we strength year driving Lenovo the first QX, products. Graphics Client with sequentially. this computing GPU the in from of as the segment record second and for strong quarter, strong as our Ryzen add-in-board quarter. currently delivered CPU, ramp Radeon Graphics operating and mobile-based revenue from saw QX improved and results Polaris doubled well notebooks are the our We Ryzen sequential architectures our the product demand driven as of Ryzen with launched half a AMD’s revenue Radeon from Radeon ASP Pro, by introduction strategic based processor we unit And from PC across ever Apple processors Mac Computing Pro segment made, most revenue in Vega gaming processor Radeon products featuring revenue channel strong and more demand markets. OEMs. strong our the powerful gaming the prior iMac in blockchain new

package. up gamers We processor and graphics into an the shipments semi-custom complementary and integrated graphics premium opens This products also for began of a product more Radeon market extends buyers. high-performance PC GPU power a that Intel is to semi-custom of multi-chip new our

graphics quarter growing its business, to on provider. center highlighted data MIXX by best sales, Radeon professional ever, Our strong a cloud had based sales major Instinct,

than full new XX Graphics year, increased and and we For as Computing year, over CPUs the high-performance segment the revenue XX% more GPUs. launched prior

shipments and a Enterprise, education, segment. to the companies. We deploy our Revenue EPYC services year-ago, our Semi-Custom and from to server of unit processors. family closed high-performance dozens the and X% deals driven securing of our hosting Embedded and sequentially revenue design wins year-ago, increased server a processors. key qualify of market quarter, ramp financial in with new continues increased the and by from QX Turning EPYC as

recently which be based continue had the data floating see has data, sharing their services. Dell/EMC instance, their power cloud with announcements systems we to Virtual the powered workloads. by DLXXX and shortly. steady cloud quarter, computing deployed qualification storage to Machines, first ProLiant into as adoption. the several and in EPYC-based for also world We public L-Series of began launch And centers, platforms Baidu shipments phase single-socket AI, more will optimize GenXX AMD performance. EPYC big point plans completed their became records for Enterprise on server, set Azure AMD, Microsoft Hewlett drumbeat Packard key for of the EPYC a of volume

platforms OEM and customers. of our across center and data server with on hyperscale Our reentry remains track into the steady deployments market a ramp new

Our of console year the completed semi-custom as year-ago, unit performed game in from the as as a the shipments current business fifth expected quarter, declined we cycle.

I close, the has fundamental our address a facing security for industry. our always across issues products. Security focus I’d been to all Before recent is AMD, like and important

both design about We in the and security our product throughout are product vigilant lifecycle.

As protected. Meltdown, new and exploits arise, to like have we with we focus with dedicated and partners customers Spectre are and keep seen speed our and informed responding to

AMD As processors. not a reminder, applicable believe Meltdown to we is

For continue with mitigations, Spectre X, ecosystem partners patches to out. operating we roll system actively our working begun including that have on Variant

processors. believe Variant is to Spectre continue on difficult of that X We AMD to exploit

patches further in term, OS with additional provide changes processor that combination have Zen in included with exploits. However, Spectre future mitigation Longer updates starting potential steps. like X we microcode cores, address to are deploying design, our we CPU our

they we We desktop expand other increase closely from with processor collaborate as security in deliver users our made is premium graphics products threats completely full industry of we our set performance these pleased momentum results. XXXX, AMD we In expect Vega XXXX, market, continue desktop a highly new with portfolio and are competitive of will product rising on with to launched launches, the these highest Radeon which the product expanded as our the with reshaped wave year next to engine protecting quarterly processor. progress client graphics and portfolio activities expected a very go-to-market market industry’s In AMD to penetration. products. with Ryzen to and significant and summary, to vulnerabilities in committed arise. We new and In are our the we increase including AMD’s

architecture Zen+ mobile Our performance second for our processors desktop notebooks, Ryzen CPU, Vega generation based Ryzen XX-nanometer AMD our Radeon graphics. and on business with higher Pro

Radeon expect more throughout and XX In Vega Ryzen than We go-to-market retail our our for this launch learning. OEM XXXX. expanding first OEM year, are and plan notebooks. the to with Later graphics, also mobile Vega of products Vega line-up to GPU, machine X-nanometer our systems high-end expand we activities will into sample launch optimized new Radeon partners, our we

closely the to next the our GPU milestones generation will market, key systems continue machine cloud based continue platforms. server for vendors first In to completing addition, investments EPYC-based an work will their in In our space. X software development also and Zen compute the major ramp growing OEMs around on server generation to we with open demand increasing learning while ecosystem address we

in Our this year. share later Zen our the as X market segment. as achieving is about to towards our industry. server position design XXXX important results foundation we business premier is focused laid now excited one goals. this even in XXXX to with complete the double-digit and year a market customers and we be financial am XXXX journey significant for and remain will of AMD strong companies on defining more of long-term achieving growth clearly sampling our progress our long-term of I our goal we a ramp continue tech the solid

turn over call to to like some to financial would the I Devinder fourth color our Devinder? additional on performance. quarter Now, provide

Devinder Kumar

year-over-year Lisa. XX% revenue quarter you, every with a growth over on everyone. increasing revenue We XXXX. was And in of afternoon, Thank culminating year for of XX% XXXX fourth pivotal XXXX growth basis, good grew annual quarter in AMD. a the

the GAAP annual annual revenue profits Both margin XXXX posted gross while and the for operating XX% by overall time Computing set new, revenue and points noteworthy grew Embedded that products, six achieving first flat. the particularly year and percentage have In and we was on profitability the we of years. addition, segment Semi-Custom year. achieved X Enterprise, strong expanded Graphics model. Computing profitable high-performance in in was segments business long-term for for foundation strength for our and is it financial the Based and our the Graphics a

results a was $XXX agreement. GPU partially a increase ago. development turn products. expected, from significantly new, a was credit compared resulted expenses of product let received by declined driven Operating R&D CPU The credit grew tax was $XX primarily products. year percentage by points million loss in net related to million quarter of from as expanding revenue XX%, to XX% basis, compared operating revenue the earnings $XX year-over-year, and $X of technology investments, per share which our in Gross Radeon fourth X an of U.S. ago On by billion driven by a year-ago adjusted driven up offset sequential primarily for Net Now, million a or strong offset a a strong period. larger by for from Ryzen Adjusted demand were $XXX go-to-market ago. compared the better XXXX. to driven tax benefit computing and due of new million partially as of portion year-over-year, ago the me was $XX for EBITDA seasonally revenue X%, per up semi-custom and was XXXX $X.XX or million XX%, million, EBITDA $XXX and sales a graphics, onetime demand. and than new $XXX and high-performance lower reform, our coming margin diluted net was Operating of million. corporate to million million tax was $X.XX product and million $X margin Total to share year in income income a quarter. $X.XX year AMD to year result $XX R&D a of X% $XXX by

graphics to licensing due year Computing Semi-Custom fourth ongoing million operating million, our to revenue. the primarily desktop by $XX $XX R&D sales Computing revenue. a benefit quarter processors. partially Operating was income Graphics $XXX a due was driven and a product richer offset loss $XXX Radeon segment segment improvement to X% the results. absence income Embedded investments, down strong server Graphics to turning year and million, compared $XX year-over-year, gain year-over-year by revenue higher and was due $XX business up mix. The a XX% to up revenue a Now, and million ago, strong from was ago. from of and million was segment of of Ryzen million, Enterprise,

to Turning balance the sheet.

debt, prior secured the Total debt we flow to in year a revolving cash quarter. resulting and of long-term and cash line from credit $XXX cash of billion equivalents million down in cash $XXX Inventory deployed including of $XXX from million slightly significantly billion. the X% due prior $X.XX totaled repurchase million, our the from debt operations. XXXX. principal fourth QX $XX down reduction to $X.X of In the from at long-term end total million principal Our the was higher in quarter, quarter, was up of

for support in the sharply strongest times in million typically of ratio the leverage times And QX our quarter. from gross cash capital X.X XXXX. was Our higher has is XX Free at revenue. increased year, working due improved flow cash flow in flow from $XXX of million the XXXX $XX was million, to to free $XX quarter. prior negative end up cash

to turn highlight I to want revenue we are accounting guidance, adopting we recognition effective Before that XXXX. standard, the

standard method, this retrospective to the helpful is full We believe are investors. our adopting under which we most

XXXX, accounting XXXX full the annual change we of revenue the to to the impact For was expect and immaterial year impact on revenue. the immaterial be

For an ramp by the AMD increase to primarily billion, XXXX, GPU million, the plus strength of Ryzen approximately expects $XX first of year-over-year, be EPYC products. minus driven or quarter revenue the of XX% and $X.XX

QX For method, $X.XX under restated comparative accounting revenue QX revenue billion purposes, was was XXXX billion. the and new restated XXXX $X.XX

to to In approximately inventory XX%, approximately be higher expenses revenue. expect non-GAAP XX% up operating approximately addition, $XXX expense in and of million revenue, to interest other, we $XX be for non-GAAP of non-GAAP be and XXXX, support QX margin or million sequentially gross be to approximately taxes

double-digit XX% approximately non-GAAP For margin, operating greater XXXX, be revenue, XX% we annual non-GAAP than in to of expect revenue. percentage gross expenses growth

addition, a for In pretax approximately XXXX. of expect XX% rate we of summary, tax in progress XXXX. made income significant we In

with margin and expansion the achieved our profitability in pleased revenue outstanding delivered are year. the topline business momentum growth, and for We

make multi-generational, it model. financial our in session. and We high-performance back significant our With a continue goal And our invest target roadmaps. question-and-answer progress deliver to long-term profitability strong product to in we XXXX continue for turn to to that, increased towards revenue Laura, I’ll Laura? as is growth

Laura Graves

for our Thank question. Devinder. Operator, you, we’re ready first

Operator

proceed today with question. from Securities. question first your Mosesmann Our Rosenblatt coming instructions] Please Hans from [Operator is

Hans Mosesmann

and is Congrats the Can There quarter please you. for the guys. QX guide, Thank guide? moving puts you give Hi. on takes of us the and lots parts.

that I And so, think would helpful. be Thanks.

Dr. Lisa Su

question. the Yes, absolutely, for Thanks Hans.

that’s XX% revenue you So, products actually up And take Primarily, guidance year-on-year. new the significantly strength. due typical look if seasonality. our it’s to our than QX better at a was that,

business that’s the all fact sixth in cycle. and QX, of to down the Ryzen the up expect relative of QX So, GPUs, just we will in do to to that XXXX, see strong year semi-custom we’re EPYC We the and due contributing the that guidance. quarter the in first be

actually is So, year-on-year. product the over the if new XX% actually you strength, guidance take

Hans Mosesmann

year-over-year will the basis rest the seasonality way the And weaker is continue model semi-custom Okay. be for of of to that year, the a the to on that?

Dr. Lisa Su

Yes.

XXXX move units the revenue is be will compared There we to should on a the the year full and So, just where expect to seasonality in likely what semi-custom new the be you XXX. down with are will a basis, accounting will down. regulations to as bit due to over adjustment we cycle, be of an with

And first and call revenue it, bit bit less in a in half. revenue the more we see, half will let’s a the so, second

revenue your product of it very the the QX back see is year, the little in is But guidance, it profile. quarterly shift similar by for then bit your and again, to question, So, new we’ll strength. driven question a really on initial

Operator

from Wong Fargo. from is question coming David Our Wells next

line Your is now live.

David Wong

much. Thanks very

some product the from for -- Hans’ And XXXX? numbers particular Can of the dollars question, terms or growth momentum Ryzen or fourth revenue your sales on to Vega, us the on helpful. you sequential give absolute sales Lisa. new be quarter in feel and would any QX in answer in Following EPYC in

Dr. Lisa Su

David. Yes, absolutely,

So, had QX. a we very strong

it look was If at overall you up XX% business, year-on-year. the

strong. very underneath that, business the look Computing Graphics was you and If

clients, a a saw particularly very seasonality. we better up So, holiday. significantly Ryzen XX% That strong sequential had than was growth, on desktop

started graphics initial all lines. And we on strength side, on product also mobile. shipments We then, saw Ryzen in the

in Apple centers. as professional we strength the as into compute saw saw graphics in blockchain; GPU gaming for ramped we as So, Vega we also launched with our saw OEMs in strength processors; the some we well data strength channel as both we

Semi-custom as semi-custom So, sequentially. that’s were the puts the expected, overall, the and typical given those takes. was down And of again, business. seasonality

David Wong

half if seasonally might thanks. how of net have Great, weak up? debt in but might Devinder, do the expect grow so, first debt been go prepared And you much net in it will remarks your XXXX? And your mentioned

Devinder Kumar

Net mean net say you debt, by David, explain that debt, that? do you just when what

David Wong

full cash the first is your minus of half the during balance year. debt cash; Well, presumably,

Devinder Kumar

debt and of we levels $XXX said in would that repurchase debt to of because provided, some long-term the in we positive. million; XXXX down tune The the free be guidance XXXX did principal cash came we the flow

debt, the So, I you net would down of guess, if the at come to as get second we anything, look half it, as XXXX.

David Wong

debt But in the the any in hope net half? the happens what half, to first first

Devinder Kumar

business. invest in the Typically, we

the in the that purchase wafers expect the fund to inventory Lisa to ahead, prepared we’re business. product the and ahead be And to just guidance, up As with you of go momentum saw in talked I QX. business strength or about, obviously

Operator

you. Thank

Lipacis Our next Jefferies. from Mark question from is coming

Your line is now live.

Mark Lipacis

Thanks deployed I Can hoping Are color to sense you us now we cloud us environments? Lisa, question. more of the versus of get starting give into past you for taking take enterprise? could pilot EPYC was EPYC. little my programs in the on a give a getting production and

Dr. Lisa Su

pleased with the made Yeah, We where end the shift and customers. absolutely we've quarter. we starting nice Mark. fourth with announced OEMs We are in large we are think Look EPYC. progress now that are very qualified

in end very we design some at some And marquee customers. so, have wins seen nice sales

If those are services good. hosting across financial the you and look looking business, education,

in side, as the about publicly cloud as adopting well environments. talked Microsoft we their On EPYC have Azure cloud Baidu

we're We of to players some the with adopt the on a are number optimizations working and EPYC of there. cloud working other required

momentum. very with we're the pleased So overall,

number was for a major available qualifications being we some but with new of the cycle in in quarter. especially I qualification And sale. go that the the through, a we think here fourth look as we that actually through knew of always platforms there gotten closed December deals we've

Mark Lipacis

a was us sustainability give updates segment, extent you're contribution on that impressive it's you view then and by then of to your side, viewing C&G what side, very getting Ryzen sense of growth can was products that the the And Thanks, a on to the how growth. Can that. chain on us and block consistently versus Radeon? that's give you. driven sense of the on seems strong, Radeon so helpful. like thank any appreciate what It you

Dr. Lisa Su

Mark. Yeah absolutely

Graphic So, that And Radeon. grew look was if million it look across and Ryzen growth, about we $XXX and Computing I at on segment, the sequentially.

a into little many went the at channel is the did was in replenish I If certainly sure third of you GPUs, of going bit into then as are a the the strength growth, the chain the seen of it have And a that of about some and and block rest of to of other our December. dynamic strength and chain around graphics clearly, the When block low, channel forward, estimates two thirds are third Ryzen. very is see first environment. fluid a GPUs We $XXX look particular, We quarter. million. segments see look going you we as I'm market. that working we're the we're that

into general So, But guidance. some important all to to as for strong momentum our into and first is segments what's my QX go of that's the contributing be overall, GPU strong of we seeing and across nice in is which that Ryzen going think here. are us half the graphics XXXX we we're comments

Operator

Thank you.

coming Rasgon from is from questions. question Stacy Please Bernstein Research. proceed with next your Our

Stacy Rasgon

a give through margins -- maybe margin, the expect questions. QX year can year, a do around takes puts us gross as the you line on for to seasonality semicustom for Hi year on the lower us particularly through growth And way business first of the mix, and to are new gross particularly guys, you you is some around guiding lower give things above you QX. are giving guiding taking trough be feeling for margins versus go you the and gross of thanks some My example? on products the the we for little in feeling my can

Devinder Kumar

can I -- the maybe add. can Lisa then take Yeah

the semi-custom from ends one Lisa margin EPYC. products, will new some the And said And products new of sequential having benefit start add said, do business in the there. on there starting that. As XX% are momentum basis we in at I is overall, standpoint. we GPUs and a But incremental a as to Ryzen, the as off see is the up the the so year, the for from earlier the of particular recognized with year. well then Obviously, that thing be we the the margin what We've previously said with QX QX year compared timing to a it start is timing than expect semi-custom past Lisa good the I is revenue XX% that XXXX a a guide. up Starting the XX% from very and gets year's and in XX%. really think starting pleased greater

Stacy Rasgon

is I would gross margins? do you terms probably in QX so believe just trough say, a of

Dr. Lisa Su

go year the is with Clearly margin usually Stacy, good we XX% half -- because expect so that the business, a to are start. as we XXXX. first half weaker are do as led off business, we of of in the the we a ramp, consumer continue our we And is new products through will starting QX

So, that’s and the I going takes how puts think forward.

Stacy Rasgon

you. Thank

seeing I So, What enterprise in certainly this point, your time unusual saw would competitors in spending some less to the and those strength of my sustainable anything what know our QX. terms in the more you versus this I see enterprise are enterprise are markets you to terms or to at enterprise seeing unusual less. exposure year? or you went in ordinarily follow-up, standpoint, of understand expect strength your of

Dr. Lisa Su

market I is are ramp. say there market exposure we a more enterprise, wouldn’t activity amount qualifications question that where with and that’s is still with sort think that’s activity. cloud trend, would of is with a our market significant all so both I Stacy, of customers EPYC in our of about the segments and a say although lot mean necessarily Yeah and your relatively is there I is share low, I our EPYC,

and see rest should through and there go of fact that especially don’t for XXXX. will the grow so, we in as we QX, we EPYC we in was be QX drop-off And don’t strong expect QX example, see a that

Operator

Thank you.

Bank next your of Vivek from coming Please Merrill Arya from question Lynch. America Our proceed question. is with

Vivek Arya

on my outlook. growth question for congratulations the Thanks strong taking and

few For older my been know accounting methodology? been have times. first QX gross margin a it's what your a But would one, just under asked sales the a and clarification, I outlook

Devinder Kumar

adopting is to accounting QX we XXXX believe standard because guidance Vivek, we the helpful measure, this on QX and are is provided full restated most we XXXX investors for revenue under a the the have method, and -- the QX XXXX obviously revenue the what new we have the and retrospective restated good under XXX.

We XXXX and will part the the are QX XXXX trends XXXX. say look to up a new products QX probably restate let’s in QX as revenues the if you for standpoint, numbers, the of you and XX-K sequential quarter-on-quarter at largely the from that's the numbers, a on basis, compare

Vivek Arya

least I the seeing at double-digit the set for so at get of year you wide what strong plus and a growth very double-digit you means starting year? Alright. and XX% range, double-digit help some you’re year could level are a for asked the Lisa very that, space growth is very

Dr. Lisa Su

Yeah, are the year starting so we strong.

I think give you guidance. to color as a question your relates the QX it maybe little more bit on to

all Devinder forward-looking on XXX. said, We and are, as are we giving comments guidance

sort However, the relates the of revenue, is to as impact business. semi-custom it largest particularly really

little it’s As know, customer. custom a a unique our bit is you business singular because

actually would revenue recognition under take non-cashable with the we rules, revenue POs. so, new And

or sort thereabouts. in have XXX would that first a So of impact let's been guidance call million the quarter about it

help where might calibrate you we are. that so And

strength you, what the important be. we -- accounting product the the want at look be Vivek? that the factor but would also rule impact clear new anyway help Does most think I is you on to it,

Vivek Arya

price plus servers. and products, Yes, very and been Lisa has And for a XX% my large your to PCs sometime XX% between traditionally helpful. Intel very follow-up, delta in there

ahead been look so of that being you’ve benefit see had new you ASPs to can segments get historically? some where you’ve you much starting converge, you positioned the previously better in with than like are of products, not As the are you price

Dr. Lisa Su

Vivek absolutely. Yes,

and graphics albeit client are a So, the business, result and at products market. fact of covering we business full if in we as higher our now the XXXX the ASP year business the of that significant ASPs server the look definitely look end expansion are fairly, our the seeing a

So, well delta there we is that I competing very coverage. a but are given still that end delta the is of the expect converging our in product market. higher

Operator

you. Thank

Please Our is Suisse. from your John Pitzer coming next proceed with question. question from Credit

John Pitzer

guide results Lisa, been afternoon, the question. the margin ask thanks quarter, thought, especially has margin a now quarter in move the QX year-over-year have while a third the on less little quarter, and letting strong me I down. Good QX semi-custom bit the perhaps than in guys. sequential fourth strong would for improvement the into the both you on is gross gross and Congratulations leverage first and so and comes calendar as

gross of EPYC more as can Ryzen relative how far sort later XXXX mix a year been beyond? And get positive just you a percent know far into as Ryzen this influence effect, there’s are a understand to gross grows I on become and we of then margin Now being ramps of Ryzen lag margin? does of But XX where you to as target maybe on help XX, percent you long-term your the me before as as a dependent the mix.

Dr. Lisa Su

Sure.

of questions different lot a their John. So,

Let me try unpack to it there.

talk about of So, sort and let’s Ryzen and QX the of margin QX. sort both

that the starting On that probably flavor high be of our give over to terms XX% where product of client the XXs of will we new quarter the are first business you ramp, XXXX. and sort of we overall in QX percentage Ryzen expect of the in in Ryzen, a was

to improvement And its ramp and helps so, basis part that QX. from definitely of point QX our XXX sequential

new in graphics terms XX% then we overall Ryzen, our and as revenue in that of expect XXXX. new you our to EPYC QX nicely I ramp into of revenues, in about go they product if think were we take totality, and products

are QX QX fact bit margin have the to a down semi-custom QX from thing And different margin under because QX. getting due case of is this is result that as up that, seasonally actually guiding is And we leverage. a we think to to to typically are certainly the bit QX QX leverage quarter little which the I So, that’s in The little this XXX. we strong products. a is

up the basis that's so overall, still a we're margin, XXX And a but headwind on points.

So gist that kinds of gets to of question? the your

John Pitzer

there OpEx. I'm helpful about year, long-term still on any for full unusual expecting, on? that target. OpEx that's then calendar that's street meltdown And quarter then you're in a continue question the the significantly maybe sort spectre expenses is or No, guiding to but your above around first was And just And line OpEx. was the Lisa. of the Revenue where for going curious with second

So, opportunity can down your about or of OpEx should is long-term leverage? XX% target revenue that's we how overtime think come maybe on down comes and there that

Dr. Lisa Su

Yeah.

I so look, was We're guidance we our guiding XXXX see the to forward, XX% leverage. roughly XXXX, basis. you we And in as some we the were sort if right to we approximately low certainly So, to we of the which it XX%. year the off but XX%, model, at approximately software. looking of for do. investing of usually starting XX% to we're go I so QX full absolutely OpEx, key thing are to us. think new look a Calendar starting us more are products, is in then And for think in that's leverage investing in at that for long-term we're Granted quarter year relative are

unusual there related expenses no to and to that. relates spectre particular with are any it unusual expenses As meltdown,

are the in think product I business. believe we're what investing in believe that the afford strongly roadmap the we we We significant have is invest business. can given to the in and revenue we growth doing we

Operator

you. Thank

from Moore coming is question next Joe from Morgan Stanley. Our

now is line Your live.

Joseph Moore

Can product little see that semicustom the I you. into QX that you. you product going bit could semicustom Thank you've a going that you other Great graphics put companies or do products. compute the context and guess talk interesting revenues in if about working is be then together. the the announced wondering Intel to you I'm part just versus part? in of over course forward, things with the of thank few to

Dr. Lisa Su

Joe. Sure

we that Intel product was graphics products. the with So, semicustom announced

multistrip way this possible. a are marketing many as my and and in module them So, is excellent they selling and standing, Radeon what end From selling customers. get we're is to to as doing an more they're in then GPUs we're silicon it packaging to applications

Radeon standard And then places for so, how build will for we custom get And our we'll products, is do as strategy in possible. we own look as our many customers. build products

this QX. revenue with is discrete them see it graphics becomes I we said did is reporting Graphics that that their the be it's in to And packaged Computing products. to semicustom very as But actually from it revenue a similar chip some to and For graphics, initial segment. we're sold in

Operator

Certainly, you. is Ross coming Deutsche Bank. from Thank next from Seymore our question

live. Your line now is

Ross Seymore

dollar Lisa, back your you the absolute an one great on for that quarter 'XX was But you in Thanks revenues? year crypto you on any gave. fourth of is the give could incremental color full put It you what there it side the to whether amount to see of or way the things. contributed that just be believe

Dr. Lisa Su

Yeah absolutely Ross.

estimate. to hard is it So,

outside the our ramped compute had GPU lot of of is a Apple, important But or conversation because and is market, to just it's there a that market, our blockchain, of consuming of product of thought we from good given there of though, business GPUs, know forward. part to we about that, so, product fact What line, lot digit business the the in a about maybe as point a we lot want estimate was GPUs it before, is of in channel. it that it Vega it said, the an is mid-single sold the market, away in percentage intend now of see of just but our don’t movement ramp better pieces said call really to and little of is mean our our the GPU all revenue, same it take hard previously is it's I in are of I bit important our as it going line, I are forecast we sort work growth growth lot we we GPU those story. large blockchain I significant let's outside so through we it’s dynamic this, we a as higher standpoint some think the market sort business the of the market. are to that ramped but than channels we our crypto gaming of seeing from annual with really the I a players

Ross Seymore

that’s Perfect helpful.

to pre many much behind of because that adjustment, where relative the in As it guidance are higher you you the us than to, think go talking quarter, post said trying back saying, was $XXX about moving my about is and question these together follow-up, I stating Semi-Custom to the all wanted be? kind it I and the million to then sequentially, a get to expected answering a or your ASC about up tie just prior benefit. up business being Is fourth of sequentially it parts

Dr. Lisa Su

so may and me keep me we’re clear sure that Yeah, let make Devinder try here. --

I QX approximately or was $XXX the adjustments, the million relative was So, that million referenced to XXXX so. $XXX which

a won’t If quite million, we’re on it see. a seasonal that, $XXX be but at is would typically -- somewhat we normally you sequential less be in look bit and pattern a up it it a up we will quite Semi-Custom, basis, that are than so different down it

Operator

you. Thank

coming question Simpson Research. Arete next Our is from from Brett

Your live. line is now

Brett Simpson

question I start much. on had hash big Yeah, it's have to to the we being crypto, if QX. whole at I Ethereum the just so compute I a look I very of QX, January seen of a thanks the than in amount mean more added mean

between of is of CPU So, the division any sort there I the sort changed and how QX. GPU sort wondering, QX it balance am of or and in looking And what’s your the ramp thank the mix C&G foundry a at capacity man well? GPUs you. of have DRAM acute is as can you source at HBMX I just there support your shortages do partners here, to and moment enough to with the they

Dr. Lisa Su

right. Yeah,

client of we would but as strong se, or in are are -- point we this to there both so So, production. client are where silicon you’re the our about it than said not us, as memory. supplying we numerous board, are like business I bandwidth for you I shortages and are graphics, talking to partners true are be, are up the so business in GDDRX, crypto is question lower At and per Relative that us the talking well. memory think market the there our is grew QX, so limited we other whether relation foundry channel and in drivers sequentially and for look high about today, were there ramping GPU them businesses your both by sure graphics driver, the were across just to in about was one

work as through key memory factors and continue We partners be to XXXX. through will our that, go we that of with one certainly the

Brett Simpson

a Okay X XXXX, what XX your plans platform are nanometers there this much. being is and in for you foundry a X X-nanometer, based you nanometer ship on talk X about thanks on in your X And a delays are some seeing can with Intel or also year little about fairly just ramping CPU lot -- perhaps partners? you TSMC mean Can very I with talked nanometers. shortly delayed a follow-up on being also

Dr. Lisa Su

is a very So important us. relative to X, node for X

are products we to X-nanometer to said working in portfolios. have on will machine in before that active learning technology XXXX, We GPU be is CPU date, here Relative sample I we get about will developments GPU X across technologies. targeted actively the But in X what that our in and nanometer we the will CPU also a and we well. closer as until And talk we are that. very shipment production doing our

Operator

Our Baird. next from Tristan from question coming Gerra is

now Your line live. is

Tristan Gerra

Hi. Good afternoon.

the in segment from You’ve embedding your is How of in that I’m that get the profile that a the in GPU you And first business? of immediate contribution expect rest QX from strong half. in type also, mentioned of the your guidance? your margin to from very demand just trying aggressive are trend you guidance? QX terms blockchain of sense

Dr. Lisa Su

is So, as new I on we it QX across think our the guidance products. said really strength

the So, our GPU not strength Ryzen the that’s we do with business conversation, as factor. But CPU it’s just business and crypto across EPYC. blockchain see one as of well or rest

And we course, of the on the in fairly balanced demand into and into first overall be with the the visibility so and so I and pattern order account have what quarter good will that. forth. lead given current what So we take believe think we times we think we’re here

other it our drivers so and business product important is have believe including think is I in very but which to the a key dynamic an that is we So, and strong is right CPU very point we QX numerous watch driver. now the do crypto environment that closely guidance our

Tristan Gerra

up. Okay. And a as quick follow

this kind time should given EPYC, given more of any In point would year terms we is there or a expect year? would of that at of you throughout expect you at ramp inflection ramp any look this the quarter linear or any that

Dr. Lisa Su

of ramp as the we through steady go that expect do I year. EPYC

unit Our target is share the to mid-single-digit end of be XXXX. by at

there But we’d are ramp steady revenue significant year. would half we throughout of in so, be the expect And certainly, ‘XX. as a the from EPYC second

Operator

Certainly.

Our from coming next Srini from is Macquarie. question Pajjuri

Your line now live. is

Srini Pajjuri

squeezing in. you Thank for me

clarifications. couple a Just

accounting QX how and go as and QX as in But works historically you you’re I QX just it QX, the how QX. to change the of for First, kind I Devinder, in we curious QX? your guess, QX. flattish QX, in kind into of seasonality and up an how changes season, gave as explanation then am down and

So to trying how understand just accounting change the the impacts seasonality?

Devinder Kumar

significant it is half and our you QX. really to Yes, as to annually second you'll that obviously first from QX you wise in and see half timing I where within later used are year. where semi-custom the change then of from the revenue [indiscernible] to the going is see much that timing be impact. it in And that think more there It's is revenue earlier immaterial opposed towards and still the standpoint. But in QX acceleration have issue the QX not of the

typically when down is to So, seasonality semicustom up. QX is changes QX QX earlier, now as said Lisa QX and business to

Dr. Lisa Su

for add seasonality that though just would I question. But

quarter third a think first a flatter very little be to you'll of than I see is than fourth profile. perhaps higher see in quarter think we of you'll used be second little with to still We peak a I down. bit QX. what flatter quarter. second expect quarter And then would And higher of quarter now a profile sort bit high have

Srini Pajjuri

of why in just curious strong very to came you I'm sequentially? I Lisa, seeing flat have clarification to see as up QX, ramps. flattish. little ASP then another just Ryzen. looks And Great. they're benefit a ASPs but you're Obviously, would bit not expected on in only like

Dr. Lisa Su

sure. Yeah

when look you So, I think mix. ASPs at on actual dependent it's very the the

bit which little the ASPs so And the the underneath And were in more holiday X actually mobile some bit Ryzen X. beginning we the But a saw of because Ryzen saw than up. actually lower. season little the saw Ryzen because Ryzen weighted desktop desktop X the shipments mobile ASPs of of ASP pulled a up and has client lower that's ASPs sales we which to we a

business. So, overall, I of it's growth. we think But the saw strong mix the just detailed very

Operator

you. Thank

Ambrish Srivastava BMO. Our coming from from final question today

Your line is live. now

Ambrish Srivastava

front. to seasonality really same also that see on in expect QX? the to working year. because free capital had Hi thank a specifically you the question But very much. memory of had dynamic next so Should you on of on have a I in I you've flow then for And inventory just and solid trust and on cash for this you kind up dynamics the year that. tightness the build Good we guided year. is, that cash you've since earlier an my question free flow much in increase quarter

Thank please and some are if the of could takes there us help that? you what So, with you. puts

Devinder Kumar

think I are and at billion. was strong where our from the There then it's concerned an just the is typically and the then the that business the wafers revenue the is given first of pressure by from cash in a to upgrades second of the half it standpoint the on year. flow year gets in overall the fact better very support cash I $X.XX free million mean cash QX in and observed. ending $XXX rightly is quarter strong cash half

far As a to is working bit it's tell. as early capital concerned little

for depends upon your the higher it is the But standpoint. from done where to And are managing the guiding but to of balance the a the do from free managed supporting up. I I be XXXX revenue year. flow from for we pretty [ph] going how to cash points, the the the to positive I as feel have good ended well, very working very revenue levels. we capital the we being key good have it think stand how debt unfolds. business sheet Obviously, feel and about that do cash

Ambrish Srivastava

Okay. Lisa. And a quick follow you up for

learning for dollar terms or growth within are drivers impact at those to If you absolute for categories dollar you in of GPU rank EPYC the of this year, machine expect the look absolute order terms you what double-digit do which product Ryzen? this year. were in If

Dr. Lisa Su

and which Yeah very as say the ramp, notebook we so if for I Epic both significant Ryzen into would were to rank deployed that Ryzen order more those, form factor that. keen I are OE very

us, starting of more that also from I and sort are we base driver we other just two I but the given growth a strong machine learning just significant. the are with, are think are for where think CPUs

Laura Graves

you speaking joined again quarter Thank for to our appreciate We fourth and today. the you thank with everyone that’s who conference you, call. us you soon. Lisa, all call joining And presenter

Operator

wonderful have Thank you, a for today. your and line day. conclude today’s you at thank may you that disconnect time We participation this your just teleconference,

Advanced Micro Devices (AMD) 30 Jan 182017 Q4 Earnings call transcript