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Advanced Micro Devices Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Revenue was a record of $3.9 billion, up 69% YoY, driven by strong growth, both AMD Instinct GPU and the fourth and the fifth generation AMD EPYC CPU sales.
- Revenue increased by 24% YoY to $7.7 billion in Q4, led by record quarterly Data Center and Client segment revenue.
- The company has made outstanding progress building the foundational product, technology, and customer relationships needed to capture a meaningful portion of the market, and believes this places AMD on a steep long-term growth trajectory led by the rapid scaling of its Data Center AI franchise for more than $5 billion of revenue in 2024 to tens of billions of dollars of annual revenue over the coming years.
- The company generated $1.3 billion in cash from operations and a record $1.1 billion for free cash flow in Q4.
- The company is seeing strong customer interest in the MI400 Series for large-scale training and inference deployments and remains on track to launch in 2026.
- Embedded segment revenue was $923 million, down 13% YoY, due to mixed end-market demand.
- Operating expenses were $2.1 billion, up 23% YoY, due to investments in R&D and marketing activities.
- Gaming graphics revenue declined YoY as the company accelerated channel sell-out in preparation for the launch of next-gen Radeon 9000 Series GPUs.
- The company expects revenue to be down by 7% sequentially, driven by seasonality across businesses.
- The company expects the Client business and the Embedded business to be down more than that, given the seasonality for those businesses.
- Revenue is expected to be down sequentially by 7%, driven by seasonality across the businesses.
- The company expects to sample lead customers this quarter and is on track to accelerate production shipments to mid-year.
- The company expects the non-GAAP gross margin to be approximately 54% in Q1, non-GAAP operating expenses to be approximately $2.1 billion, non-GAAP other net income to be $24 million, non-GAAP effective tax rate to be 13%, and the diluted share count is expected to be approximately 1.64 billion shares.
Q&A Highlights from Advanced Micro Devices Inc Earnings Call Q4 2024
- Analyst asked about AMD's guidance for Q1, specifically regarding the expected decline in Data Center revenue.
- AMD's Q1 guidance is down 7% sequentially, with Data Center revenue expected to decline by a similar amount. The company expects the Client and Embedded businesses to decline more than the corporate average, while Gaming is expected to decline less. This is due to the seasonality of those businesses and the fact that AMD is coming off a year with a lot of inventory normalization.
- AMD's Q1 guidance is down 7% sequentially, with Data Center revenue expected to decline by a similar amount. The company expects the Client and Embedded businesses to decline more than the corporate average, while Gaming is expected to decline less. This is due to the seasonality of those businesses and the fact that AMD is coming off a year with a lot of inventory normalization.
- Analyst asked about AMD's competitors and their pricing strategies.
- AMD assumes that the server CPU market is very competitive, but the company has the best lineup portfolio, including Turin, Genoa, and Milan, which provide the best TCO for customers. AMD is confident in continuing to drive the service CPU business, growing both in units and ASP, and gaining share.
- AMD assumes that the server CPU market is very competitive, but the company has the best lineup portfolio, including Turin, Genoa, and Milan, which provide the best TCO for customers. AMD is confident in continuing to drive the service CPU business, growing both in units and ASP, and gaining share.
- Analyst asked about the company's expectations for the Data Center segment in Q4 2024.
- The company expects the Data Center segment to perform consistently with the second half of 2024, both for the server and Data Center GPU businesses.
- The company expects the Data Center segment to perform consistently with the second half of 2024, both for the server and Data Center GPU businesses.
- Analyst asked about the company's ability to grow at a 60% CAGR in 2025, compared to the $5 billion-plus it did in 2024.
- The company expects to provide guidance for the Data Center segment in 2025, with some qualitative color on the progress between the server and Data Center GPU businesses. The company believes that the demand for AI compute is strong, and the Data Center accelerator TAM is upwards of $500 billion by 2028. The company is confident in its roadmap and sees the business growing to tens of billions in the next couple of years.
- The company expects to provide guidance for the Data Center segment in 2025, with some qualitative color on the progress between the server and Data Center GPU businesses. The company believes that the demand for AI compute is strong, and the Data Center accelerator TAM is upwards of $500 billion by 2028. The company is confident in its roadmap and sees the business growing to tens of billions in the next couple of years.
- Analyst asked about AMD's perspective on the news from DeepSeek, specifically regarding the rate and pace of innovation in the AI world.
- Lisa T. Su, CEO of AMD, stated that the DeepSeek announcements, including the Allen Institute and Stargate, demonstrate the rapid pace of innovation in the AI world. She believes that the advancements in models and algorithms are good for AI adoption, as they allow for less infrastructure and more deployment of AI compute. Additionally, she emphasized AMD's commitment to open source models and the rate of adoption in that space. She also addressed the ASIC discussion, stating that different types of compute, including CPUs, GPUs, ASICs, and FPGAs, are necessary for the diversity of AI workloads.
- Lisa T. Su, CEO of AMD, stated that the DeepSeek announcements, including the Allen Institute and Stargate, demonstrate the rapid pace of innovation in the AI world. She believes that the advancements in models and algorithms are good for AI adoption, as they allow for less infrastructure and more deployment of AI compute. Additionally, she emphasized AMD's commitment to open source models and the rate of adoption in that space. She also addressed the ASIC discussion, stating that different types of compute, including CPUs, GPUs, ASICs, and FPGAs, are necessary for the diversity of AI workloads.
- Analyst asked about the shape of the first half of 2025 Data Center GPU ramp, specifically if it has changed over the last few months and is related to the pulled-in timeline.
- Lisa T. Su stated that AMD has gotten more positive about the 2025 Data Center GPU ramp, with the MI350 Series being pulled into the mid-year timeframe being an incremental positive. She also mentioned that the shape of the first half is similar to what was expected before, with new AI design wins for MI300 and MI325 in the first half of the year and larger deployments of training and inference expected for the MI350 Series.
- Lisa T. Su stated that AMD has gotten more positive about the 2025 Data Center GPU ramp, with the MI350 Series being pulled into the mid-year timeframe being an incremental positive. She also mentioned that the shape of the first half is similar to what was expected before, with new AI design wins for MI300 and MI325 in the first half of the year and larger deployments of training and inference expected for the MI350 Series.
- Analyst asked about the drivers of the strength across desktop, notebook, and enterprise in Q4, as well as the company's thoughts on inventory buildup and client revenue outperforming the broader PC market in the second half of 2024.
- Lisa T. Su, CEO of AMD, explained that the company's Client business performed well throughout 2024, with Q4 being a very strong quarter. She attributed the strength to a combination of factors, including the launch of new gaming CPUs and the strong adoption of AMD's products. She also noted that the company doesn't believe there is a substantial inventory buildup and that the strong performance is due to the company's products.
- Lisa T. Su, CEO of AMD, explained that the company's Client business performed well throughout 2024, with Q4 being a very strong quarter. She attributed the strength to a combination of factors, including the launch of new gaming CPUs and the strong adoption of AMD's products. She also noted that the company doesn't believe there is a substantial inventory buildup and that the strong performance is due to the company's products.
- Analyst asked about the company's efforts to drive customer adoption of its overall AI platforms and the feedback on its AI networking architectures.
- Lisa T. Su explained that networking is an important part of the AI solution and that the company has been investing and spending a lot of effort with its customers and partners. She mentioned that the company has been working closely with its partners on Ethernet technology and is developing its own in-house AI NIC. She also noted that the company is standing up full rack solutions at both the MI350 level and in the MI400 Series.
- Lisa T. Su explained that networking is an important part of the AI solution and that the company has been investing and spending a lot of effort with its customers and partners. She mentioned that the company has been working closely with its partners on Ethernet technology and is developing its own in-house AI NIC. She also noted that the company is standing up full rack solutions at both the MI350 level and in the MI400 Series.
- Analyst asked about the company's guidance for flattish GPUs in the first half of 2025 compared to the second half of 2024 and whether it would result in a sequential decline in Q1 and Q2.
- Lisa Su clarified that the guidance was for double-digit growth, not strong double-digit growth, and that the Data Center segment was up 9% sequentially, with the Server segment seeing more growth. She also mentioned that some models may be underestimating the Q3 Data Center GPU number, and that the guidance is for a roughly flat performance in the first half of 2025 compared to the second half of 2024, with some variation depending on deployment schedules.
- Lisa Su clarified that the guidance was for double-digit growth, not strong double-digit growth, and that the Data Center segment was up 9% sequentially, with the Server segment seeing more growth. She also mentioned that some models may be underestimating the Q3 Data Center GPU number, and that the guidance is for a roughly flat performance in the first half of 2025 compared to the second half of 2024, with some variation depending on deployment schedules.
