AMD Q317 Results CEO Prepared Remarks

Author:Kyle Bennett

Date: Tuesday , October 24, 2017

AMD was kind enough to share its full prepared statement from CEO Lisa Su at its Q317 earnings call this afternoon.

AMD Q3 2017 Conference Call CEO Prepared Remarks

Q3 was a strong quarter for us, demonstrating the significant growth potential of AMD, driven by our high-performance products, leadership IP and long-term strategy.

Revenue increased 26 percent from a year ago to $1.64 billion. Gross margin also improved significantly year-over-year as we achieved profitability and generated positive free cash flow in the quarter.

Computing and Graphics Segment

We made excellent progress in the quarter and reported operating profitability for the first time in three years based on our leadership Ryzen processor and GPU product offerings.

We made excellent progress in Q3, as the continued success of our Ryzen family of CPUs combined with significant graphics growth resulted in a 74 percent increase in Computing and Graphics segment revenue year-over-year.

Client computing revenue increased by a strong double-digit percentage from a year ago as we expanded our Ryzen processor family and saw increased demand in the desktop market.

Ryzen 5 and Ryzen 7 processors have ramped well in the desktop channel market, reaching 40 to 50% desktop market share at strategic e-tailers worldwide. In addition, OEM adoption is accelerating as customers ramp shipments in advance of the holiday sales cycles.

In the quarter, we launched additional Ryzen CPUs, including:

- Ryzen 3 CPUs, expanding our reach in the mainstream and value market segments;

- Ryzen Threadripper processors, returning AMD to the High End Desktop Market;

- And Ryzen-PRO based offerings, which have been adopted by all major commercial PC providers including Dell, Lenovo and HP, expanding our presence in the commercial space.

Also in Q3, we qualified and began early shipments of our Ryzen Mobile processors, combining our "Zen" CPU cores and Vega GPU cores in a high-performance APU designed to power ultrathin and 2-in-1 notebooks. Acer, HP, and Lenovo plan to launch their initial Ryzen Mobile-based systems in the coming weeks and we expect an expanded assortment of premium notebooks to launch in Q1 2018.

In graphics, we achieved record GPU revenue in the quarter, based on significantly improved ASPs and higher unit shipments from a year ago. These financial improvements were driven by the launch of our Vega-based GPUs and strong demand for our Polaris products across both gaming and blockchain markets.

In the quarter, we expanded further into premium portions of the graphics market with new consumer and professional GPU solutions.

- Our Radeon RX Vega family of GPUs launched in the channel, targeted at the enthusiast-class gaming segment. Revenue from initial shipments of these products is significantly outpacing previous premium Radeon GPUs.

- Radeon Instinct MI25, our GPU compute solution, also began shipping in volume to mega cloud datacenter customers.

- And Radeon Pro WX 9100 professional graphics cards, targeting the high-end professional content creation market started shipping late in the quarter.

In addition, we saw expanded AMD Radeon adoption with cloud customers in the quarter, driven by our investments in GPU Compute.

Amazon Web Services announced that they have deployed AMD Radeon PRO technology to power Amazon AppStream 2.0, driving GPU accelerated cloud delivery of virtual applications.

We also announced a collaboration with Baidu to build more flexible and powerful AI computing platforms based on the deployment of our Radeon Instinct GPUs in their datacenters.

Enterprise, Embedded and Semi-Custom Segment

Revenue was approximately flat year-over-year and increased 46 percent sequentially. Sequential growth was based on a seasonal increase in semi-custom revenue, as well as growth in server revenue from our EPYC datacenter processors.

Our semi-custom business continues to perform as expected for the year, and we anticipate seasonal demand to remain healthy as our customers enter the holiday sales cycle with Sony’s PlayStation 4 Pro and Microsoft’s Xbox One X.

In our Server business, revenue increased from a year ago as we began ramping sales of our EPYC datacenter processors to key cloud and OEM customers.

Customer engagement with our EPYC processors is growing as the true performance and features of the new platform are tested and implemented, with Tencent and joining the list of datacenter customers planning to deploy EPYC processors.

In a short period, three of the "Super 7" mega datacenter providers have publicly announced plans to deploy EPYC-based products into their hyperscale environments, including Baidu, Microsoft Azure, and Tencent, and we have strong engagements with other major cloud providers.

In addition, HP Enterprise and Dell are in the process of bringing their first EPYC-based platforms to market in Q4 and we are actively engaged with them to accelerate testing and validation of EPYC-based systems in datacenters across a broad number of large and medium enterprise customers.

We remain confident and focused on the steady expansion of our datacenter presence over the coming quarters based on the high-performance and rich feature set of the EPYC product.

Close and Outlook

Additionally, as a part of our ongoing strategy to monetize our differentiated IP, we successfully closed a patent licensing transaction in the quarter.

We are very pleased with our third quarter results.

Throughout 2017, we have delivered significant year-on-year revenue growth and margin expansion as we achieved multiple major product, customer, and market milestones.

As we head into the final quarter of the year, we look forward to continuing to accelerate our business. 2017 annual revenue growth is now tracking above our previous estimates and we remain confident in our ability to make AMD one of the premier long-term growth companies in the tech industry.