Advanced Micro Devices Inc Q2 2023 Earnings Conference Call Insights

Key highlights from Superior Micro Units Inc (AMD) Q2 2023 Earnings Concall

Administration Replace:

• [00:02:41] AMD stated its AI section income grew by greater than 7 occasions sequentially, pushed by the launch of the Intuition MI300X GPU.

• [00:13:29] AMD is executing effectively in opposition to its strategic priorities and expects the PC market to develop seasonally in 2H23.

• [00:20:30] AMD expects the shopper section to return to profitability in 3Q.

Q&A Highlights:

• [00:22:53] Matt Ramsay of TD Cowen requested how is AMD planning to attain its purpose of rising its Information Middle enterprise by 50% in 2H23, and the drivers of progress. Lisa Su CEO stated AMD is seeing sturdy demand for AI-related merchandise within the information middle, however there’s additionally some softness in cloud spend exterior of AI. The corporate expects a big ramp in 2H23, with progress weighted in direction of 4Q.

• [00:25:18] Matt Ramsay from TD Cowen requested for an replace on the MI300 program, together with buyer suggestions on the {hardware} efficiency and the way the software program work with lead clients will translate into different buyer deployments. Lisa Su CEO replied that AMD has made important progress with its ROCm software program stack and is getting constructive suggestions from clients on the efficiency of its MI250 and MI300 AI accelerators.

• [00:27:42] Aaron Rakers at Wells Fargo enquired if the Information Middle enterprise continues to be anticipated to develop double digits for the total yr, and if the implied income for 4Q is a 50% sequential improve. Jean Hu CFO replied that the information middle market is dynamic, with sturdy momentum for AMD’s product portfolio however continued softness within the enterprise market. AMD expects excessive single-digit YoY progress within the information middle market, with sturdy sequential progress in each 3Q and 4Q.

• [00:29:03] Aaron Rakers with Wells Fargo queried how AMD has managed the provision chain to satisfy the anticipated demand ramp within the information middle market, and the way AMD sees the provision chain for the remainder of the yr. Lisa Su CEO stated that AMD has been working with its complete provide chain to make sure ample provide for a ramp-up in 4Q and into 2024, together with wafers, backend capability, and particular parts for MI300.

• [00:30:26] Toshiya Hari of Goldman Sachs requested for an estimate of the proportion of AMD’s implied Information Middle progress in 4Q that’s attributable to supercomputing, and whether or not the Intuition collection is contributing to progress exterior of supercomputing. Lisa Su CEO stated AMD expects double-digit sequential progress in Information Middle income in 3Q, pushed by the ramp of Zen 4 server CPUs and enormous supercomputer wins. The corporate expects important progress in 4Q, pushed by the ramp of MI300 and MI250 accelerators.

• [00:32:38] Toshiya Hari with Goldman Sachs requested for an replace on the aggressive panorama within the Consumer enterprise, and whether or not there’s a path again to 20-30% working margins. Lisa Su CEO answered that AMD’s Consumer enterprise is rising because of its Ryzen 7000 collection processors and steps to enhance profitability, resembling optimizing its R&D footprint. The corporate has made its working bills within the Consumer section extra environment friendly whereas investing in AI and Information Middle for increased returns, and expects to return to twenty% working margins sooner or later.

• [00:35:26] Harlan Sur from JPMorgan enquired if the enterprise section, is predicted to contribute to the sturdy 2H progress profile of the Information Middle enterprise regardless of a continued muted surroundings in enterprise. Lisa Su CEO clarified that AMD is investing in its enterprise enterprise to capitalize on the expansion alternatives available in the market. The corporate is growing its go-to-market actions and investing in additional enterprise growth assets to succeed in extra enterprise clients.

• [00:36:20] Harlan Sur at JPMorgan additionally requested if AMD has thought of growing China-specific SKUs for its accelerated compute merchandise, given the numerous unmet demand within the area. Lisa Su CEO stated AMD is dedicated to complying with US export controls, however the firm sees a possibility to develop AI options for patrons in China.

• [00:37:42] Vivek Arya of Financial institution of America enquired if AMD’s GPU accelerator gross sales are about $500 million this yr, does that imply its server CPU gross sales are successfully flattish YoY. Lisa Su CEO replied that AMD’s GPU gross sales in 1H23 have been very low, however the firm expects to see important progress in 2H23, pushed by the ramp of MI300.

• [00:39:04] Vivek Arya at Financial institution of America requested about AMD’s particular edge within the industrial AI accelerator market, and the sustainability of it. Lisa Su CEO answered that AMD believes that its AI portfolio is exclusive and succesful, with a powerful {hardware} roadmap and a concentrate on software program optimization. The corporate sees a number of winners within the AI market, and is dedicated to being one among them.

• [00:43:00] Stacy Rasgon with Bernstein Analysis enquired how a lot of AMD’s This autumn Information Middle income progress is predicted to come back from MI300 versus CPU, and what does that suggest for seasonality into 1Q. Lisa Su CEO replied that AMD expects MI300 to ramp in This autumn 2023, with important income contribution from supercomputing and AI. The corporate expects early deployments within the first half of 2024, adopted by extra quantity in 2H23.

• [00:46:43] Joe Moore of Morgan Stanley requested how a lot will AMD’s embedded enterprise decline in 2H23, and is that this decline as a result of frequent infrastructure market or different components. Lisa Su CEO stated that AMD’s embedded enterprise is predicted to say no by double-digits sequentially in 3Q, because of weak point within the communications market and stock optimization. The core markets of the enterprise are holding up effectively.

• [00:48:56] Timothy Arcuri with UBS requested concerning the firm’s expectations for stock days in 4Q23, given the ramp of recent merchandise and the corporate’s purpose of normalizing stock days to 90-100 days. Jean Hu CFO stated AMD expects stock days to come back down in 3Q and 4Q, however it’s going to doubtless stay elevated at round 110-120 days as a result of lengthy manufacturing cycle for superior course of applied sciences.

• [00:50:19] Timothy Arcuri with UBS enquired if provide of MI300X is prone to be a bottleneck for AMD subsequent yr, given the excessive buyer curiosity and Cohost’s capability constraints. Lisa Su CEO replied that AMD has been working to safe important capability for MI300 throughout all the provide chain, regardless of the tight market circumstances. The corporate is dedicated to creating MI300 a big progress driver.