AMD Conference Call CEO Prepared Remarks

AMD's CEO, Dr. Lisa Su, started the financial call with the following report:

2019 marked another major milestone in our multi-year journey. We delivered record annual revenue of $6.73 billion and significantly increased both gross margin and net income as we successfully introduced and ramped the strongest product portfolio in our 50-year history. We grew client and server processor annual revenue by $1.5 billion in 2019, driven largely by the strong demand for our 7nm Ryzen and EPYC processors powered by our “Zen 2” processor core. Looking at the fourth quarter, we ended the year very strong with quarterly revenue increasing 50 percent year-over-year to a record $2.13 billion while also significantly increasing net income.

Computing and Graphics Segment

Fourth quarter revenue increased 69 percent year-over-year to $1.66 billion. Ryzen processor adoption accelerated sharply in 2019, helping to drive significant double-digit percentage increases in client processor annual unit shipments, ASP and revenue. We ended 2019 with our highest quarterly client processor unit shipments in more than six years based on strong demand for Ryzen desktop and mobile processors. In desktop, we had a very strong holiday period as our 2nd and 3rd generation Ryzen processors consistently held top sales spots at the largest global etailers and retailers. We launched our Ryzen 3950X processor and the 24 and 32 core versions of our 3rd generation Ryzen Threadripper processors in November. Our 16-core Ryzen 3950X processor is the world’s fastest mainstream desktop processor, while our latest Threadripper CPUs offer unmatched performance for the high-end desktop market. In January, we expanded our leadership position in the HEDT market with the launch of our flagship 64-core Ryzen Threadripper processor which is the world’s highest performance desktop processor.

In mobile, we had our eighth straight quarter of strong double-digit percentage year-over-year revenue growth as we expanded the number of AMD-powered laptops available from major OEMs. We began shipping our Ryzen 4000 mobile processors powered by our “Zen 2” core at the end of the fourth quarter. These new processors double the performance-per-watt of our prior generation and deliver leadership single threaded, multithreaded and graphics performance for thin and light notebooks, while enabling the industry’s first ultrathin laptops with 8 cores. Initial systems featuring the Ryzen 4000 processors are expected to launch later this quarter and more than 100 AMD-based consumer and commercial laptops are planned for 2020 from Acer, Asus, Dell, HP, Lenovo and other major OEMs.

In graphics, fourth quarter unit shipments grew by a strong double-digit percentage year-over-year, driven by sales of our Radeon RX 5000 series GPUs featuring our new RDNA architecture. We further expanded our portfolio of RDNA GPUs with the introductions of the 5500XT and 5600XT desktop graphics cards, highlighted by strong third-party reviews that clearly establish the 5600XT as the most powerful gaming GPU available for under $300. We launched our RadeonTM 5000M mobile GPUs in the quarter as well, and we are seeing solid design win momentum based on their strong performance and power efficiency. The first laptops powered by the new GPUs are available now – including the recently updated Apple MacBook Pro – and we expect many more notebooks featuring our Radeon 5000M GPUs to launch throughout 2020.

Data center GPU revenue increased sequentially driven by cloud VDI and game streaming deployments. We announced a major update to our open source GPU computing software stack in the fourth quarter featuring performance optimizations, expanded development tools and support for the most popular machine learning frameworks. We continue making strategic software investments to make it easier for developers to tap into the full capabilities of our Radeon Instinct accelerators for HPC and AI applications. For the year, data center GPU revenue grew by a strong double-digit percentage as we continued to make progress growing our presence in this important part of the market.

Enterprise, Embedded and Semi-Custom Segment

Revenue of $465 million increased 7 percent year-over-year as EPYC processor revenue growth offset declines in semi-custom revenue. Semi-custom sales continued to soften in the quarter in advance of the next-generation console launches from Sony and Microsoft planned this year. For 2020, we expect first quarter semi-custom revenue to be negligible and the ramp of next-generation semi-custom products to start in the second quarter with revenue to be heavily weighted towards the second half of the year.

In server, revenue grew by a strong double-digit percentage as unit shipments and ASP increased sequentially driven by demand for our 2nd Gen EPYC processors. Our 2nd gen EPYC processors are ramping significantly faster than the first generation as we see particularly strong pull for our higher core count models where our performance and TCO advantages are the most significant. Cloud adoption with the largest providers continues to accelerate, driven by the expanding use of EPYC processors to power their critical internal workloads as well as a significant increase in the number of AMD-powered instances publicly available. Shipments to cloud providers increased sequentially by a significant double-digit percentage to support expanding buildouts at Amazon, Google, Microsoft, Oracle and Tencent. Microsoft announced the availability of four new virtual machines and AWS announced two new EC2instances powered by 2nd Gen EPYC processors. In the enterprise, Dell began shipping their full portfolio of servers powered by our latest EPYC processors. We have doubled the number of EPYC processor platforms in market to more than 100 offerings in the quarter. These new platforms are driving increased enterprise customer engagements, broadening our sales pipeline considerably. In HPC, we secured multiple large wins in the quarter based on our unmatched performance and scalability, highlighted by French, German and UK national supercomputing center deployments as well as the San Diego Supercomputing center.

We are pleased with the significant traction and momentum in our server business and remain on track to achieve our goal of double-digit percentage unit share by mid-year based on the growing demand for our 2nd Gen EPYC processors.

Summary

I am very proud of our 2019 accomplishments as the successful ramps of our latest Ryzen, Radeon and EPYC processors resulted in record annual revenue and substantial increases in gross margin and net income. I want to take a moment to recognize the more than eleven thousand AMDers around the world whose focus and determination enabled us to achieve these results.

We enter 2020 well positioned to continue gaining share across the PC, gaming and server markets based on having an unmatched portfolio of leadership products spanning from desktops to laptops, data centers and game consoles. With more than twenty 7nm designs in production or development, we are very excited about our next wave of products that can accelerate our growth in 2020 and beyond.

We are still in the early stages of our journey and remain focused on meeting our commitments as we establish AMD as the high-performance computing and graphics leader.

AMD's FY2019 Financial Report AMD Conference Call CFO Prepared Remarks
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  • phr3dly - Tuesday, January 28, 2020 - link

    The stock is up 80% since October. Lots of great news is already baked into the price. Reply
  • WaltC - Tuesday, January 28, 2020 - link

    Only speculators buy the stock then dump weeks later...;) Up and down share price volatility, especially in microcosm, tells us almost nothing about a given company. Only amateurs react to every little up and down, etc.

    Interesting that Intel is hit with yet another major CPU architecture vulnerability that affects at least everything Intel shipped in the last five years--object lesson on the perils of milking, I guess.

    https://cacheoutattack.com/CacheOut.pdf
    Reply
  • Shlong - Thursday, January 30, 2020 - link

    I bought AMD at $8 and sold it when it got to the $30's. Then I bought Tesla in the $200's and sold it a few weeks ago in the $500's. Now it's trading at $650. Reply
  • Dr. Swag - Tuesday, January 28, 2020 - link

    I believe the reason is that their forecast for Q1 2020 is lower than people thought they would put it at Reply
  • Targon - Tuesday, January 28, 2020 - link

    Their forecasts are foolish and neglect things like seasonality. Q1 2019 to Q1 2020 makes more sense than expecting that sales will be generally steady with some blips upward for product launches. When revenues come from selling products, then the buying cycle for buyers needs to be understood.

    If there are a lot of computer sales for "back to school" and for the holiday season, you have to understand that the OEM computer makers need to buy parts well before that time, on the order of six to nine months. Laptop chips may be sold to OEMs in February but not available to customers until May or June(three months for the OEM to prepare new product models plus QA), then the products go out through the distribution channel to the sellers. It's not as quick as parts that are sold directly to consumers(desktop processors).
    Reply
  • psandeep - Wednesday, January 29, 2020 - link

    Seasonality makes sense when talking about established players that have low variations in market share. Expectations from AMD are higher given the hype (justified) around their products. They are supposed to be improving with every quarter. A lot of folks believe that AMD can produce as much as the customers are willing to order, which is not as straightforward as it seems. Reply
  • Dr. Swag - Wednesday, January 29, 2020 - link

    I'm kinda confused by what you're saying. They definitely take seasonality into account as evidenced by the fact that their forecasts were lower than what amd reported for q4. It's just that what they had expected amd to forecast for q1 is lower than what amd actually forecasted Reply
  • tipoo - Tuesday, January 28, 2020 - link

    10% growth in Epyc was smaller than expected given all the balls in their court Reply
  • DiHydro - Tuesday, January 28, 2020 - link

    I don't think that is terrible for a segment that traditionally doesn't seem have a lot of room for growth. I feel that many datacenter and enterprise buyers are hesitant to change quickly, and are not buying new systems every year. Or if they are buying systems every year it's to replace what they already have. Reply
  • phr3dly - Tuesday, January 28, 2020 - link

    This is so true. We are putting together a large PO now, but it will probably end up being for Intel systems. Why? Because our previous systems are all Intel, and moving to Cascade Lake from Skylake is super easy from a qual process. And moreover while we're "enterprise" we aren't *so* enterprise that our vendor will give us a bunch of machines to evaluate.

    So while I'm confident we'd get far more bang for our buck with an Epyc 2, our IT director is confident that he can get the same machines we have today with an updated CPU, and get it installed with a working OS image with very little effort.

    That means I have another year to find some Epyc systems to get in-house to benchmark with our load. Next January's PO might be for AMD.
    Reply

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