Advanced Micro Devices Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joshua Buchalter - TD Cowen - Analyst : Congrats on the results. I was hoping you may expand on the drivers of upside in both footprint and in particular, the guide. How should we think about 2Q growth by segment? And wanted to double-click on Client in particular. That business is up 67% year over year in the first quarter, and there's obviously a lot of concerns on pull-in. So I was hoping you could walk through some of the drivers of the strength in client in particular and how you're thinking about that in 2Q. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Thank you for that color. To follow up, I want to ask about how the ex-China X308 Instinct family performed in the quarter and how you're thinking about the back half of the year. I think you mentioned in the prepared remarks, significant double-digit year over year. Could you maybe provide some color on how Instinct did in the first quarter, how you're thinking about the first half ahead of the 350 ramp in next month? Thank you.

Question: Timothy Arcuri - UBS Equities - Analyst : Lisa, you said that Data Center GPU grew significant double digit, but it was like $600 million last March. So I would think that -- I mean, I think a lot of us thought it was going to be like $1.7 billion to $1.75 billion. So is that the wrong way to sort of interpret that? Because it seems like it more than -- it went up triple digits at least. So can you help us there? And also, I'm curious, the additional $100 million that sort of has to come out from the ban, does that all come out in September? Or is there some remnants to have to come out in the fourth quarter as well?

Question: Timothy Arcuri - UBS Equities - Analyst : Got it. And then Jean, just on the inventory, it was up a lot. Is that just due to ZT or is there something else happening there? Thanks.

Question: Harlan Sur - JPMorgan - Analyst : I know there's been a lot of focus in your upcoming MI350 series, Lisa, but MI400 next year is where you potentially close the competitive gap in a big way, right? You're bringing frontier class, model training, performance, GPU, and a rack-scale solution. More and more of the challenges has been standing up these rack-scale platforms, power, cooling, footprint, networking, connectivity, telemetry, et cetera, right? Lots of well telegraphed issues with standing up these rack-scale architectures. So as you shared your MI400 rack-scale solution architecture with customers, like what is the AMD team doing to potentially address the ease of these deployments with the MI400? And just in general, what's been the overall feedback been like on MI400?

Question: Harlan Sur - JPMorgan - Analyst : And then I continue to be impressed, I mean, seven consecutive quarters of strong year-over-year growth in your EPYC enterprise and on-prem

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Going back to kind of the Data Center business and particularly the GPU business. I think last quarter, you had alluded to the fact that you had expected the Data Center revenue to be roughly flat in the first half of the year. I guess if we were to take out the $700 million impact from China, would the expectation still be flat for the year? Is that a fair assumption?

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Okay. And then as a quick follow-up, kind of thinking about the gross margin, obviously, this quarter's guidance reflective of the charge that you're taking. Should we assume that in the back half with mix attributes to be considered, that you would see a return to that 54%-plus gross margin in the second half of the year? Is that a fair assessment?

Question: Thomas O'Malley - Barclays - Analyst : I just wanted to understand your view on system-based architectures and whether you feel like you have what you need right now. Obviously, Link 1.0 coming out, you can use third-party providers to kind of do the interconnect. ZT System does do a lot for you in terms of the system architecture. But from the interconnect side, do you think that you need more? Is that something that you're going to do internally, externally? Just want to understand where you think the portfolio is today and whether you can address system-based architectures with what you have today.

Question: Thomas O'Malley - Barclays - Analyst : Helpful. And then if we look at the full year, I mean, we'll get the units with the filing, but it looks like there's some material share gains here in the first quarter. When you look at the full year, just to level set us on share gains versus market growth, could you maybe talk about what you see the Client business growing at a base level? And then just obviously, it's difficult to kind of predict where share will go. But just any comments on what you're seeing thus far is a couple of points of shares kind of what you're seeing in the first quarter as well. We'll get a little more later, but mostly just on the market growth for 2025. Thank you.

Question: Vivek Arya - BofA Global Research - Analyst : Thank you. I had two questions as well. On the first one, just near term. Lisa, your GPU sales grew sequentially in Q1. How much was MI308 in that number? And if you look at 2025 overall, do you think GPUs can still grow despite this China headwind that you've mentioned relative to the $5 billion-plus you did last year?

Question: C.J. Muse - Cantor Fitzgerald - Analyst : I wanted to revisit your sections around Client. If you were to just flatten the Q1 actual, you would grow the business about 30%. You're obviously very bullish on taking share. You talked about huge tailwinds from ASPs. But curious, when you put it all together, how should we think about traditional seasonality into the second half, particularly with the potential of some pull-ins here in the first half?

Question: C.J. Muse - Cantor Fitzgerald - Analyst : Very helpful. And then I guess looking to next year, can you talk about 400 series and rack-level solution go-to-market strategy? You talked about kind of trying to obtain partners. Is there a certain number that you're targeting? And then how are you thinking about kind of getting through some of the learning curve challenges of getting the rack-scale working with OEM partners such that you can deliver that ramp in 2026? Thanks so much.

Question: Stacy Rasgon - Bernstein - Analyst : For the first one, given the China data center GPU headwinds in Q2 and Q3, do you think that GPU business actually grows year over year in Q2 and Q3? Understanding your comments for the full year on it, but do you think given those headwinds in Q2 and Q3, it can actually grow year over year?

Question: Stacy Rasgon - Bernstein - Analyst : Okay. So you do think it can grow year over year in Q3. Okay. For my second question, I wanted to ask about kind of the trends in Q1. So you said it was Data Center GPU was down, I guess, modestly in Q1 as expected. But again, if I go back to your sort of double-digit year-over-year comments, I mean, it couldn't have been any more than like $1.4 billion REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2025 / 9:00PM, AMD.OQ - Q1 2025 Advanced Micro Devices Inc Earnings Call in Q1 for and it feels like it's less than that, which means it would have been down at least 20% sequentially, maybe more, which also implies that the server CPUs in Q1 were up sequentially, which was also well above seasonal similar to Client. I guess what I'm asking is, are those trends correct? Am I modeling that correct? And I guess, what are the implications in that case of server CPU is actually up well above seasonal in Q1, given this environment?

Question: Ross Seymore - Deutsche Bank - Analyst : I'm going to go to the Embedded space. I know it's not the biggest one, but everything else has been addressed pretty detailed. You mentioned the second half getting up to year-over-year growth. It seems like that requires some significant double-digit growth sequentially in both quarters just to get the full half there. What gives you the confidence in that sort of ramp?

Question: Ross Seymore - Deutsche Bank - Analyst : Great. Thanks for that. And I guess as my last question would be on the OpEx side of things. You guided to the overall number for the second quarter, $2.3 billion. You said there's $50 million from ZT in there. Is that the entirety of the ZT side of things? Or what should we think for kind of full-year OpEx or the second half, however you want to discuss it?

Question: Joe Moore - Morgan Stanley - Analyst : One of the things your cloud customers have been talking about is this kind of growth in inference costs, the sort of reasoning models using a lot of inference compute and some tightness. Can you talk about that from AMD's perspective? Are you seeing that in your business? Does that change the focus that you have going forward?

Question: Joe Moore - Morgan Stanley - Analyst : Great. And then just an update on your thoughts on competing with custom silicon with ASICs in the AI space. Most of your largest customers also have a custom silicon offering. So will they invest in both AMD and ASICs? And just how do they decide how to apportion that investment?