$AMD @AMD Q3 2022 Results, thread:

GAAP YoY
➡️ Revenue $5.56B (+29%)
➡️ GM 42% (-610bps)
➡️ OpEx $2.43B (+113%)
➡️ OpIncome -$64m (-107%)
➡️ Net Income $66m (-93%)
➡️ EPS $0.04 (-95%)
Non-GAAP YoY
➡️ Revenue $5.56B (+29%)
➡️ GM 50% (+150bps)
➡️ OpEx $1.52B (+47%)
➡️ OpIncome $1.26B (+20%)
➡️ Net Income $1.1B (+23%)
➡️ EPS $0.67 (-8%)
Revenue below expectations due to macro and inventory correction.
Data Center YoY

➡️ Revenue $1.6B (+45%)
➡️ Op Margin 31% (+300bps)
➡️ Op Income $505m (+64%)
10th straight quarter of increased server CPU sales
Cloud revenue doubled YoY, 70+ AMD Instances in Q3
OEM Down due to match sets, macro slow
Record sales FPGA from Cloud and Financial
Client YoY

➡️ Revenue $1.0B (-40%)
➡️ Op Margin -3% (-3200bps)
➡️ Op Income -$26m (-105%)
Below PC Consumption, reduced downstream inventory
Desktop channel sell-through grew, launch of Ryzen 7000/AM5
Ramp in Q4 with new motherboards
Gaming YoY

➡️ Revenue $1.6B (+14%)
➡️ Op Margin 9% (-700bps)
➡️ Op Income $142m (-39%)
Strong semi-custom sales, decline in graphics
6 straight quarters in semicustom graphics
Soft consumer demand and focus on reducing downstream GPU inventory
RDNA3 launch next week, 5nm chiplet
Embedded YoY

➡️ Revenue $1.3B (+1549%)
➡️ Op Margin 49% (+1900bps)
➡️ Op Income $635m (up from $23m)
Growth from Aerospace, Automotive, Telco, demand strong
Enables differentiated capabilities
New North America 5G and wired deployments
Q3 Balance YoY

➡️ Cash $5.6B (+$2.0B)
➡️ Accounts receivable, Net $3.34B (+$2.1B)
➡️ Inventories $3.37B (+$1.47B)
➡️ Total Debt Principle $2.5B (+$2.2B)
➡️ Total Debt, Net $2.47B (+$2.15B)

Cash flow from ops, $965m
FCF $842m
Repurchased $617m common stock
Non-GAAP Outlook
➡️ Q4 Revenue $5.5B +/- $300m (+14% YoY)
➡️ Q4 GM 51%
➡️ Q4 OpEx $1.55B (28%)

➡️ FY $23.5B +/- $300m (+43% YoY)
➡️ FY GM 52%
➡️ FY OpEx 25%
Q: Wells Fargo - Client down in Q3, work through inventory, how think about where the bottom is?
A: PC biz been volatile, underperformed in Q3. Q4 guided PC down again, that will be significant. Monitor macro, but exit year in better place.
Q: Server supply for ramp?
A: Been ramping, made progress through year. More supply in Q4 than earlier in year. Some investments coming online Q4. Into 2023 with Genoa not to be supply constrained.
Q: Goldman Sachs - Outlook for 2023 in Server, how think +ve against macro? Grow 20-30% range?
A: Little early to talk. In nearterm, some macro headwinds in all markets. It varies by segment - NA cloud is most resiliant, AMD is strong, good progress. Into 2023, expect growth
A: China has been weak in 2022. Not forecasting recovery in 2023. On Enterprise, most impacted by macro, have seen customers take longer to make decisions. Feel good about product portfolio, even with choppy market, can gain share. DC trend are good.
Q: GMs still 300bps down in Q2, client is down, but server and embedded is up. From a mix, should be better, what's driving margins down?
A: Client margins coming down - Q3 all biz in line except client. In DC, Cloud has lower ASPs. Some new capacity from supply, there some additional costs from the agreements, they are baked in.
Q: Stacy - Extra week in Q4 driving extra revenue?
A: Not really counting on it. Plus and minus in quarter, Q4 guidance is based on gaming and PC being lower. Also holidays. DC and embedded are higher, but not expecting material impact.
Q: Units vs pricing. In Q3, is client margins come down, how did units vs pricing do and into Q4.
A: Look at 3Q. Lots of dynamics - market was weak, consumer was weak, our footprint most in quarter. Units down, ASPs also down.
A: ASP is still up YoY, been discplined in the pricing environment, did see dynamics in Q. Continue to watch. Q4 expected to be competitive, embedded that in the guide.
Q: Bank of America - What is the client revenue for Q4? $800m-$900m? What does client recovery look like - $2B? Competitor suggested client TAM only down 4-5% in 2023. How to derisk the model?
A: In Q4, we're guiding modestly down for client and gaming. Coming off a low Q3 base. Also correct inventory, so we're going to undership consumption in Q4. For 2023, lots of factors - this year PC down almost 20%. Next year, down single digits would be good, to 10%.
Q: On Gross Margins - how much are the right-off or pricing actions in Q3 and in Q4 will they recover in Q1?
A: Look at Q3 solo, came in 50% GM, we had $160m charges, if you adjust for those, the margin in Q3 is 52%. We guided to 54%, came in at 52%, due to weak client PC market and client margins down.
Rest of business went to expectations. Feel good about products, increase margin, guide 51%, go from there.
Q: Cowen - DC segment. Look back to pre-announcement, came in a little bit under. Cloud revenue is still double YoY, can you break down DC between cloud strength, but there were some enterprise headwinds on HPC from CPU/GPU.
A: Focus on Q3, cloud did more than double. Enterprise was down. GPU side, had strong Q in 3Q in 2021, that was down too. NA Cloud is best DC segments, some macro but resiliant. Market share is very good there, expect to grow.
As Biz is more cloud weighted, that tends to have downward pressure on margins. But focus is on footprint on cloud and enterprise. Positioned well for platforms.
Q: Super dynamic in PC market - demand changes a lot. How did Q progress from original guidance? How quick did you see it, how does this impact monitoring inventory or operational changes?
A: Very volatile. Weaker than expected - consumer is where we are weighted and that was weak. Overall macro econ has also weakened, customers have become more cautious. Sell through inventory but not replenish stock to same levels.
Previously wanted to gain inventory - but situation is dynamic. Better relationships in supply chain, market remains volatile. All biased towards reducing inventory levels.
Q: Morgan Stanley - Visibility in embedded/Xilinx?
A: Embedded biz done really well, strong Q3. See growth in Q4. Been focused in the sub-segments. It's very broad - comms was up, aero was up, auto was up. Some weakness in consumer. Some subsets of industrial was weaker.
Still supply constrained on legacy nodes, but progress on supply in Q4. Multiple Q visibility due to long lead times. Also gained share.
Q: Deutche Bank - Q4 down modestly in client and gaming. Visibilty for DC?
A: On absolute, flat to Q4. Modest decline with gaming, expect gaming to be down in Q4 but that's offset with new graphics launch. In DC/Embedded, roughly same, modest flat to plus.
Q: OpEx, desire to stick to Analyst Day biz model, vs gaining market share and new products? Are buffers conflicting?
A: Continue to invest in strategic areas. Roadmaps, supply. Slowed down hiring. Remain disciplined. Into 2023, bring more in balance with revenue.
A: Multiple levels in Opex. Feel very good about DC, embedded, commercial direction. Continue to invest. Be more conservative in consumer-facing through 2023.
Q: BMO - PC biz, disparity between AMD Q3 guide and Intel Q4. Things usually normalize, but is it a case Intel had the medicine earlier and AMD overshipped?
A: As we exited 1H, we were planning for a reasonable 2H PC half. Usually 3Q is seasonally higher, we built with our customers. Market is cautious, behaviour is changing.
Worked with customers on inventory. There were some temporal dynamics, we are aware. Some of those are aggressive pricing that we didn't follow. Nothing fundamental, portfolio is strong, very good platforms in place. Work through it!
Q: Will investments in capacity taper off over the next few Q?
A: Cap agreements have some benefit for server space. Long term agreements to support that growth. Given the market backdrop, work with suppliers with timing for ramp. There is some flexibility overall, work on next Q
Q: Instances in Milan - ramp of Genoa. How long does Milan momentum continue into 2023, and how are customers with Genoa?
A: Happy with Milan ramp. Continuing to ramp Milan into 2023. Genoa initial shipments to strategic customers to Q3, continuing in Q4.
A lot of the qualifications and first instances, Q4 to Q1. Milan and Genoa are going to co-exist for quite some time, both are very competitive.
Q: Harlan - Cloud customers growing 30-40%. Building more compute, is this building strong mid-term outlook?
A: In near term, some optimization each cloud vendor is doing. In med term, customers telling us they need more compute. Additional workloads building out. Also upgrade older compute. New product, strong TCO, more efficient.
Q: Citi - share expectations, desktop, notebook, server, next 12 months, taking macro out of it?
A: In DC, we expect to gain share in cloud and enterprise. More underrepresented in enterprise. NA Cloud see line of sight to significant new deployments.
In desktop/notebook, focus is on certain segments, premium, gaming, commercial. In those areas, there are opportunities to continue to gain share. Desktop DIY/channel, have strong lineup, additional products next year.
Q: If downturn in PC continues, ASP declines, would is spread to DC, and would you be willing to give up share?
A: AMD has strong value prop. Our strategy is not to lead on price. Also price in DC is one factor, it's not the leading factor for most customsers. Work to do for us in workload optimization in DC.
As to PC biz, PC biz has become more price sensitive, and will remain competitive in focused profitable markets.
Q: UBS - US/China. China is 25% of AMD revenue, but that's sell-in. How do you think about US/China trade?
A: Watching closely. New regs have come into effect, minimal impact to AMD revenue near term. Working closely with DoC and US Govt. On Med term basis, our view is to follow US regs and need for national security. Majority of China biz is non-DC, it's mostly PC, consumer-facing.
Q: Run rate of PC in Q4? Inventory leans out a bit? Market only absorbed 50m units in Q3, 200m per year, which would be bad for full year. August/September must have been bad.
A: We did drain a good amount of inventory in Q3, drain more in Q4, will make progress. Also depends on macro in next couple of months. Good visibility into market factors. Planning for weaker PC.
Q: Barclays - client business, units vs pricing? Mix away from high-end vs competition?
A: Certainly more units. ASPs down seq, but up YoY. Decline was driven by units, but small ASP factor QoQ. As market weakened, more pressure in high-end, not just velocity. Mix towards lower ASPs, towards more incentives to clear inventory.
Longer term, dont think there's a significant mix change.
Q: GMs down 100bps down Q3 to Q4, mix in favor for Cloud/Embedded. What's the reason for the core margins to be down?
A: Excluding the $160m charges in Q3, we were 52%, we're guiding to 51%, continue with client being weak, clearing inventory. In DC, we see mix is high for NA Cloud, but that's lower ASP, but as we increase capacity, that has a bit of cost impact.
Q: DC / Cloud.
A: DC not necessarily up, macro has impact on spending. Our weighting is towards NA Cloud. As it relates to the market, enterprise is weak (biz being more cautious), China is weak. There's no in general with cloud, some are optimizing footprint, some are building.
Depends on specific customer. Working with customers for 2023, coming from supply constrained, we see which workloads are moving - gives us visibility.
Q: Gaming market in general - is this the peak gaming year in 2022? Still difficult to get a PS5.
A: Still some pent up demand into the holiday season. Q3 is the peak, Q4 down seasonally. For 2023, puts and takes, best to model gaming flattish, see how the holiday season goes.
That's the end of the Q&A. Have fun everyone! Don't forget to subscribe to my newsletter and youtube channel!

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