Thank you for having us.
Yeah, well, I want to say, one, congrats on being in the CFO seat for a year now. Almost a year. But I want to just start with what I know everyone kind of wants to talk about, and especially after your event yesterday. Maybe you could start with just highlighting what you announced. Clearly, the stock is reacting today, but yeah. What was your highlight announcement you can dive into?
Yeah, we had a very exciting day yesterday with our customers, the partners, the ecosystem. It's actually a very important milestone and inflection point for AMD to be a strong player in AI computer space. We all know the opportunities are tremendous, and we are really pleased that we get to the point where we can be very competitive in this marketplace. There were so many announcements yesterday, so what I'll do today is just highlight some of the key things we announced yesterday. You can absolutely listen to the webcast, and it's super exciting. Of course, we formally launched MI300A and MI300X, and highlighted the performance advantage we have, especially when you think about the inference. MI300X has the industry-leading memory bandwidth and capacity. So it provides a better TCO for customers.
You can either run small models or you can use less GPUs. And so it's a great product, very competitive, and, as we said during our last earnings call, MI300 will be the fastest revenue to $1 billion in our history. And, we are very confident about the $2 billion+ revenue number we talked about for 2024. Secondly, software. This is really important. We announced ROCm 6. When you think about the performance improvement that we have made during a very short period of time between ROCm 6 and MI300X, we actually improved performance by 8 times compared to prior generations. So that's very exciting. I think one of the most important things, strategically, and the strength of ROCm, is really about, embracing the open source ecosystem.
It's important because we allow developers to write portable code to work on an AMD machine, AMD machine, or other GPUs. So we actually give tremendous flexibility, and it's more cost effective. It's exciting, and you know, we're going to launch ROCm 6, and we expand our open source ecosystem partnership significantly. I think we announced during yesterday. OpenAI is going to include the MI300X for their Triton 3.0 release very soon. So that's not what happened in Triton 2 release, so this is a very significant announcement. And then third thing, on networking side, you know, we had a panel from Arista, Broadcom, and Cisco to really talk about the ecosystem, how we work with the internet and the Ultra Ethernet Consortium.
Everybody's working on the ecosystem to make sure the generative AI adoption, the large clusters that we can use, provide best TCO. So very exciting, and, you all, you know, some of you probably already saw the customer list we have. We have a very broad customer engagement yesterday, and we have the full customers showing up, which include Microsoft, Oracle, Meta. On the OEM, ODM side, you know, we have Dell, we have Supermicro, Lenovo, and a lot of more customers we're engaging with. And one example I think is important to know is, Meta literally did bring up MI300X and OCP, and literally commented, "It's the fastest bring up from design to deployment in their history." So that's really a strong proof point of not only the hardware capability, but software maturity.
So we're very excited about the opportunities we have. Of course, you know, in addition to all the hardware, software, networking, we also talk about the PC side. We have the AI PC. AMD actually was the first to include the AI engine in the PC with the Ryzen 7000 series. We actually already shipped millions of units, and we announced the next generation product, which will include AI engine. The thing about us is, we think about the portfolio, we think about end-to-end AI, and we have a strong portfolio to provide the whole solutions from the PC side to the data center side.
Perfect. Thank you for, for covering all those. I wanted to just dive into your reiterated view of the $2 billion next year. So clearly, there's a handoff between the A and the X series, right? You, you talked on last earnings, you guided December, $200 million, and then sales followed by latest remarks, and the rest of the year gets to $2 billion. You have some HP, and then you move to some hyperscale customers. Is that transition and how it's so smooth a function of one customer, or is that all of the customers, maybe all the ones you had on stage yesterday, all ramping very quickly?
Yeah, a good question. When we talk about the MI300 ramp, we did mention that in Q4, predominantly it's from the supercomputer MI300A, that one customer. The deployment of a supercomputer tends to be lumpy. We deploy everything in one quarter, the next quarter, in Q1, it's actually very minimum. And then Q1, we also said it's around $400 million. It's from multiple customers, right? Multiple, not only small customers, but also enterprise customers and the startup. So we are very pleased with the customer lineup and the production, the commitment from customers.
In terms of the open ecosystem that you mentioned and the qualification cycles for those new customers, there's been one announced customer for a while, and it's official, with multiple coming on stage. Can you talk about from the time a customer chooses to use your product, how quickly can they get that deployed in the cloud? Particularly, you mentioned, you know, ROCm, you know, you have a software layer and the hardware layer.
Yeah, great question. It's very different. Different customer engagement, what kind of workload they want to qualify, it takes different times. Some of our larger customers, we have been working with them for years. A lot of you know, Microsoft, we have been working with them for a long time. Meta, we also mentioned that we work with them from MI100 to 200, to now 300. So those are longer term commitment and a lot of workloads. But some of the enterprise customers, because of the nature of the ROCm, they actually can port it very quickly, months. And we also talked about significantly yesterday, it's the out-of-the-box experience with ROCm.
Mm-hmm.
So for a lot of startups or very simple workload, they literally can take it out of the box to make this happen. So it's a wide range of things, but I think the most important thing is, we have made a tremendous progress on the software side to mature it to the point, different customers can have different experiences and deploy it very quickly.
Oh. So I think you're currently very positive on that $2 billion outlook for next year, but I think something that consistently comes up with your competitor is capacity. And if you look at how much you could exceed that $2 billion, do you run into a wall at any point where capacity becomes an issue? And more particularly, does memory become an issue next year, just as you've heard more and more about constraints in that industry?
Yeah. Capacity is absolutely still very tight. What we have done is, we have worked with our supply ecosystem significantly for a long time, you know, not just, not just now, but back to six, seven, eight months ago, to make sure we can secure capacity. We actually have more than enough capacity to support the revenue on this side. Our view is that we really want to make sure we're positioned for success, because we do have a very competitive product portfolio. If you look at the customer engagement that we have, you know, yesterday, it's only a very small portion of the customers. It took us, like, two hours. It's a long, long event because we just have so many customers who want to come, want to be part of this announcement.
I think there are a lot more engagements beyond yesterday's. Companies are out there, so we do feel pretty good about it.
Helpful. So NVIDIA's put themselves on a path to release new generations on a yearly cadence. They just recently announced their H200 product, but they're using more HBM to close the gap as well. Can you talk about what your planned cadence is for your platforms? And do you think that this will be more HBM, more HBM, more HBM, or is there a way to increase performance at that rate from the computer perspective?
Yeah, I think the cadence of AI market is so different from what we have seen in the past. The cadence from both NVIDIA or AMD, it's really because of the customer demand, right? The customer is driving that significant change and adoption and the need, the requirement for hardware solutions. So for us, I think if you look back, right, we have been developing GPU for a long time. And even if you look at the MI series of product, 2020, when we had our first MI300. So MI300, 200-300, we also have a 250. We actually, within 4 years, we did have a multiple generation of MI300. And if the customer support really, not only on us, on the whole industry, we will accelerate our cadence. I think we have the capability, and we are investing in R&D internally.
We are reallocating our resources to increase tremendously R&D in data center, especially GPU side. We feel pretty good about the team, the results, and the capability over the top.
I think a common pushback on any new entrant into a market is, especially if there's a software stronghold, you know, how do you get into these customers? And I think you mentioned with some of the announcements that you talked about yesterday, that you're trying to create an open ecosystem such that your chips interact with your customers, just like the world of CUDA and NVIDIA today. When you look at the next year, can you talk about what it would take from your customers to both have success on internal workloads as well as external workloads? And how quickly do you think your software ecosystem takes a hold where it's being used across?
Yeah, that, that's a good question. We are the new entrant into a market, and the software development, NVIDIA has had for a decade or even longer. I think there are two aspects of our strategy. The first is, we have been doing this for not just last few years, actually four to five years. The most important strategic decision for us is actually, our ROCm software stack. It's open source in nature. We plan to work with open source, the ecosystem, and partner together to address this, software issue or challenge. So it's not just us, we have the whole open ecosystem. If you just look at how fast, the development of all the framework, AI framework, the library, the compilers, and the models in the last 12 months, it's tremendous.
So I do think by partnering with the open source ecosystem, and secondly, we also invest aggressively in our own capability and the results. Together, we actually provide our customers a much more cost-effective, flexible solution, right? Because in the end, when you have this kind of large market opportunities, the customer really want to choose the hardware they want, and the ecosystem also want to write model very quickly. So a lot of people are writing the model on the AI framework. They're using the libraries, the compilers, or whatever, openly available. So we do think what we're trying to do on the software side is to partner with the ecosystem, and really advance the ease and the flexibility for everybody to write their model quickly.
Helpful. Let's pivot to a market where you weren't a new entrant, but a minority entrant, and you've really grown your share, which is in the DC/CPU side. So you've gotten your share up to the high 20s. Can you talk about the time horizon for you to get to that 50/50 share? Is that a goal of yours? What do you think the business dynamic would be as an impact of that? Is there a margin differential in getting from this range, 50% range? Is there a way that you need to interact with customers that's different? Any help, any, any details there will be helpful.
Yeah, maybe, maybe the first thing is I have to take a step back to look at how we get to our market share. So Q3, announced our earnings, our revenue market share actually is 29.7%, so it's close to 30%. I think how we get there is, some of you probably remember 2017, that's when AMD had the first server product portfolio, Gen 1. And during the next four, five years, we continue to execute on the very advanced roadmap to provide a customer the best TCO, best performance per watt, best performance dollar. And each generation, we are leading our competition significantly. So getting to the market share we have today is because of the technology and the innovation we had.
When you look at the market share we have today, in the cloud market, we are actually getting to close to what, 50% of the market share, but in the enterprise, we're still at mid-teens.
Mm-hmm.
So from now on, going forward, we'll continue to drive the product leadership and make sure we can lead, provide the best TCO. We'll continue to gain share in cloud market, but most importantly, we have invested significantly in auto market during the last several years. As you probably know, the enterprise market is very different. You have thousands of customers, each customer, you know, they buy licensed servers, and you literally needed to work with each customer, give them a TCO, and they once they learn, they can get more performance, they can save power, they save operating costs, they are very excited to adopt, but it takes time. So it's a process.
When we look at the dynamics we have, look at the enterprise customer adoption, we do think going forward, we'll continue to gain share in cloud, but enterprise share can, because of our effort and the work, we should see that benefit going forward.
You do have that technology lead, which has led to a lot of these share gains. But let's just, let's just, you know, create a world in the future. So next year, Genoa and Bergamo are using 5-nm from TSMC. Intel is still on. But fast-forward, let's say Intel's roadmap is successful. That has them reaching parity with their 18A fairly soon.
Mm-hmm.
If we get into. you don't need to get into the weeds on the competitive threat, but in a world in which you are more at technology parity, what does that look like to you from the CFO? Do you see any change in the market in that?
Yeah, I think one thing about AMD is Lisa Su and the team. They always made assumption that the market is competitive. The assumption is our competitors will be as competitive as we are on the process technology. If you look back at the success of the company, one of the things I learned is really, it's not just about process technology. It's actually the combination of the architecture, the packaging, working with foundry partners, the design, and all those things AMD has really worked very hard over the last decade. So the combination of those things to give us like a smaller die, right? So it's more cost efficient and power efficient. And all those things provide the TCO advantage.
I think, from my perspective, really, we needed to stay cutting edge, and we're introducing our next generation, Zen 5, next year, which we feel pretty good about the leadership of the performance of the PC we have-
A nd getting to that question with the feedback. But do you have a view of the traditional server market into next year? I think you saw a cannibalization of wallets this year with the boom of AI. I think there's a big disagreement on what the return to growth should look like, if there is any.
Yeah, I think necessarily, there's no challenging time for the traditional server market. I think a lot of you track that market. We all know year-over-year, it actually declined, primarily because the unit volume declined quite significantly. Our view is there are two fundamental business issues. The first one is that during the COVID, a lot of companies, as all the other semiconductor segments, they pulled the inventory. So they were digestion of inventory from the COVID side of the oversupply situation. And then, second half and later on, maybe you're right, is your point, the generative AI, the CapEx need to prioritize the AI spending, definitely crowding out some of the server spend.
But when we think about it, if you look at the purpose of the server, it's to support the transaction processing and the basic workload. When you think about Meta, you know, their Instagram, Facebook or WhatsApp, you know, Amazon, Shopping, all the fundamental basic workload we do today is being done by server. And frankly, those data continues to increase, double, and the need for compute continues. Our view is when you think about how customers deploy hardware, it's all about best silicon, how they can get the best TCO. So for all those traditional workloads, servers offer the best TCO. We think that it is the case today, and it will be the case in the future. So what we're going through the stage is really the digestion, the prioritization or optimization.
But, you know, the server depreciation in life, everybody's extended to six years. Beyond six years, what the challenges we are going to have is with older server, you actually need more power. You need more space, because when you look at the Gen 1, six Gen 1 can replace 12 graphics. And when you need space, you need power, you need efficiency, you really need to upgrade. So our view is, you know, the server market is going to come back, going to serve the basic traditional workload versus the, you know, the incremental AI need going forward. It's not going to be like a high growth market, but ASP will continue to increase as the industry continue to drive the core count increase.
Helpful. I want to pivot to the client business. You guided revenue growth into Q4, but it's been some weaker data coming in from ODM. So I guess multi-part question. I know you were under shipping market for much of the year, but how is visibility today, and are you still seeing the split better?
Yeah, I think it's worth to just do a quick recap about the PC market. It's a very cyclical market. It's one of the semiconductor segment that got into a cyclical downturn first, right? It literally happened a year ago, and this downturn actually was quite severe. It was one of the worst during the last, whatever, three decades. So the first half of the year, when you look at 2023, the whole industry was going through the inventory digestion. So we both basically sold in much less versus sell out, allow the downstream inventory continue to digest. That was the first half. Then second half is another different situation. The inventory largely gets consumed, so you do see the industry start to be normalized. And when you look at the Q3 and our full guide, it's part of the normalization.
I think stabilization or what you would say is, I think right now, if you look at IDC or third parties, forecast for next year is they do believe next year, the PC market unit volume will come up, but it's like a low single digit. So our view is, it's normalized, it's it stabilized. Going forward, you will see the typical seasonality to one, and then, you know, next year, the industry. And it's a economic sensitive factor, too. So we don't know what the next economic situation will be, but, in the end, it, the PC market is stabilized. That's the good news.
I will say, as we announced yesterday, it's exciting in the long run with the AI PC, because eventually a model for AI work needs to be done at the device level and not do everything at the, in the cloud. I think probably not 2024, but definitely 2025, we'll see tremendous momentum from AI PC that will help the replacement cycle.
Well, and I just want to hit on pricing in that market as well. Are you seeing any more aggressiveness for your competitor? I think you guys have done a good job of kind of getting ahead of the trend in that business. But, you know, share has, you know, come back a bit since the pandemic, but it's kind of stabilized here. What's going on from a pricing?
Yeah, I think we gained share in Q3. Yeah, quite a lot of share actually in Q3. I think on the pricing side, it's a competitive market. Yeah. I think our view of strategy has always been focusing on the premier side of the market, or the commercial market, more for mid-range to high-end, because we need to drive a profitable growth, right? If you just grow top-line revenue without a profitability, you know, then it does not make economic sense. So I think what you would see us to continue to really drive the profitable growth segment. We believe we have competitive advantage.
Helpful. I want to shift again to the embedded business. It was down materially in September. You guided down double digits going into December. The supply chain is, is mixed. I think you're hearing maybe some recovery next year just off of these low levels. But, I just wanted to get your take on that market, and clearly there are a variety of end markets within there. If you could spend some time on just what's causing some strength that comes.
Yeah. The embedded business here, it's not into the acquisition we did direct, actually, you should talk about it. But, I think the performance after acquisition, it was tremendous. It literally, it grew like 17%, a double digit in the last year. I think, what happened is, if you look at the this time, the semiconductor inventory correction, it's actually staged. If you look at the embedded inventory correction, it literally is one year behind the PC correction. It's great at AMD, we have a very diversified portfolio. We have PC gaming, and then we have embedded and data center, so you actually can see the different correction coming at a different time. So embedded, Q3 to Q4, we just get into this very super correct. We said it's going to decline double digits sequentially after earnings call, and we guided that.
We think the Q1 is going to be very similar because it typically takes several quarters. I would say by looking the market, definitely you see the industrial, some of the auto, some inventory they are digesting. When lead time drop from 52 weeks to 14 weeks, what the customers behavior immediately will be, "Hey, let me take this opportunity. I can digest my inventory. I used to think I need one year," you know, because you have 52 weeks lead time. So I think it would take several quarters, but actually, we do have the segments like aerospace, defense, and also animation. Those are continue to perform. So it's a different picture within the end market, but overall, our belief is, it's the second half, we should see the recovery.
Also, when we look at our portfolio, we do have a really strong set of portfolio, which have a continued to gain design win market share. Typically, when the market recovery, we'll get a tailwind to help the business.
Thinking about all the markets that you just talked about, you have a very robust ramp in the Data Center business. You have a robust ramp in AI, PC stabilized, the embedded business, which has traditionally been down, but then up again in the second half or hopefully improving the second half. Why shouldn't all these factors lead to a better gross margin ramp as well?
Yeah, as you nailed it, it should, and we definitely will drive that gross margin expansion. It's important for us to continue to expand our gross margin. Fundamentally, it's a reflection of the IP, right? The R&D work out. So, the tailwind of embedded business, right now it's really headwind. The embedded business was like 24% of our revenue, and now it's like 16%-17%. That's a huge couple on gross margin side. We are managing through it because we do have the PC client side, the gross margin coming back. And but the second half of next year, we do think we'll get more tailwind from embedded and continuously expand gross margin.
Last one, because we've run out of time. You have this big AI ramp in the future. It sounds like you're quite positive about it. You have still a large amount of cash on your balance sheet. Can you talk about priorities, in terms of where you're going to spend that money? This ramp is really coming right now.
Yeah. Given the significant market opportunity and significant revenue investing, it's absolutely our number one priority. We'll continue to invest organically and through acquisition. But our business model generates a lot of cash, so we can continue to do buyback. It's very important for us to return cash to shareholders.
Perfect. Thank you so much for being here. Really appreciate it. Thank you all.
Thank you.