Earnings Call: Q2 2021

Jul 27, 2021

Hello, and welcome to the AMD Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Laura Graves, Corporate Vice President of Investor Relations. Laura, please go ahead. Thank you, and welcome to AMD's Q2 2021 Financial Results Conference Call. By now, we hope you have had the Participants on today's conference call are Doctor. Lisa Su, our President and Chief Executive Officer and Devinder Kumar, our Executive Vice President, Chief Financial Officer and Treasurer. This is a live call and will be replayed via webcast on our website. Before we begin, I would like to note that Syed Moschkilani, Senior Vice President and General Manager of our Client Business and Ruth Cotter, Senior Vice President of Worldwide Marketing, Human Resources, Investor Relations and Strategy We'll attend the Jefferies Semiconductor and Hardware Summit on Tuesday, August 31. Devinder Kumar will attend the Deutsche Bank Technology Conference on Friday, September 10th and our Q3 2021 quiet time is expected to begin at the close of business on Friday, September 10th. Today's discussion contains forward looking statements based on current beliefs, assumptions and expectations, speak only as of today and as such involve risks And uncertainties that could cause actual results to differ materially from our current expectations. We refer to the cautionary statement in our press release for more information on factors that could cause actual results to differ. We will refer primarily to non GAAP financial measures during this call. The full non GAAP to GAAP reconciliations are available in today's press release and slides posted on our website. With that, I will hand the call over to Lisa. Lisa? Thank you, Laura, and good afternoon to all those listening in today. Our business performed exceptionally well in the 2nd quarter As strong execution and growing customer preference for our high performance products generated significant market and financial momentum. We saw very strong demand across all of our businesses, which resulted in 2nd quarter revenue growing 99% year over year to 3,850,000,000 We expanded our gross margins by 4 percentage points, doubled operating margin and more than tripled profitability year over year. We also delivered record revenue for the 4th straight quarter and generated record free cash flow in the quarter. Turning to our Computing and Graphics segment. 2nd quarter revenue increased 65 percent year over year to $2,250,000,000 driven by significant growth in both Ryzen and Radeon processor sales. In client computing, we had another record quarter of processor revenue. Both desktop and notebook revenue increased by a strong double digit percentage year over year, and we believe we gained revenue share for the 5th straight quarter. In desktop, robust demand for our highest end Ryzen Processors drove a richer mix in the quarter as Ryzen 9 Processor Unit Shipments more than doubled year over year. In notebooks, unit shipments and ASP increased sequentially and year over year. We delivered our 7th straight quarter of record mobile CPU revenue led by the steep ramp of our latest generation Ryzen 5000 mobile processors. In the enterprise, Ryzen Pro mobile processor unit shipments nearly doubled year over year as we won multiple high volume deployments in the quarter with Fortune 500 Financial Services, Automotive and Pharmaceutical Companies. In graphics, revenue doubled year over year, Led by demand for Radeon 6000 Series Desktop Graphics Cards in the channel and adoption of our data center GPUs, rDNA2 GPU shipments grew by a double digit percentage sequentially as the first notebooks powered by our Radeon RX 6000 M Series GPUs launched, Including the 1st AMD Advantage Notebooks that combine high performance Ryzen CPUs, Radeon GPUs and AMD Software with premium design features to deliver best in class gaming experiences. ASUS, HP, MSI and Lenovo announced Plans to bring AMD Advantage Notebooks to market over the coming months as we further expand our presence in the gaming notebook market. Data center graphics revenue more than doubled year over year, driven by new deployments of our AMD Instinct accelerators, including initial shipments of our next Generation data center GPUs featuring our cDNA2 architecture. CDNA2 represents a major step forward in our multiyear data We expect data center GPU revenue to grow in the second half of the year as we ramp production of our next generation AMD Instinct accelerators And open source RHACM software to support multiple leading edge supercomputer wins, including Frontier, Lumi and Pawsey. Turning to our Enterprise Embedded and Semi Custom segment. Revenue increased 183% year over year to $1,600,000,000 driven by strong growth in both semi custom and Epic Processor Sales. Semi custom revenue grew sequentially and year over year, and we expect Game console demand to remain strong throughout the year. We announced a new semi custom win earlier this month as Valve In embedded, we are making good progress expanding our presence across key verticals, including automotive, networking and storage. We ramped production shipments in the quarter of AMD Ryzen Embedded CPUs and Radeon RDNA 2 GPUs to power the in dash infotainment systems and Tesla's latest Model S and Model X vehicles. Now turning to server. We delivered our 5th straight quarter of record server processor revenue. Sales grew by a significant double digit percentage sequentially, driven by higher unit shipments We are seeing very strong demand across our full server portfolio with 2nd gen EPYC processor revenue growing sequentially And 3rd gen EPYC processor sales more than doubling quarter over quarter. 3rd gen EPYC processor revenue is ramping faster than the prior generation as customers and multiple third party reviewers recognize the absolute performance and price performance leadership of our latest server processors. Cloud demand further accelerated in the quarter, led by growing internal workload adoption and nearly 50 new AMD powered instances by AWS, Microsoft Azure, Google, Tencent and Alibaba. Google announced it chose AMD EPYC Processors to exclusively power the first offering in its new Tau VM family that delivers industry leading performance and value for scale out workloads versus other competitive X86 and ARM offerings. In enterprise, we see demand accelerating As more than 100 and third Gen EPYC Processor Platforms are now in production from Dell, HPE, Lenovo, Supermicro, Cisco and others. In addition, we are seeing a rapid expansion in the number of AMD powered solutions and appliances from our OEM and ecosystem partners targeting hyperconverged and virtual desktop infrastructures as well as workloads demanding the highest per core performance such as EDA and computational fluid dynamics. We secured multiple HPC wins in the quarter, including newly announced deployments by the National Supercomputing Center in Singapore and the French Atomic Energy Commission. Our substantial momentum in HPC was highlighted by the fact that the number of AMD based and that EPYC processors power half of the 58 newly listed systems. Looking at our overall data center business, Revenue nearly doubled year over year and increased sequentially from a high teens percentage of overall revenue in the 1st quarter to greater than 20% in the second quarter. We expect data center revenue to continue growing faster than overall revenue Based on the strength of our EPYC Processors and Instinct Accelerators and the significantly expanded engagements we have built with the leading OEMs and largest MDCs. Turning to our Xilinx acquisition, we passed additional milestones in the quarter and received unconditional regulatory approvals in multiple jurisdictions, including in the EU and the United Kingdom. We remain on track to close this strategic transaction by the end of the year and are excited about the opportunities ahead. In closing, I'm extremely pleased with our execution And strong supply chain execution, we now expect annual revenue to grow by approximately 60% year over year, up from approximately 37% growth we guided at the beginning of the year. Driving our product and technology roadmaps to continue setting the pace of innovation for high performance computing. We remain on track to launch next generation products We also recently demonstrated the next major advance in our triplet strategy with our differentiated 3 d die stacking technology that enables significantly denser and more efficient connections between stacked chips. Based on the strength of our long term roadmap and the deep partnerships we have established, We expect to continue growing significantly faster than the market. In summary, we are making great progress towards our ambitious goal of establishing AMD as a high performance computing leader and a best in class growth franchise. Now I'd like to turn the call over to Devinder to AMD had another outstanding quarter. Our high performance computing product momentum is driving record revenue growth, Record profitability and significant cash generation. 2nd quarter revenue was $3,850,000,000 Up 99% from a year ago and up 12% from the prior quarter, year over year growth was driven by significant revenue increases Across all businesses, gross margin was 48%, up 3 60 basis points from a year ago, driven by an improved revenue mix and higher margin contribution from all businesses. Operating expenses were $909,000,000 compared to $617,000,000 a year ago as we continue to invest in business growth and our long term product roadmaps. Operating income was $924,000,000 up $691,000,000 from a year ago, driven primarily by revenue growth. Operating margin doubled to 24%, up from 12% a year ago. Net income More than tripled to $778,000,000 up $562,000,000 from a year ago. Diluted earnings per share was $0.63 per share compared to $0.18 per share a year ago. This includes A 15% effective tax rate in the Q2 of 2021 compared to 3% a year ago. Now turning to the business segment results. Computing and Graphics segment revenue was 2,300,000,000 up 65% year over year, driven primarily by significantly higher client and graphic processor revenue with a richer product mix in both businesses. Computing and Graphics segment operating income was 526,000,000 or 23% of revenue compared to $200,000,000 or 15% a year ago. Enterprise Embedded and Semi Custom segment revenue was $1,600,000,000 up 183% From $565,000,000 the prior year, the strong revenue increase was driven by higher semi custom product revenue And EPYC Process Sales. EESC segment operating income was $398,000,000 or 25 percent of revenue compared to $33,000,000 or 6% a year ago. Turning to the balance sheet. Cash, cash equivalents and short term investments were $3,800,000,000 up from $3,100,000,000 at the end of the prior quarter. Free cash flow was a record $888,000,000 compared to $152,000,000 in the same quarter last year. Free cash flow for the first half of twenty twenty one of $1,700,000,000 was more than double 2020 annual free cash flow. With our strong financial results and growing cash generation, we announced the $4,000,000,000 stock repurchase program in May, under which we repurchased 3,200,000 shares of common stock for $256,000,000 in the 2nd quarter. Inventory was $1,800,000,000 up from the prior quarter in support of higher revenue expected in the second half of the year. Let me now turn to the 3rd quarter outlook. Today's outlook is based on current expectations and contemplates the current Global supply environment and customer demand signals. We expect revenue to be approximately $4,100,000,000 Plus or minus $100,000,000 an increase of approximately 46% year over year and approximately 6% sequentially. The year over year increase is expected to be driven by growth across all businesses. The sequential increase is We expect non GAAP gross margin to be approximately 48%, non GAAP operating expenses to be approximately 1,000,000,000 Non GAAP interest expense, taxes and other to be approximately $150,000,000 and the diluted share count to be approximately 1,230,000,000 shares. For the full year 2021, We now expect revenue growth of approximately 60% over 2020, up from our prior guidance of approximately 50%, driven by growth across all businesses. We also expect non GAAP gross margin to be approximately 48%, Up from prior guidance of approximately 47 percent, non GAAP operating expenses to be approximately 25% of revenue, down from previous guidance of approximately 26% of revenue. Non GAAP effective tax rate to be 15% and we expect the company's cash tax rate to be approximately 2%. In closing, We delivered another excellent quarter with very strong year over year growth, accelerated our business momentum and delivered exceptional financial returns. With that, I'll turn it back to Laura for the question and answer session. Laura? Thank you, Devinder. Operator, we're ready to begin the Q and A session now. Thank you. We'll now be conducting a question and answer Our first question today is coming Congratulations on a very strong set of results. Lisa, you didn't really touch on the supply situation in the marketplace Today, that appears to be a pretty big focus for companies and also for investors. How would you characterize the current gap between Supply and demand and importantly, as we look ahead to 2022, how comfortable are you from a foundry wafer capacity and ABS And then I've got a quick follow-up. Sure. Well, hey, thanks for the question. I think it's fair to say that the semiconductor demand environment and particularly the AMD demand environment has been very strong in 2021. We've been working on supply for the past couple of quarters. I think I'm actually quite pleased with the progress that we've made in terms of increasing our What I've said previously is certainly, we do see some level of constraints, but we are making progress each quarter. We're continuing to bring on extra supply each quarter, which is leading to the full year guidance raise that we have. So I think overall, we continue to make progress. I will say that it's tight like you've heard from many other companies through the end of this year. I think it improves in 2022. We've been planning for significant growth. Our model is one where we're going to drive significant growth. So we've been planning with that with our And we do have confidence that we can continue to grow substantially as we go into the second half of this year and into 2022 with The supply chain. Great. And then as a quick follow-up, I guess a multipart question on your server CPU business or data center business more broadly. I was hoping you could speak to sort of the revenue construct in the second quarter. And if you can differentiate In 2nd gen and 3rd gen, Rome versus Milan and then what you're seeing on the cloud side versus enterprise side of your business And the outlook into the second half as you think about sort of the different segments of that business. And then finally, you talked about data center being more than Sure. Okay. Quite a few questions there. So let me try to work through them. So in terms of the makeup of our data center business, I mean, our server business was very strong. I think the product capability and sort of just sort of the performance and the total cost of ownership For Milan has proven out very well with our customers, so we're very happy with that launch. In the Q2, we did see significant growth with Milan. And that being the case, so Rome was still a larger portion of the revenue. And I would say in the Q2, it was more cloud weighted. So we saw cloud tends to ramp faster on new generation and that was the case in the Q2. So cloud grew faster Then Enterprise, as we go into the second half of the year, we expect that Milan will ramp very quickly and crossover 3rd gen will cross over 2nd generation in the Q3. And what we're seeing actually is continued strength across cloud and HPC, PC, which have been traditionally strong for AMD, but we're actually seeing very good momentum in enterprise. And I think with the The breadth of the platforms that we have out there and just the coverage and then sort of the per core performance as well as the overall socket level performance, We're getting a very strong traction and we're pleased to see that. So I think as we go into the second half of the year, I think enterprise will be a stronger component For us, it was in the first half of the year, and that's the balance that we want. But overall, we're pleased with that. And then in terms of your question About server was I'm sorry, data center was greater than 20% of our revenue in the 2nd quarter. We believe that the data center business will continue to be a strong driver for us into the second half of the year. And so it will be a larger percentage of our overall revenue, in the second half of the year. Thank you. Our next question is coming from Aaron Rakers from Wells Fargo. Your line is now live. Yes, thanks for taking the question. Congratulations as well on the quarter. I wanted to ask about kind of the trajectory of gross margin. If we take the full year guidance now guiding up 100 basis points With the 3Q guide into consideration, it looks like you're actually pushing towards a 50% gross margin. How do we think maybe you can unpack how we should think about the segment gross margin levels? And do you think that that if we're hitting 50%, that I think on the gross margin, first of all, I'd say we are very pleased with the progress we have made. And as you observed, we have taken up the guidance for the year from 47% to 48%. In our long term target model, we had plans to to greater than 50%. And I think with the strength of the businesses that Lisa just talked about, especially in the data center, help us get there. The product mix is important, the ramp in the data center and the client PC business as we gain revenue share is going to be important to drive that, And we are confident that we can continue to improve the gross margin given the mix of the And also the revenue ramp in the businesses that are higher than corporate average gross margin. Feel very good about getting to the greater than 50% over time. Yes. I'm sorry. Erin, I was just going to add to that. I think the most important thing to think about as you think about our business going forward is it really is about the mix of business. So as data center becomes a higher percentage of our business, that's a favorable mix for us. And then within the segments as well As we look at where we're strategically focusing as we really mix to the higher end of the portfolio, those are the key things that we're looking at from a margin But there are always puts and takes in the business. It's just really about the mix. Yes. And then just as a real quick follow-up, as Milan ramps and appreciating that Rome, it sounds like still the majority of the Epic lineup. How successful have you been as far as leveraging a Thank you. Yes. So as we think about sort of the trajectory of The business, it is about offering more performance per socket and that is what we're doing. So I think Milan is Certainly, a performance uplift relative to Rome. It does lend itself to a higher ASP or higher mix of the business. And then clearly, as we go to Genoa, we're going to continue that trajectory. So I think and then within server, there's also a mix between cloud and enterprise. As I said earlier, we're quite cloud weighted here in the first half of the year. And as we go to A stronger percentage of enterprise, that would also be a favorable mix, in the server side of the business. Thank you. Our next question is coming from Vivek Arya from Bank of America Securities. Your line is now live. Thanks for taking my question. Lisa, it's To continue on the server business, until last year, we saw AMD take about 2 to 3 points of Server share annually, this year the share gains seem to be accelerating on the order of 4 to 5 points. I'm curious what's driving this Acceleration and did you see anything from Intel's roadmap disclosures yesterday that you think can impact your server share gain momentum? Yes, Vivek, thanks for the question. Well, as you know very well, we're very focused Sort of multi quarter, multi year progress in the server and the data center business. I think we're excited With the momentum around our server business, I think the product roadmap is very strong. I think the execution has been very strong. I think customers also, with the 3rd generation in Milan, felt much more comfortable to go more broadly With Milan, just because this was sort of the 3rd time, right? They had many of our customers were on Rome already, but With Milan, it was sort of socket compatible. And so there was it was a faster time to ramp and we're seeing it ramp faster. So We feel good about where we're positioned. I mean, it's a very competitive market out there, Vivek. I'll always say that. We expect our competition to be really good and we need to be better than that. And so our team is very focused on execution and we're excited about Genoa. I think our customers are excited about Genoa. And so we need Keep the momentum and keep the roadmap execution as strong as it has been. Got it. And for my Follow-up, you announced a $4,000,000,000 share buyback. I believe you kind of midway or late midway Through Q2, you only did about $256,000,000 of that. How should we think about buybacks going forward? Are you Do you have a certain time frame in mind? Just how what's going to guide your decision when and how much of buybacks to do? Thank you. Yes, I think no specific, Vivek. As you know, these programs, I mean, we will be opportunistic and we will obviously return capital to the shareholder as the balance sheet continues to improve. We're very pleased to initiate the program in Q2 with about $256,000,000 purchased $3,200,000 and you will see us do more over time, but I wouldn't want to get into any Specifics on this call. Thank you. Our next question is coming from Matt Ramsay from Cowen and Company. Your line is now live. Thank you very much. Good afternoon, everybody. I guess, Lisa, one of the things I was really pleased to see in this set of results and investors have asked me about You guys have rightly been spending a ton to grow the business and that's been reflected in the growth. And I just wonder How you're thinking about the balance of revenue growth versus delivering sort of upside to operating margins going forward, It's an item that's been a fulcrum from some investors in my conversations. Thanks. Sure, Matt. Maybe I'll start and then see if Devinder has anything to add. I think we've always been very thoughtful about how we both invest in the business as well as delivering operating leverage. And look, I think our revenue growth has been very strong. It was certainly above what we had previously forecasted. We are taking To invest in the business and that's investing in R and D and investing in sales and marketing and really The overall capabilities there, but you do see the operating leverage in the business. And I think we intend to continue to deliver improved operating margins as we go forward. So I think we can do it do all of those things. I think we can continue to grow revenue significantly above the industry. We will continue to invest in OpEx At a lower rate than the revenue growth and we will continue to deliver operating margin improvement over time. Yes, I think you covered it, Lisa. I think that's what I'll say. I mean, as you saw, we did update the guidance for OpEx As a percentage, revenue from about 26% to 25% for the year and we continue to discipline from a viewpoint of the investments we need to make to grow the business As well as obviously, invest in R and D go to market, hiring people is another area of focus right now as the business is growing pretty significantly. Thank you both for that. As my follow-up, it's interesting the more strength the PC market It's almost like the more concern investors have that eventually we revert back towards the mean. And Lisa, your competitor gave some fairly bullish commentary about the state of the PC industry going forward. And I wonder if you might Share your view and we've heard in our work a few bobbles in the Chromebook market, and Maybe a couple of PC OEMs saying they're building a tiny bit of CPU inventory. So on the back of that commentary about the market, if you have any views on your own visibility and inventory of AMD Yes, sure, Matt. So, look, there are lots of different signals in the PC market. So, maybe I will make a few comments. I think it's Fair to say that end user demand has been very strong. So very strong in the first half of the year, very strong in the second half of last year. And That's from all this work from home, school from home, sort of and then some of this return to office trends. Within that, there is a little bit When I look at the market, I would say that we performed very well. Within this market backdrop, we continue to gain revenue share. And what that means is we're focusing on The most strategic segments of the PC market. As we go forward, I do agree that end user demand is strong. I also believe that if you look at the second half of this year for the PC market, you'll hear about sort of pockets of component shortages or match sets and things like that. So we're taking that into account as we think about the second half of the year. From our perspective, we're planning the PC the Our PC business to be about flattish, first half into second half. And, again, we think that that's very well supported by All of the ordering patterns and all of our sort of look at what the PC OEMs are doing. From an inventory standpoint, we do not believe there's significant inventory. We do track it very closely Of AMD product anyways, we look at it at the retailers as well as at with our OEMs. So I think we have this very We're watching it very closely and recognize that the PC market may go up or down. We're expecting it to be, like I said, for our business, Roughly flattish first half and the second half. And that being the case, we continue to believe that there is strong end user demand And there's just some supply matching that needs to happen in the marketplace. Our next question today is coming from John Pitzer from Credit Suisse. Your line is now live. Yes, good afternoon, Lisa. Thanks for letting me ask the question and congratulations First is just a clarification. I think you said in your prepared comments relative to the June quarter that Epic grew solidly double digits sequentially. The overall segment grew about 19%. I'm just curious, did Epic outgrow the overall segment? Or was it more in line? Can you give us a sense of how it did relative to the segment? Yes. We outgrew the segment in the Q2. Perfect. And then my second question is just more of a strategic question around pricing. And clearly, last week on their conference call, Intel talked about perhaps being a little bit more price aggressive, especially in data center To protect share, and I'd like to get kind of your thought on pricing. I mean, in my mind, that market is much more about a total cost of ownership than an entry point. And given your price performance, I'm just kind of curious as to how concerned you are about the pricing environment or how concerned you think we should be over time? Yes. Thanks for that, John. Look, I think the market has always been competitive. I don't see that it has Become more competitive where that's changed. As you said, pricing is not the first order variable when you're buying a server It really is about total cost of ownership. I think the performance leadership that we have It's clearly there, and I think customers see that. So we will always fight for every socket. I mean, you know that We're very competitive in that fashion, but we think that the way to do that is with the strength of the roadmap and the strength of the deep partnerships And price is sort of a second order lever in this market. Thank you. Thank you. Our next question today is coming from Harlan Sur from JPMorgan. Your line is now live. Good afternoon and great job on the quarterly execution. Now with Milan on a strong ramp trajectory and also good to see the momentum in enterprise, As you guys continue to drive EPYC into new markets, just wanted to get an update on the pull in the telco service provider market, right? It's a relatively big market, right? It's about $6,000,000,000 $7,000,000,000 market. Milan supports much more networking functionality versus prior generations And operators continue to virtualize the core of their networks and with 5 gs, they're also starting to virtualize their radio access And so just wanted to see if the team is seeing early momentum with Milan with telco equipment OEMs as well as with some of the large 5 gs service providers? Yes, sure. Harlan, thanks for the question. Yes, look, we believe the Telco segment is a very good segment for us. And I would say that there is a lot of interest. I wouldn't say it's a significant piece of revenue today. So I view that as sort of opportunity As we continue to build out the solutions for Millon, but it is one of the areas that we believe is very Strategic for AMD and as Xilinx comes into as we combined the Xilinx business with ours, I think Their relationships as well in the communications and telco market will be helpful in just bringing the overall Solution set together. So, yes, we think it's a good market for us, but I would say we're still very early on that particular cycle. Great. Thank you. And then, on the strong early momentum in Enterprise as you move into the second half and As you probably have some visibility into next year because the enterprise call cycles are probably a bit longer than some of your cloud customers. Can you just talk about the breadth of the engagements in enterprise across large corporations and small to medium sized businesses? Yes, Harlan. So we have seen a very strong pipeline and that started with that started with Rome, But we see that expanding with Milan. I think if you look at the breadth of platform offerings from all the largest OEMs For Milan, it's just broader than our past generation. And I think people are also starting To come up with more appliances and we've done quite a bit more ISV optimization as well. So our visibility is very good into the second half of the year, and it's also very good into 2022. I think the good piece about this, as you said, it is longer design cycles, But with large companies and certainly with some of the Tier 2 Cloud guys, we've seen good strong visibility for multiple quarters. And then as we think about sort of the small, medium business and the channel business, I think all of that is a strong opportunity for us. Thank you. Our next question is coming from Joe Moore from Morgan Stanley. Your line Now live. Great. Thank you. I wonder if you could talk about the seasonality of the console Business in the back half of the year, is there any seasonality or does that continue to be kind of more of a supply constraint? Sure, Joe. So the console business, we're quite early in the console cycle and I think you've seen that there's very strong demand for those products. And so, I think the seasonality is not typical. So typically, we see the second half What it is in a typical console seasonality. Great. Thank you. Our next question is coming from Stacy Rasgon from Bernstein Research. Your line is now live. Hi, guys. Thanks for taking my questions. Lisa, around the PC environment, so you sound a bit more sanguine about it versus your competitor who does Given your other outlook for kind of continued strong growth, do you think that strong growth is dependent at all On the state of the PC market next year, so for example, like if PCs say we're down 10% next year, do you still think you could still grow strongly year over year in 2022 Off the rest of the portfolio? Yes, sure, Stacy. So look, I think, there are lots of different signals in the PC market for 2022, so I think what we're doing is taking, let's call it, we're planning for various different scenarios. But I would say that from our point of view, the overall answer to your question is yes. I mean, we believe that there's a We have strong growth momentum across the portfolio and we believe that we will we can grow in the PC business as well Even if the market is, let's call it, not as robust as some might forecast. Our view is that we're still underrepresented Across the board in the markets that we play in, whether you're talking about data center or PCs or gaming. And on the PC side in particular, We're making very good progress in sort of commercial premium gaming notebooks, premium consumer. We have more platforms coming with our Ryzen 5000 and our next generation. So I think our sort of outlook is Less dependent on what exactly happens in the market. But obviously, we watch the market very closely and we work with our OEM partners very closely to Stay in tune with what they're seeing. Got it. Thank you. That's helpful. For my follow-up, I want to ask the OpEx question a little more explicitly. So You did take it down for the year and you're 25%. But if I'm doing my math right, the Q4 OpEx percentage is closer to 28%. And I get why I understand. But I think the Analyst Day model you've given, oh, 16 months ago had sort of an OpEx to revenue midpoint somewhere in the mid-26s. Should we think about OpEx, I guess, trending down from that exit rate to that more kind of like model level? Or are you still going to be taking this opportunity at least for the next like several quarters, Maybe to invest at a bit of a higher level, is that exit rate of OpEx to revenue more representative of what we might see in the near to medium term? Yes. I think Stacy, first of all, you hit it right. The priority for this is to invest in the business for growth. We are growing And just to cover the guidance, so obviously, there's a lot of areas to invest in to support that growth, whether it's R and D or go to market or even hiring. 2nd of the year, you also have salary increases that kick in for our employees. And obviously, that does drive the OpEx higher Just given the guide we gave for Q3, which is higher than Q2 from an overall OpEx standpoint. As far as the numbers are concerned, I know you're We come in a little under 25%. We gave the approximate guidance of 25%, but I think we'll come in Under 25% for the year. Nothing extraordinary there. It's just making sure we plan the business, support the growth And make sure that into 2022, as we have new product introductions that Lisa just talked about, we continue to support that Because there are a lot of new products coming into 2022. So really that's what it is, Stacy. Got it. Thank you very much. Thank you, Stacy. Operator, two more questions, please. Certainly. Our next question is coming from Blayne Curtis from Barclays. Your line is now live. Hey, thanks for letting me ask a question. Just want to ask on the graphic strength. I think you said it doubled. Just curious, Is there a way to parse out how much is coming from crypto? And then I think what I heard you say is in the back half, it's a driver for September. Just Driving to December with PC slot again, kind of just maybe you could describe how much of the strength in graphics is kind of more client graphics versus the data center? Yes, sure, Blayne. So to your question about the quarter and second quarter, We do not believe there was a significant crypto component in our graphics revenue. I mean, the graphics revenue as we see it is really, RDNA2 ramping. We launched some new products in mobile and we're pleased with of our DNA2 in mobile as well as we started shipments of some of our data center GPUs. Our view is that the crypto base component is really negligible. And then as we go into the second half of the year, I wouldn't say graphics is the largest driver of our business. The driver really is around data center and that's data center across CPUs as well as some of the early ramp of the GPUs. But we do expect there continues to be strong demand for gaming graphics. And we know there are a lot of gamers out there who are still looking to get some of their cards. And so we will support That demand, but I don't think crypto was a big piece of it and we'll continue to focus Our efforts on getting our gaming graphics over into the gamers' hands. And then maybe just a follow-up on the data center GPU opportunity. You've mentioned you have some new wins with HPC and a couple of them are fairly Just kind of curious when you think about that impact in the model. Is that a next year story or is it a bit further out? Yes. So I mean, we'll see some growth in the second half of the year off of a small base. I think it becomes A more meaningful driver as we go into next year and then certainly the following year. So think about the data center GPU story as sort of the early innings of What we did on the CPU side, we're excited about the product, Blaine. I think it's a very exciting Product with our next generation cDNA2, I think we have won some early wins with HPC. We're continuing to work with some cloud customers The machine learning and AI aspects of it, but it's really a multiyear journey and the larger driver of our data center business is the server CPU side. Our final question today is coming from Mark Lipacis from Jefferies. Your line is now live. Hi, thanks for taking my questions. Lisa, I had a question about your announcement with Google for their TAO instances. I thought it was fascinating because it looks like they're disabling one of the threads and running Milan in a single threaded mode, which It seems to me like a throwback to 20 years ago. So I had a couple of questions on this. I haven't seen Intel Xeon Processors in this mode, is there something about the AMD architecture, the Milan architecture beyond higher core count that It just makes it more sense to use AMD Processors in this mode versus Intel Processors. Are you seeing a lot of demand outside of Google for this kind of single threaded implementation? And if you are, would it make sense to make like a separate line of CPUs that streamlines the logic for only one processing thread and then you could fit these Potentially, you've been a lot more cores on the CPU and cut the power dissipation. It seems like it would be the next logical step. Would that even be feasible? Is that something Sure. So, Mark, the way I would say is this, and again, I want to be a little bit, sort of broad in how I answer the question. I think what you see in the server land is that, There are lots of different use cases for the processors. And you have some that are looking for sort of the bleeding edge Performance and there the multi threading is very, very useful and you get better performance Per watt, performance per dollar, and just overall socket level performance. I think what we've seen is That as you look across use cases, there are some use cases where you're more focused on performance per dollar than overall performance. And you might choose to optimize sort of what you do, sort of how you configure the processor differently. I think what you'll see from us, Mark, as we're spending a lot of time with our hyperscale partners and what we want to do is offer them The type of instance that they need and that their customers need. So you'll see us do more customization across the board With the idea of we want to satisfy that range of performance that across Sort of the entire range of use cases. So I think we'll talk more about how we think about the roadmap as we go forward. But I will say that we're being very thoughtful in ensuring that we have the right product for the right workload and that it's optimized for performance and power and cost in all those areas. Great. Thank you. Very helpful. Appreciate it. Thanks, Mark. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. Thank you, everyone. We appreciate your time today and certainly your interest in AMD. As always, we appreciate your support and we look forward to seeing you at an event here in Q3. Have a great day. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.