AMD (Minutes): 1H25 data center business shows no quarter-on-quarter growth
AMD (AMD.O) released its Q4 2024 financial report (ending December 2024) after U.S. stock market hours on February 5, 2025, Beijing time. The key points from the conference call are as follows:
The following is a summary of AMD's Q4 2024 performance conference call. For financial report interpretation, please refer to "AMD: Deepseek Fuels, GPU 'Spare Tire' Dreams Shattered ASIC"
1. $AMD(AMD.US) Core Information Review of Financial Report:
2. Detailed Content of AMD Financial Report Conference Call
2.1 Executive Statements on Core Information:
1. 2024 Financial Performance Review
Full Year Performance
Revenue: Full-year revenue reached $25.8 billion, a year-on-year increase of 14%. Among them, data center business revenue grew by 94%, client business revenue grew by 52%, while gaming and embedded business revenues declined.
Earnings Per Share (EPS): Increased by 25% for the year, reaching $3.31.
Gross Margin: Increased by 300 basis points for the year, reaching 54%.
Free Cash Flow: Doubled compared to 2023.
Q4 Performance
Revenue: Q4 revenue was $7.7 billion, a year-on-year increase of 24% and a quarter-on-quarter increase of 12%. Among them, data center business revenue reached $3.9 billion, a year-on-year increase of 69%; client business revenue reached $2.3 billion, a year-on-year increase of 58%; gaming business revenue was $563 million, a year-on-year decrease of 59%; embedded business revenue was $923 million, a year-on-year decrease of 13%.
Gross Margin: Q4 gross margin was 54%, a year-on-year increase of 330 basis points.
Earnings Per Share (EPS): Q4 was $1.09, a year-on-year increase of 42%.
2. Data Center Business
2024 Performance
Data center business revenue reached $5 billion, a year-on-year increase of 69%.
Strong sales of the fifth-generation EPYC Turin processors and fourth-generation EPYC processors drove growth in the server business.
Among cloud service providers, AMD EPYC processors have a market share exceeding 50%, and adoption rates among enterprise customers have significantly increased.
Instinct GPU business revenue exceeded $5 billion, with significant year-on-year growth.
2025 Outlook
The data center business is expected to continue strong growth, with full-year growth projected to reach double digitsThe MI350 series GPUs are expected to begin mass production in mid-2025, ahead of the original schedule, which is expected to drive growth in the data center GPU business.
Data center business revenue is expected to be stronger in the second half of the year than in the first half.
3. Client Business
2024 Performance
Client business revenue reached $2.3 billion, a year-on-year increase of 58%.
Strong demand for Ryzen processors has driven growth in desktop and mobile client businesses.
Ryzen processors dominate among global retailers, with a market share exceeding 70%.
2025 Outlook
Client business is expected to continue growing, with the PC market expected to grow at a mid-single-digit percentage year-on-year (around 5%).
AMD plans to drive client business revenue growth through its strong client CPU product portfolio and momentum in winning customer orders.
4. Gaming Business
2024 Performance
Gaming business revenue was $563 million, a year-on-year decrease of 59%.
Semi-custom sales declined, mainly due to Microsoft and Sony focusing on reducing channel inventory.
Gaming graphics business revenue decreased year-on-year, primarily due to preparations for the launch of the next-generation Radeon 9000 series GPUs.
2025 Outlook
It is expected that channel inventory has normalized, and semi-custom sales will return to a more historical pattern.
The next-generation Radeon 9700 series GPUs will be launched in early March 2025, which is expected to drive growth in the gaming graphics business.
5. Embedded Business
2024 Performance
Embedded business revenue was $923 million, a year-on-year decrease of 13%.
The market demand environment remains complex, with the overall market recovery pace slower than expected.
AMD continues to expand its adaptive computing product portfolio, launching differentiated solutions.
2025 Outlook
The embedded business is expected to continue growing, with the market gradually recovering.
6. Future Outlook
First Quarter 2025 Expectations
Revenue is expected to be approximately $7.1 billion, a year-on-year increase of 30%, and a quarter-on-quarter decrease of 7%.
Non-GAAP gross margin is expected to be around 54%.
Non-GAAP operating expenses are expected to be approximately $2.1 billion.
Non-GAAP effective tax rate is expected to be around 13%.
Long-term Outlook
AMD expects that the data center AI business will continue to grow rapidly, with revenue reaching billions of dollars in the coming years.
AMD will continue to invest in AI and innovation to drive long-term growth.
2.2 Q&A:
Q: Regarding the GPU business, the performance of over $5 billion in revenue in 2024 is impressive. Can you talk about the development trend of the Instinct business in 2025? For example, the revenue growth pace in the first half and second half of the year, and the impact of product cycle dynamics?
A: The data center GPU business grew rapidly in 2024, with strong performance throughout the year.
In 2025, on the hardware side, the MI325 began shipping at the end of the fourth quarter, and new designs will be deployed in the first half; on the software side, progress is also ongoingThe MI350 series was originally planned for release in the second half of 2025, but progress is currently smooth and customer demand is strong, so we have advanced the mass production timeline to mid-year.
The overall data center business is expected to achieve strong double-digit growth in 2025, including both the server product line and the data center GPU product line. In terms of revenue pace, the second half is expected to be stronger than the first half, as the MI350 will act as a catalyst for the data center GPU business.
Overall, we are satisfied with the growth trajectory of the data center business for the full years of 2024 and 2025.
Q: Does the 7% quarter-over-quarter decline guidance for the first quarter imply an overall quarter-over-quarter decline in the data center business? How does it relate to seasonal factors?
A: The 7% quarter-over-quarter decline in the first quarter is consistent with the average decline across the company for the data center business.
The client business and embedded business will see a larger quarter-over-quarter decline due to more pronounced seasonal factors; while the gaming business will see a decline slightly smaller than the company average, as 2024 experienced inventory adjustments, and inventory has now normalized.
Q: Regarding the server CPU business, it was previously mentioned that growth in core count would drive business growth by about 15% to 20%. However, competitors seem to be more aggressive in pricing to consolidate market share. In this case, can the server CPU business still achieve such growth?
A: The server CPU market is competitive, but AMD has the strongest product portfolio from Turin to Genoa to Milan, which allows us to provide customers with the best total cost of ownership (TCO).
Therefore, we are confident in continuing to drive growth in the server CPU business, not only in terms of shipments but also in average selling price (ASP) and market share.
Q: Can you provide insights into the revenue situation for data center GPUs in Q4 2024? And what are the expectations for Q1 2025?
A: The overall performance of the data center business in Q4 2024 is in line with expectations, with the server business performing better than the data center GPU business.
For the first half of 2025, the data center business (including servers and GPUs) will be consistent with the second half of 2024.
Q: AMD's expectations for the data center GPU business in 2024 are very clear, but there are no specific numbers for 2025. Does this imply a change in confidence for 2025? Is the 60% compound annual growth rate (CAGR) mentioned for 2024 applicable to 2025?
A: 2024 is the first year for the data center GPU business, and it is necessary to clearly demonstrate business progress. The business scale has now exceeded $5 billion, and in 2025, we will provide more guidance at the segment level.
In the long term, demand for AI computing is strong, and the data center accelerator market is expected to exceed $500 billion by 2028. Although there are no specific numbers for 2025, we are confident in expanding the business scale to billions of dollars in the coming years.
The MI300 is a good start, and the MI350 series is even more powerful, capable of handling a wider range of training and inference workloads. Looking ahead, the MI400 series is also receiving significant attention and is expected to achieve innovative rack-level designsQ Will the news about DeepSeek affect confidence in the semiconductor market? How will the market shares of ASICs and GPUs evolve in the coming years?
A The progress of DeepSeek indicates that the pace of innovation in the AI field is very fast. Innovations in models and algorithms contribute to the widespread adoption of AI, even as less infrastructure is needed to achieve training and inference capabilities, this also helps deploy AI computing to a broader range of applications.
AMD supports open source, and the rapid development of open-source models is impressive, which will drive further adoption of AI.
For ASICs and GPUs, the diversity of AI workloads means that various computing resources are needed, including CPUs, GPUs, ASICs, and FPGAs. ASICs may capture a portion of the AI market, but given that AI algorithms are still rapidly changing, ASICs may be a more optimized choice for specific workloads, while GPUs offer greater flexibility and adaptability.
AMD's product portfolio includes CPUs, GPUs, and it is also involved in discussions about ASICs, enabling it to provide comprehensive computing solutions for customers.
Q Does the early launch of MI350x in the middle of the year indicate a change in the pace of the data center GPU business in the first half of 2025? Is there a gap before the product launch?
A There is no significant change in the pace of the data center GPU business in the first half of 2025. The early launch of the MI350 series is a positive signal.
The business performance in the first and second quarters will align with previous expectations, as new AI customer orders will be obtained in the first half of 2025, including the deployment of MI325. The launch of the MI350 series will bring more content, higher average selling prices (ASP), and larger-scale deployments, including training and inference.
Q The client business performed strongly in the fourth quarter, with growth exceeding expectations. Can you explain the growth drivers in the desktop, laptop, and enterprise markets? Are there concerns about inventory backlog?
A The client business performed strongly throughout 2024, with the fourth quarter being particularly outstanding. Growth is primarily driven by the following factors:
Desktop market: New gaming CPUs were launched in the fourth quarter, and the market response was enthusiastic, with strong sales. Although market demand is robust, product supply was once limited, and efforts are still being made in January to meet backlog orders.
Laptop market: OEM partners launched several new AI PCs equipped with many new mobile processors released at CES. AMD currently has the strongest mobile PC product portfolio, supporting all needs from high-end to mainstream markets.
Regarding inventory backlog, there are currently no signs of significant inventory backlog. AMD believes that the strong performance in the fourth quarter is mainly due to the strong adoption of new products. Although there are rumors in the market about potential early procurement due to tariff issues, AMD did not observe this situation in the fourth quarter.
Looking ahead to the first quarter of 2025, despite seasonal factors in the overall market, the desktop business is performing better than seasonal trends, while the laptop business is in line with typical seasonal performance. Overall, there is optimism about the growth prospects for the client business in 2025Q Did the server CPU business achieve a double-digit growth quarter-on-quarter in the fourth quarter? The fourth quarter marks the sixth consecutive quarter of double-digit year-on-year growth in server solutions business. From a quarter-on-quarter perspective, did the enterprise services business achieve growth in the fourth quarter? Looking ahead to 2025, what is AMD's market share outlook in the enterprise market?
A The server business achieved double-digit quarter-on-quarter growth in the fourth quarter, with strong performance in both cloud services and the enterprise market.
In 2024, AMD made significant progress in the enterprise market, particularly in the enterprise market where the sales cycle typically lasts 6 to 9 months. By increasing marketing investments, AMD successfully converted multiple proof of concepts (POC) into large-scale deployments.
Looking ahead to 2025, AMD has a strong product portfolio covering all price points, core counts, and workloads, and expects robust growth in the enterprise market.
Q Network technology is a key component of AI infrastructure, but there seems to be a misunderstanding about AMD in this area in the market. How is AMD driving customer adoption of AI platforms through existing Ethernet technology and a strong ecosystem? What are AMD's plans for network technology innovation in 2025?
A Network technology is indeed a key component of AI solutions, and AMD has been closely collaborating with customers and partners to advance network technology.
With the evolution from MI300 to MI325, MI350, and MI400, AMD continues to increase the proof points for network technology. In terms of inference, AMD has demonstrated excellent performance and total cost of ownership (TCO).
AMD is developing its own AI network interface cards (NIC) and plans to launch complete rack solutions in the MI350 and MI400 series.
Overall, AMD believes that network technology is crucial and is driving the development of AI solutions through efforts in hardware, software, and system-level scaling.
Q The data center GPU business achieved strong year-on-year growth in 2024, but it seems that quarter-on-quarter growth will slow down in the next three quarters of 2025. Can you explain the reasons? Is it related to product transitions? Additionally, regarding ASICs, has there been any change in customer demand for training and inference?
A The data center GPU business achieved significant growth in 2024, but the first half of 2025 is indeed in a product transition period, which may affect quarter-on-quarter growth.
The early launch of the MI350 series is very important for both customers and AMD, and hardware progress has been smooth, with many lessons learned from the initial deployment of MI300.
Regarding ASICs, no significant changes have been observed in customer demand for training and inference. Customers are satisfied with AMD's performance in inference but also hope for strong performance from AMD in training solutions. AMD is addressing these needs through software investments and network technology.
Overall, ASICs are part of the solution, but AMD's product portfolio encompasses CPUs, GPUs, and network technology, enabling it to provide comprehensive solutions for customersQ In the fourth quarter, the server business achieved a double-digit growth quarter-on-quarter, but according to guidance, the GPU business in the first half of 2025 will be flat compared to the second half of 2024. Does this mean that the GPU business will decline quarter-on-quarter in the first and second quarters of 2025?
A The data center business grew by 9% quarter-on-quarter in the fourth quarter, with the server business growing slightly above this level, while the data center GPU business grew slightly below this level.
For the first half of 2025, the data center GPU business is expected to be roughly flat compared to the second half of 2024, but the specific performance will depend on the timing of deployments.
Overall, it is expected that the data center GPU business will achieve strong double-digit growth for the entire year of 2025.
Q Will the shipment volume of the GPU business in 2025 be higher than in 2024?
A Of course, to achieve strong double-digit growth, the volume in 2025 must be higher than in 2024.
Q What is the market outlook for the server CPU business in 2025? Can you differentiate the performance between the cloud services and enterprise markets? Additionally, AMD's market share among major cloud service providers has exceeded 50%. How do you view the competition from custom chips developed by these clients in the future?
A In 2025, AMD expects the server market (including cloud services and enterprise markets) to perform well.
In the first half of 2024, cloud service providers reduced their investments in CPUs, but began to increase them in the second half, and this trend is expected to continue into 2025.
The enterprise market is also entering a refresh cycle, with many cloud service providers updating their data centers.
Regarding the competition from custom chips, the key lies in having the right products for specific workloads. AMD has expanded the design points of each core generation through the Zen 4 and Zen 5 product lines to meet the needs of cloud-native and enterprise optimization.
Overall, the server market is competitive, but AMD has earned its deserved market share with a strong product portfolio and delivery capabilities.
Q Regarding the guidance of a 54% gross margin for the first quarter, can you elaborate on the main influencing factors for the second quarter and the second half of 2025?
A Gross margin is primarily influenced by the revenue mix. In the first quarter of 2025, both the data center business and client business achieved significant year-on-year growth, so the revenue mix is comparable to the fourth quarter, with a gross margin guidance of 54%.
If the revenue mix remains stable in the first half of 2025, the gross margin is expected to stay around 54%. However, as we enter the second half of the year, with the data center business becoming the fastest-growing driver for the company, the gross margin is expected to improve.
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