Advanced Micro Devices CEO Lisa Su said it's an exciting time for the industry as the widespread deployment of AI is driving demand for significantly more compute across a broad range of markets.

During the first quarter, Su noted that data center segment and client segment sales each grew by more than 80% year-over-year.

"Under this backdrop, we are executing very well as we ramp our data center business and enable AI capabilities across our product portfolio," Su said in an analyst call. In after-hours trading, AMD's stock is down 2.9% to $153.58 a share.

For the quarter, however, AMD reported muted financial results. In the first quarter, AMD's revenue increased to $5.5 billion, as results were dragged down by weakness in gaming as console sales for the PlayStation 5 and Xbox Series X/S enter their fifth year in the market.

In fact, gaming demand is down "a lot," said AMD CFO Jean Hu, in the analyst call.

"If you look at gaming, demand has been quite weak. That's well known. Also [they have] inventory issues. We guided down more than 30% in the first and second quarters, and the second half will be lower than the first half. That is how we are looking for the gaming business this year," Hu said.

"Looking further ahead, AI represents an unprecedented opportunity for AMD. While there has been significant growth in AI infrastructure build outs, we are still in the very early stages of what we believe is going to be a period of sustained growth driven by an insatiable demand for both more specialized AI and high-performance general purpose compute," Su said in an analyst call after the company reported its first quarter results for the period ended March 31.

In Q&A, she said she was impressed with supply chain and the launch of the latest processors and that supply remains tight as demand remains strong.

Data Center segment

Lisa Su shows off the 4th Gen Epyc processor.

Data Center segment revenue grew 80% year-over-year and 2% sequentially to a record $2.3 billion. The substantial year-over-year growth was driven by the strong ramp of AMD Instinct MI300X GPU shipments and a double-digit percentage increase in server CPU sales, Su said.

She said AMD believes it "gained server CPU revenue share in the seasonally down first quarter led by growth in enterprise adoption and expanded cloud deployments. In cloud, while the overall demand environment remained mixed, hyperscalers continued adopting 4th Gen EPYC processors to power more of their internal workloads and public instances."

There are now nearly 900 AMD-powered public instances available globally as Amazon, Microsoft and Google all increased their 4th Gen EPYC processor offerings with new instances and regional deployments. In the enterprise, AMD has seen signs of improving demand as CIOs need to add more general purpose and AI compute capacity while maintaining the physical footprint and power needs of their current infrastructure.

This scenario aligns perfectly with the value proposition of our EPYC processors, given AMD's high core count and energy efficiency it can deliver the same amount of compute with 45% fewer servers compared to the competition, cutting initial capex by up to half and lowering annual opex by more than 40%.

As a result, enterprise adoption of EPYC CPUs is accelerating, highlighted by deployments with large enterprises including American Airlines, DBS, Emirates Bank, Shell, and ST Micro. AMD is also building momentum with AMD-powered solutions powering the most popular ERP and database applications. As one example, the latest generation of Oracle Exadata, the leading database solution used by 76 of the Fortune 100, is now powered exclusively by 4th Gen EPYC processors.

Looking ahead, Su said AMD is very excited about our next gen Turin family of EPYC processors featuring the Zen 5 core. She said AMD is widely sampling Turin and the silicon is looking great.

"In the cloud, the significant performance and efficiency increases of Turin position us well to capture an even larger share of both first and third party workloads," she said.

In addition, there are 30% more Turin platforms in development from our server partners compared to 4th Gen EPYC platforms, increasing enterprise SAM with new solutions optimized for additional workloads. Turin remains on-track to launch later this year.

Turning to our broader data center portfolio, AMD delivered its second straight quarter of record data center GPU revenue as MI300 became the fastest ramping product in AMD history, passing $1 billion in total sales in less than two quarters.

In cloud, MI300X production deployments expanded at Microsoft, Meta and Oracle to power generative AI training and inferencing for both internal workloads and a broad set of public offerings. For the enterprise, AMD is working very closely with Dell, HPE, Lenovo, Supermicro and others as multiple MI300X platforms enter volume production this quarter.

In addition, there are more than 100 enterprise and AI customers actively developing or deploying MI300X.

On the AI software front, AMD made progress adding upstream support for AMD hardware in the OpenAI Triton compiler, making it even easier to develop highly performant AI software for AMD platforms.

AMD partners are seeing very strong performance in their AI workloads. As they jointly optimize for their models, MI300X GPUs are delivering leadership inferencing performance and substantial TCO advantages compared to H100.

For instance, several AMD partners are seeing significant increases in tokens per second when running their flagship LLMs on MI300X compared to H100.

Client segment

Revenue was $1.4 billion, an increase of 85% year-over-year driven by strong demand for the latest generation Ryzen mobile and desktop processors with OEMs and in the channel. Client segment revenue declined 6 percent sequentially.

"We saw strong demand for our latest generation Ryzen processors in the first quarter," Su said.

Ryzen desktop CPU sales grew by a strong double digit percentage year-over-year and Ryzen mobile CPU sales nearly doubled year-over-year as new Ryzen 8040 notebook designs from Acer, Asus, HP, Lenovo and others ramped

The company expanded the portfolio of leadership enterprise PC offerings with the launch of our Ryzen PRO 8000 processors earlier this month. Ryzen PRO 8040 mobile CPUs deliver industry-leading performance and battery life for commercial notebooks. And the Ryzen PRO 8000 series desktop CPUs are the first processors to offer dedicated, on-chip AI accelerators in commercial desktop PCs.

"We see clear opportunities to gain additional commercial PC share based on the performance and efficiency advantages of our Ryzen PRO portfolio and an expanded set of AMD-powered commercial PCs from our OEM partners," Su said.

She also said the market is on-track to return to annual growth in 2024 driven by the start of an enterprise refresh cycle and AI PC adoption.

"We see AI as the biggest inflection point in PCs since the internet, with the ability to deliver unprecedented productivity and useability gains," Su said.

We will also take the next major step in our AI PC roadmap later this year with the launch of our next generation Ryzen mobile processors codenamed Strix. Customer interest in Strix is very high based on the significant performance and energy efficiency uplifts we are delivering.

Design win momentum for premium notebooks is outpacing prior generations as Strix enables next generation AI experiences in laptops that are thinner, lighter and faster than ever before. We are excited about the growth opportunities for the PC market and based on the strength of our Ryzen CPU portfolio we expect to grow revenue share this year.

Gaming segment

AMD's Q1 2024 performance.

Su said that revenue declined 48% year-over-year and 33% sequentially to $922 million. First quarter semi-custom SoC sales declined in line with our projections as we are now in the fifth year of the console cycle. That's a pretty dramatic decline, but very familiar when it comes to console cycle.

In gaming graphics, revenue declined year-over-year and sequentially. AMD expanded its Radeon 7000 series family with the global launch of our Radeon RX 7900 GRE and also introduced its driver-based AMD Fluid Motion Frames technology that can provide large performance increases in thousands of games.

Embedded segment

Su said that revenue decreased 46% year-over-year and 20% sequentially to $846 million as customers remain focused on normalizing their inventory levels.

"We launched our Spartan UltraScale+ FPGA family with high I/O counts, power efficiency, and state-of-the-art security features and we are seeing strong pipeline growth for our cost-optimized embedded portfolio across multiple markets," Su said.

Given the current embedded market conditions, AMD is now expecting second quarter embedded segment revenue to be flat sequentially with a gradual recovery in the second half of the year. Longer-term, AMD sees AI at the edge as a large growth opportunity that will drive increased demand for compute across a wide range of embedded devices.

To address this demand, AMD announced its second generation of Versal adaptive SoCs that deliver a three times increase in AI TOPS per watt and 10x greater scalar compute performance compared to prior generation of industry leading adaptive SoCs. Among the customers is Subaru.

Closing remarks

In summary, Su said AMD executed well in the first quarter, setting us up to deliver strong annual revenue growth and expanded gross margin driven by growing adoption of our Instinct, EPYC and Ryzen product portfolios. She said the Strix products are suited for the high end of the market.

AMD's priorities for 2024 are to accelerate the data center growth by ramping Instinct GPU production and gaining share with Epyc processors, launch next generation “Zen 5” PC and server processors that extend leadership performance and expand our adaptive computing portfolio with differentiated solutions.