Stacy Rasgon: Hi guys. Thanks for taking my questions. I noted that you said that gross margins would expand in the second half, but you didn’t give us any color on how much they might expand. Can you give us any idea like first half to second half? Or I mean just for the full year, do you think gross margins grow year-over-year from the 52% that you printed in 2022?
Jean Hu: Stacy, this is Jean. Let me take this question, then Lisa can add. As we talk about it, it’s both our Embedded and Data Center segment have strong gross margins. So we feel pretty good about second half. We continue to have the growth of both Embedded and Data Center segment. The major headwind we are facing is really Client side, which if you think about the gross margin in the first half of 2022 versus the first half of 2023, the major impact is from the client revenue, inventory correction, which impact the gross margin in the Client segment. So going into second half, the normalization of the Client segment will help us to expand the gross margin. I think it really depends on how the Client segment will recover. That will drive the gross margin if it’s going to go back to the first half of 2022 or expand beyond that level. But overall, we feel pretty good. Once we normalize the Client segment, our gross margin will continue to expand.
Stacy Rasgon: So I guess, I ask the question again. For 2023, do you think gross margins can expand over 2022?
Lisa Su: Maybe what I would say, Stacy, is I think we’ve given you the puts and takes for where the margin goes. I think it depends a bit on what happens in the macro environment. But we do feel good about second half expansion, and we’ll see sort of the relative recovery in macro as it relates to all of our segments.
Stacy Rasgon: Got it. Thank you. I guess for my follow-up, maybe it follows up on that a little bit more just around the mix. I get how Data Center and Embedded should be growing in the second half versus the first half. But presumably, Client will, too, first half to second half, given that you are under shipping, it sounds like by a pretty wide margin right now. How do you feel about your mix just across the four businesses of the second half versus the first half? Do you think your Data Center plus Embedded mix, as a percentage of total revenue in the second half, is materially higher than it is in the first half? Or I mean could it even be not that different at all given the potential growth that you might see just from the channel normalization in clients?
Lisa Su: Yes. I think the way to think about it is, I think our Data Center grow – growth in the second half versus first half, we expect that to be significantly stronger. As it relates to clients, we would also expect it to be stronger. Again, depending a bit on macro and sort of how the TAM actually evolves. I think for the Embedded businesses, I would say that we expect to grow over the full year 2023 versus 2022. What we see right now is a fairly strong backlog and good visibility into the first half of the year. I’m not ready to say that Embedded will grow in the second half versus the first half, though, because we’re coming off very strong growth already. And so I think those are the puts and takes.
Operator: Thank you. Next question is coming from Toshiya Hari from Goldman Sachs. Your line is now live.
Toshiya Hari: Good afternoon. Thank you so much for taking the question. Lisa, the pushback that we often get is AMD is doing really well, gaining share, but you’re gaining share in relatively mature markets. And when it comes to AI, you do have a strategy, but you really haven’t shown the product set, if you will. You talked about how you have CPU, GPU, FPGA and Pensando, and you’re shipping samples of MI300, I guess, later this quarter and potentially launching in the second half. At what point do we, as analysts and investors, start to see your AI strategy materialize in the P&L and your profitability, if you will.
Lisa Su: Yes. Thanks for the question. We believe that AI is a huge driver of compute growth. And given our portfolio, it should be a driver of our growth as well. I think if you think about the product sets that we are putting sort of AI content in, you should expect MI300, of course, on the GPU training side. We just launched Ryzen AI in our PC portfolio. You can expect additional AI acceleration coming in our server portfolio as well. So you’re going to see AI broadly across our road maps. In terms of when – we’ve talked before about sort of our Data Center GPU ambitions and the opportunity there. We see it as a large opportunity. As we go into the second half of the year and launch MI300, sort of the first user of MI300 will be the supercomputers or El Capitan, but we’re working closely with some large cloud vendors as well to qualify MI300 in AI workloads.
And we should expect that to be more of a meaningful contributor in 2024. So lots of focus on just a huge opportunity, lots of investments in software as well to bring the ecosystem with us.
Toshiya Hari: That’s very helpful. And then, Lisa, as my follow-up, I had a question on profitability in your client business or your PC business. I think a year ago, margins were really high. Supply was relatively tight. Since then, with the inventory correction and perhaps a little bit more competition, your profit margins are down. You talked about the first half of this year still being sort of in digestion mode, and then in the second half, things normalizing. But would it be realistic to assume your gross margins in the Client business return to first half ’22 levels? Or in hindsight, margins back then were perhaps – you were over-earning in that business given the environment?
Lisa Su: Yes. Sure. So I think on the Client segment, it’s fair to say that we believe, given where we are with the client inventory levels, the first half will certainly be lower. We expect some improvement in the second half. But in terms of overall margin, we expect that the client business will be below the corporate average, and that’s how we’re modeling the client business.
Operator: Thank you. Next question is coming from Aaron Rakers from Wells Fargo. Your line is now live. Aaron, perhaps your phone is on mute. Please pick up your handset.
Aaron Rakers: Yes. Thanks you for taking the questions. I guess the first question is going back to the Data Center piece of the business and specifically around the ramp of Genoa. I’m curious, is there any help that you can provide us with thinking about the ASP uplift you expect to see with the Genoa product cycle? And I guess at some point through 2023, how do we start to think about the Bergamo product cycle as well impacting the server CPU business?
Lisa Su: Sure. So Aaron, we started shipping Genoa in the third quarter that ramped into the fourth quarter and will continue to ramp through 2024. The way I think about – or the way you should think about the Genoa ramp is that it is a new platform for our customers. So they’ll be introducing it – introducing first-in-cloud sort of internal workloads and then going to external workloads and then enterprise. So I think it will be throughout 2024. We have – I’m sorry, throughout 2023. We do have higher core counts on Genoa. So you would expect that, that will give us some ASP uplift as we go through to some of those higher core count products. Bergamo will launch in the first half of the year. We are on track for the Bergamo launch, and you’ll see that become a larger contributor in the second half.
So as we think about the Zen 4 ramp and the crossover to our Zen 3 ramp, it should be towards the end of the year, sort of in the fourth quarter, that you would see a crossover of sort of Zen 4 versus Zen 3, if that helps you.
Aaron Rakers: Yes, that’s very helpful. And then as a quick follow-up, the business doesn’t really ask that much about, but it’s been doing phenomenally well here these last couple of quarters. It’s actually the Xilinx business. I know it’s within the Embedded largely. But your self-reporting, I think if I read the filings correctly, growing 40% plus on a like-for-like basis for Xilinx. I think your competitor also growing a solid pace. How do you think about the sustainability or durability of that demand in that Embedded or Xilinx business as we move through ’23?
Lisa Su: Sure. So Aaron, that business has done very well. So the Xilinx business, I think our overall Embedded business continues to do well. When we look across the subsegments, there are puts and takes in the subsegments. But what we see is content is going up. So we had records in communications, industrial and health care, aerospace and defense, automotive. We have the Embedded processor content that’s also going into automotive. So we feel very good about that business. I think as we look into 2023, I mentioned this in the question with Stacy. We have a very good visibility to the first half just given the lead times and the backlog. And the first half looks strong, so we expect to grow sequentially in the first quarter.
As we go into the second half of the year, we’re monitoring the overall demand environment. And just given how strong it’s been, we are looking at whether there’ll be some puts and takes in some of the end market segments there. But overall, I think the key point is the content, and our design win momentum is good, and we continue to ramp new design wins in the Xilinx business.
Operator: Thank you. Your next question is coming from Joe Moore from Morgan Stanley. Your line is now live.
Joe Moore: Great, thank you. I wonder if you could talk to us about the puts and takes of PC market share in a down 10% environment. I would assume it helps you with consumers better than commercial, but what is your progress in terms of penetrating the notebook market and penetrating the commercial market where you could continue to gain share?
