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AMD to offer CPUs with Xilinx AI engine in 2023

And unlike Intel, Zen giant saw boom in PC land, thanks to focus on high-end parts

AMD plans to introduce processors next year that integrate an AI engine from the company's recently acquired Xilinx FPGA business unit, which helped the chip designer deliver high sales growth in the first quarter along with the company's traditional PC and server businesses.

CEO Lisa Su disclosed the plans for new AI-fueled CPUs during her company's first-quarter earnings call Tuesday, where she said the resulting microprocessors will "enable industry-leading inference capabilities" as part of broader plans to capitalize on AMD's $49 billion Xilinx acquisition.

The AI engines are already being used in Xilinx's FPGA-based products for embedded and edge applications, including image recognition for cars, according to Victor Peng, Xilinx's former CEO who now leads AMD's Adaptive and Embedded Computing Group.

Peng said AMD is working on developing "unified" software that will help developers take advantage of the new AI capabilities for both inference and training in datacenters and at the edge.

Overall, Su said, Xilinx will allow AMD to have a "much broader set of offerings" in the AI hardware space that goes beyond the company's current capabilities with CPUs and GPUs.  

"We now have the best portfolio of high-performance and adaptive computing engines in the industry, and we see multiple opportunities to leverage our expanded technology portfolio to deliver even stronger products," she said.

Su said the addition of Xilinx's portfolio of FPGA-based products will also allow the company to sell more chips and drive higher sales with AMD's largest customers who have diverse computational needs.

As part of AMD's growing efforts in software, Su said the company is exploring the possibility of charging money for new kinds of software in the future. Rivals Intel and Nvidia have already been making money from software, and they have both expressed big ambitions in this area.

"You should see us investing a lot more in software," Su said. "And then in terms of the monetization and stuff, I think we can address that more as we think about the overall solution space that we'll be offering across all of these compute engines."

Su and Peng teased that AMD will share more details about its long-term plans for Xilinx, its pending acquisition of networking chip provider Pensando, and software, at a financial analyst event on June 9.

Investors see early promise in a combined AMD-Xilinx

AMD's latest quarter marked the first period during which the US giant recorded revenue from Xilinx, which became a part of the company mid-February. On first impression, investors were impressed and drove AMD's stock price up more than six percent in after-hours trading Tuesday.

On the call, Su boasted that the chip designer's expanding portfolio is giving AMD "lots of levers for growth" amid a "significantly larger" total addressable market. She added that Xilinx specifically gives the corporation "multiple high-margin, long-term revenue streams."

The company's revenue in the first quarter grew 71 percent year-over-year to $5.9 billion, and it forecast sales to increase to roughly $6.5 billion in the second quarter, which would mark an approximately 69 percent uplift from the same period last year.

This sales trajectory prompted AMD to upgrade its forecast for full-year revenue to $26.3 billion in 2022. This nearly doubled the company's previous guidance for annual sales growth to 60 percent.

When not using standard accounting practices, AMD's gross margin was 53 percent in the first quarter, and the company expects that to grow to roughly 54 percent in the second quarter. The company expects this margin to remain at that level by the end of the year, which is up from the roughly 51 percent it previously anticipated.

Su said AMD increased its revenue forecast in anticipation of continued strong demand for Xilinx products as well as the company's chips for servers and game consoles. She added that improving supply capacity with third-party foundries, mainly TSMC, also contributed to the picture.  

"We have invested significantly over 18 months in securing the supply and capacity, and we're seeing it come online," she said.

Business segment breakdown

While Intel reported a plunge in its PC business last week, AMD experienced the opposite, reporting a 33 percent year-over-year increase to $2.8 billion in first-quarter revenue for its Computing and Graphics segment. Sales for both its Ryzen CPUs and Radeon GPUs grew in the double digits over that period, which Su said helped AMD grow CPU revenue share for an eighth straight quarter.

Su said AMD has been able to keep growing in the microprocessor market for PCs because of its focus on the premium, gaming, and commercial segments. This was reflected in the fact that the average selling price for the company's processors were higher sequentially and year-over-year.

AMD's Enterprise, Embedded and Semi-Custom segment saw much higher growth, with first-quarter revenue increasing 88 percent year-over-year to $2.5 billion. This was the result of its Epyc server CPU and automotive chip businesses more than doubling, plus "significant" double-digit percentage growth for AMD's custom chips destined for game consoles.

As for the company's server GPU efforts, Su said sales were flat as AMD launched its new Instinct MI210 accelerators, which are currently recorded in the Computing and Graphics segment.

With AMD's server CPUs and GPUs combined, they represented somewhere in the low 20 percent range of the chip designer's total revenue in the first quarter, according to Su.

When it came to Xilinx, AMD generated $559 million from the business, which was only part of the company for roughly the final six weeks of the first quarter. Looking at Xilinx's revenue for the entire quarter, the business brought in more than $1 billion in revenue, up 22 percent year-over-year.

If you've ever thought AMD could be a little more transparent about how much money it makes from its server chips, we have good news.

Starting in the second quarter, AMD will start reporting revenue across four segments: datacenter, gaming, client, and embedded. Su said the company will share more details about the opportunities AMD sees in each segment at the upcoming financial analyst event.

"We are incredibly excited about the opportunity in data center," Su said. ®

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