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Advanced Micro Devices (AMD) Q4 2021 Earnings Call Transcript

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Advanced Micro Devices (NASDAQ: AMD)

Q4 2021 Earnings Call

Feb 01, 2022, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the AMD fourth quarter and full year 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] 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.

Laura Graves -- Corporate Vice President, Investor Relations

Thank you, and welcome to AMD's fourth quarter and fiscal year-end 2021 financial results conference call. By now, you should have had the opportunity to review a copy of our earnings release and accompanying slideware. If you have not reviewed these documents yet, they can be found on the Investor Relations page of amd.com. Participants on today's conference call are Dr.

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 Dan McNamara, senior vice president and general manager of server, will attend the Virtual Susquehanna Financial Group 11th Annual Technology Conference on Thursday, March 3rd. Our first quarter 2022 quiet time is expected to begin at the close of business on Friday, March 11th; and AMD will host its 2022 Financial Analyst Day on Thursday, June 9th.

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Today's discussions contain 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. Please refer to the cautionary statement in our press release for more information on factors that could cause the 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 the slides posted on our website.

Now with that, I will hand the call over to Lisa. Lisa?

Lisa Su -- President and Chief Executive Officer

Thank you, Laura, and good afternoon to all those listening in today. 2021 was an outstanding year for AMD as we exceeded our aggressive growth goals and delivered another record year. Each of our businesses grew significantly and set new annual revenue record, highlighted by data center revenue more than doubling year over year. Annual revenue grew 68% to a record 16.4 billion, and we expanded gross margin for the sixth straight year.

We also delivered record net income and EPS, both of which more than doubled year over year. Looking at the fourth quarter, we ended the year exceptionally strong with our sixth straight of greater than 45% year-over-year revenue growth. Fourth quarter revenue grew 49% from a year ago to a record 4.8 billion. We expanded gross margin by more than five percentage points and doubled operating income year over year.

Turning to our computing and graphics segment. Revenue increased 32% year over year to 2.6 billion, driven by growth in both Ryzen and Radeon processor sales. Record client computing revenue grew by a double-digit percentage from a year ago, led by record notebook sales. We saw strong demand for premium AMD notebooks and our higher-end desktop CPUs in the quarter as Ryzen 5000 processor unit shipments grew by a double-digit percentage sequentially.

As a result, we believe we gained client processor revenue share for the seventh straight quarter. We launched our Ryzen 6000 series notebook CPUs at CES last month, featuring our new Zen 3+ core that further extends the leadership compute, gaming, and battery life capabilities of our mobile processors. We increased the number of premium gaming and commercial design wins from Acer, Asus, Dell, HP, Lenovo, and other major PC providers to more than 200, including more than 20 AMD advanced notebooks that combine Ryzen CPUs, Radeon GPUs, and Radeon Software to deliver the ultimate gaming experience. We also provided the first public demonstration of our upcoming Ryzen 7000 desktop processors at CES.

Ryzen 7000 series desktop CPUs provide a significant performance increase compared to our current Ryzen processors by combining our high-performance five-nanometer Zen 4 core with our next-generation memory and I/O technologies in the new AM5 socket. There's a lot of excitement in the market for our next-gen Ryzen desktop processors and we're on track to launch in the second half of 2022. In graphics, revenue more than doubled year over year for the third straight quarter. Radeon 6000 series GPU unit shipments and revenue both grew by double-digit percentages sequentially, led by strong demand across our RDNA 2 desktop family.

At CES, we announced that we expanded our Radeon 6000 series GPU portfolio with our first mainstream RDNA 2 desktop GPU, priced at $199. We also introduced new mobile GPUs that deliver up to 20% more performance than our prior generation and our first mobile graphics chips for thin and light gaming notebooks. Data center graphics revenue more than doubled year over year, driven largely by HPC wins for our latest Instinct MI200 accelerators. We are seeing growing customer engagements for our data center GPUs based on the leadership AI and HPC performance of our new MI200 accelerators, highlighted by multiple supercomputing wins and an expanded set of platforms on track to launch from Atos, Dell, HP, Lenovo, Supermicro, and others starting later this quarter.

Turning to our enterprise, embedded, and semi-custom segment. Revenue increased 75% year over year to 2.2 billion, driven by record EPYC processor and semi-custom sales. Semi-custom sales increased year over year as the current game console cycle continues outpacing all prior generations. We expect revenue to grow this year driven by continued strong demand for the latest Microsoft and Sony consoles.

Turning to server. We had another outstanding quarter. Revenue more than doubled year over year and increased by a double-digit percentage sequentially, driven by demand across both cloud and enterprise customers. In cloud, revenue more than doubled year over year as the largest providers expanded internal deployments and more than 130 new AMD-powered instances launched from Amazon Web Services, Alibaba, Google, IBM, Microsoft Azure, and others.

Microsoft Azure previewed a new HPC instance, powered by our third-gen EPYC processors with 3D stack memory that delivers up to 80% more performance than currently available instances. Our differentiated 3D stacking technology further extends the leadership performance of EPYC processors and technical computing workloads like EDA, fluid dynamics, and complex simulations. We started volume production of EPYC processors with 3D stacked memory earlier this quarter in advance of OEM platform launches with all our major server partners. In enterprise, revenue doubled year over year, driven by the ongoing ramp of more than 100 third-gen EPYC platforms available from Dell, HP Enterprise, Lenovo, Supermicro, Cisco, and others.

In HPC, EPYC processor adoption was highlighted by the number of AMD-powered supercomputers on the November Top500 fastest supercomputers list, tripling year over year to 73. EPYC processors also dominated the Green500 list, and are now powering eight of the top 10 most efficient supercomputers in the world. Turning to our overall data center business. We made outstanding progress in the last year.

We exited 2021 with data center revenue contributing a mid-20 percentage of overall revenue, and we expect 2022 to be another year of significant growth based on the strong customer demand signals for our current and next-generation products. In November, we provided first details of our next-generation EPYC processor, codenamed Genoa, that will feature up to 96 Zen 4 cores and next-generation memory and I/O technologies, including breakthrough memory expansion capabilities. Customer excitement for Genoa is extremely high as it extends our performance leadership across a broad range of workloads. We also announced the addition of Bergamo to our server road map, featuring a version of our Zen 4 core called Zen 4c that has been specifically optimized for cloud-native computing.

Bergamo is a high-core talent, power-efficient CPU that can be used in the same platforms as Genoa. It will feature up to 128 CPU cores and deliver significant performance and power efficiency advantages for cloud workloads. We are sampling Genoa processors to customers now and are on track to launch later this year with Bergamo shipments planned to follow in the first half of 2023. Turning to our Xilinx acquisition.

We were pleased to announce that China's State Administration for Market Regulation approved the transaction on January 27th. The only remaining regulatory approval required is FTC approval of our HSR refiling, and we expect to close the transaction in the first quarter of 2022. I am more excited than ever about the benefits of the acquisition for both AMD and Xilinx stakeholders. Customer excitement is also high as they look forward to the opportunity to deepen their strategic engagements with AMD based on our expanded technology and solutions portfolio.

In summary, I am incredibly proud of our performance in 2021. Our record annual results highlight our strong execution over multiple years to establish the technical, operational, and strategic foundation to position AMD as a high-performance computing leader. Each of our businesses performed extremely well in 2021 with growth significantly ahead of the long-term financial model we outlined at our Financial Analyst Day in 2020. I want to take a moment to recognize and thank the AMD employees whose passion, dedication, and execution have enabled this success.

Turning to 2022. Demand for our product is very strong, and we look forward to another year of significant growth and share gains as we ramp our current products and launch our next wave of Zen 4 CPUs and RDNA 3 GPUs. We have also made significant investments to secure the capacity needed to support our growth in 2022 and beyond. Looking out over the long term, we are confident in our ability to continue growing significantly faster than the market, based on our expanded road map investments and the deep relationships we have established with a broad set of customers who view AMD as a strategic enabler of their success.

Now I'd like to turn the call over to Devinder to provide some additional color on our fourth quarter and full year financial performance. Devinder?

Devinder Kumar -- Executive Vice President, Chief Financial Officer, and Treasurer

Thank you, Lisa, and good afternoon, everyone. We had a very strong 2021, with increased demand for our products, excellent execution resulted in record annual revenue, continued gross margin expansion, record profitability, and significant cash flow generation. Fourth quarter 2021 revenue of 4.8 billion was our sixth consecutive quarterly record, up 49% from a year ago, driven by strong revenue increases across all businesses. Gross margin was 50%, up 560 basis points from a year ago, driven by a richer mix of products and data center revenue growth.

Operating expenses were 1.1 billion, compared to 789 million a year ago as we increased investments in our long-term product road maps to support the significant growth trajectory of our business. Operating income doubled from a year ago to a record 1.3 billion, up 665 million, primarily driven by significant revenue growth and higher gross margin. Operating margin was 27%, up from 20% a year ago. Net income was a record 1.1 billion, up 486 million from a year ago.

Diluted earnings per share was $0.92, compared to $0.52 per share a year ago. This includes a 15% effective tax rate, compared to a 3% rate a year ago. Now turning to fourth quarter business segment results. Computing and graphics segment revenue was 2.6 billion, up 32% year over year, driven by higher graphics and client processor revenue.

Computing and graphics segment operating income was 566 million, or 22% of revenue, compared to 420 million a year ago. The increase in operating income was driven primarily by higher revenue, partially offset by higher operating expenses. Enterprise, embedded, and semi-custom segment revenue was 2.2 billion, up 75% from 1.3 billion the prior year. The strong revenue increase was driven by significantly higher EPYC processor and semi-custom sales.

EESC segment operating income grew significantly to 762 million, or 34% of revenue, compared to 243 million, or 19% a year ago. Operating income growth was driven primarily by higher revenue and richer product mix, partially offset by higher R&D and go-to-market expenses. Turning to the balance sheet. Cash, cash equivalents, and short-term investments were 3.6 billion at year-end.

As we continue returning capital to shareholders, we repurchased 756 million of common stock in the fourth quarter and closed out the year with 1.8 billion of repurchases. Additionally, we have repurchased 1 billion to date in the first quarter of 2022 and have 1.2 billion remaining under the authorized 4 billion share repurchase plan. Quarterly free cash flow was 736 million, compared to 480 million in the same quarter last year and 764 million in the prior quarter. Inventory was 2 billion, up 53 million from the prior quarter.

Now let me turn to our full year financial results. 2021 revenue was 16.4 billion, up 68% year on year, driven by strong growth across all businesses. Gross margin was 48%, up 370 basis points from the prior year, driven by the strength and competitiveness of our EPYC, Radeon, and Ryzen processors. Operating expenses were 24% of revenue, compared to 28% in 2020.

2021 operating income was up 146% from a year ago to 4.1 billion, resulting in an operating margin of 25%, compared to 17% in 2020. Net income was 3.4 billion, up 118% from the prior year. Full year free cash flow was a record 3.2 billion, resulting in free cash flow margin of 20% for the year. In addition, we invested approximately 1 billion during 2021 in long-term supply chain capacity to support our expectations for future revenue and market share growth.

Let me now turn to our financial outlook. Today's outlook is based on current expectations and contemplates the current global supply environment and customer signals and does not contemplate the addition of Xilinx as that transaction has not yet closed. First quarter 2022 revenue is expected to be approximately 5 billion, plus or minus 100 million, an increase of approximately 45% year over year and approximately 4% quarter on quarter. The year-over-year increase is expected to be driven by growth across all businesses.

The quarter-on-quarter increase is expected to be driven by higher server and client revenue. In addition, for Q1 2022, we expect non-GAAP gross margin to be approximately 50.5%; non-GAAP operating expenses to be approximately 1.2 billion; non-GAAP interest expense, taxes, and other to be approximately 207 million based on a 15% effective tax rate; and the diluted share count to be approximately 1.22 billion shares. For the full year 2022, we expect revenue to be approximately 21.5 billion, an increase of approximately 31%, driven by growth across all businesses. We expect non-GAAP gross margin to be approximately 51%, non-GAAP operating expenses to be approximately 24% of revenue, non-GAAP effective tax rate to be 15%, and non-GAAP cash tax rate to be approximately 9%, due primarily to the US tax requirement to capitalize R&D and the full utilization of our U.S.

net operating losses and tax credits in 2022. In closing, we had an outstanding quarter and an excellent year with very strong revenue growth and numerous financial records. As we enter 2022, our leadership products and growing customer momentum continue to position us very well for long-term growth. I look forward to AMD delivering another year of very strong financial performance.

With that, I'll turn it back to Laura for the question-and-answer session. Laura?

Laura Graves -- Corporate Vice President, Investor Relations

Thank you, Devinder, and thank you, Lisa. Operator, we're ready for our first question.

Questions & Answers:

Operator

Certainly. We'll now be conducting a question-and-answer session. [Operator instructions] Our first question today is coming from Aaron Rakers from Wells Fargo. Your line is now live.

Aaron Rakers -- Wells Fargo Securities -- Analyst

Yeah. Thanks for taking the question, and congratulations on the quarter. Just thinking about the full year, you know, guidance. I know that you had mentioned in your prepared remarks that you expect the semi-custom segment to grow.

I'm curious if you could help us maybe appreciate how you're thinking about the semi-custom segment relative to the server segment and whether or not that 30% contribution from total data center still applies for 2023, the outlook that you had provided at the last Analyst Day, or you think that we're tracking above that trend? Thank you.

Lisa Su -- President and Chief Executive Officer

Sure, Aaron. Thanks for the question. So for 2022, I mean, our current view is that we'll see growth in all of our businesses. You know, we see strong demand for our products, as well as, you know, we have increased supply capability, given what we've done with our partners.

So relative to the growth from the different businesses, the growth will be led by server. So from what we see from customers and design wins and platforms and all that, you know, server will be very strong next year. But we also expect growth from our other businesses, including consoles, including our PC business, our graphics business, and our embedded business. So we expect the percentage of data center to continue to increase as we go into next year, and we'll give more on that as we go through the year.

Aaron Rakers -- Wells Fargo Securities -- Analyst

Thank you.

Lisa Su -- President and Chief Executive Officer

Thanks, Aaron.

Operator

Thank you. Our next question today is coming from Matt Ramsay from Cowen and Company. Your line is now live.

Matt Ramsay -- Cowen and Company -- Analyst

Thank you very much. Good afternoon. For the whole team, but Lisa, congrats on getting close on Xilinx. Excited to see what that brings, and obviously the strong results.

The -- one of the questions I'm getting tonight is -- with such a strong start, greater than 30% guidance for revenue in 2022, can you just kind of walk us through maybe with a little more specificity, some of the things that you've done in the supply chain around substrate, around back-end test and package, around wafer demand, and just to give people comfort that there's coverage there and visibility and the potential for upside, particularly as you take server and desktop on the five nanometer. I imagine, seven-nanometer capacity won't go away. It will stay as that new capacity comes online. So I just want to make sure I understand all the variables around the confidence in supply.

Thanks.

Lisa Su -- President and Chief Executive Officer

Yeah, absolutely, Matt. Thanks for the question. So, you know, we've been working on sort of the supply chain really for the last four or five quarters knowing the growth that we have from a product standpoint and the visibility that we have from customers. So in regards to your question on 2022 supply environment, we've made significant investments in, you know, wafer capacity, as well as substrate capacity and back-end capacity.

We feel very good about our progress in the supply chain to meet the 2022 guidance and, you know, our goal is, frankly, to have enough supply to satisfy the demand out there. So, you know, our view is we're going to continue to work with our partners and our customers to ensure that we know what they need. And likewise, you know, our capacity investments are for 2022, but also beyond 2022, because as the business grows, we need to continue to forecast and make plans for that, and that's what we've been working on.

Matt Ramsay -- Cowen and Company -- Analyst

Very good. Thanks for that. Just as a follow-up, I've been hearing more and more, and as you guys roll out the five-nanometer portfolio, many of those products in server and in desktop will include next-generation Infinity Fabric. And it's been a conversation for a while about what you guys have branded sort of A+ A, AMD CPU, and GPU together.

I wonder as you look out over the next several quarters, how -- Lisa, how would you characterize that combination in importance to your company strategy and the growth? Thanks.

Lisa Su -- President and Chief Executive Officer

Yeah. Well, we're very excited about our five-nanometer products. I think Zen 4 is, you know, very critical. It's a focus for this year for both our server road map, as well as our client road map.

And then the work with the Infinity Fabric really is just on top of that and allows us to continue to optimize, you know, sort of the AMD CPU and GPU ecosystem together. So whether on the data center side, with our data center GPU products, you know, working with EPYC in high-performance computing or on the PC side, when we have our, you know, AMD APUs plus our discrete graphics, you know, plus the software on top. So it is an important -- very important element of our strategy, and it just goes to continuing to differentiate with the overall portfolio as we go into these new platforms.

Laura Graves -- Corporate Vice President, Investor Relations

Thank you, Matt. Operator, next question, please.

Operator

Certainly. Our next question is coming from Ross Seymore from Deutsche Bank. Your line is now live.

Ross Seymore -- Deutsche Bank -- Analyst

Hi, thanks for letting me ask a question. Congrats on the strong results and the strong guide. Lisa, I just want to talk about the computing segment, the client computing side. At least in my model, that was a significant portion of the upside in the quarter after, I believe, last quarter, you talked about not wanting to fill the channel and make sure you ship according to demand.

So in the near term, what changed? And perhaps more importantly, as you look into 2022, it appears that you're planning for significant share gains to continue in that sector. Can you talk a little bit about what gives the confidence for that share gain, please?

Lisa Su -- President and Chief Executive Officer

Sure, Ross. So, you know, your question about the computing and graphics segment. Look, you know, our focus in this segment is to be very closely aligned with our customers and what they're doing in the market. So we've been monitoring, you know, sell-in and sell-out and sell-through trends very carefully.

I think the strength that we saw in the fourth quarter was very much a result of, you know, sort of the product strength. And we saw, you know, very nice notebook demand continuing at the premium part of the market in commercial, gaming, premium ultrathin. So we believe that the PC performance was, you know, a bit above our original guidance, but we believe that was to match end-user demand. Going into 2022, you know, again, same story.

I think the -- you know, what we see is 2021 was a strong year for PCs. Overall, the industry shipped, you know, approximately 350 million units. I think our view is that 2022 will be roughly flattish from a unit standpoint. But we will see a -- some mix, you know, changes in there with enterprise and premium being stronger than, for example, low end and education.

So, you know, from our standpoint, it's revenue share that we believe we can gain. It's the strength of our Ryzen 6000 series that we just launched at CES. We have, you know, 200 platforms from all of the OEM customers, and we have pretty good visibility in working with our customers on that. So -- and I think we feel good about it.

You know -- and, again, the client business is one of all of our businesses, you know, will grow. And I like that diversity, frankly, in the portfolio. But we feel good about the progress we've made in PCs, and we'll continue to ensure that we're matching sell-in with sell-out so that there is not inventory build in the business.

Ross Seymore -- Deutsche Bank -- Analyst

Thanks for all that color. Maybe a quick follow-up on the pricing side of the equation. You talked about getting enough supply to grow the impressive targets that you guys have for the year. Conceptually and strategically, how do you think about pricing? Is that something you pass along? Is it a tailwind to gross margin? And I don't know if you'd give any sort of precision, but out of the 30% plus that you're guiding to for the fiscal year, roughly, how do we think about pricing as a tailwind within that?

Lisa Su -- President and Chief Executive Officer

Yeah. Well, you know, I would say the way to think about pricing is, you know, the industry has seen, you know, some price increases across the supply chain. And, you know, that's as to be expected given the amount of capacity that we're all putting on to satisfy, you know, the strong demand. So, you know, we're always in this for the long-term and working with our supply chain partners, as well as our customers, to ensure that we find a way to kind of share the additional costs.

But, you know, our focus is on ensuring that we have the supply to meet the high demand. And, you know, I think what you're seeing is, you know, growth in the model from the standpoint that -- you know, we've always kind of said we're underrepresented in the business. You know, when you look even today with all of our growth, we're still underrepresented in the business, whether you're talking about the server business or the PC business. And so, you know, we believe that our product strength and our, you know, customer engagements are such that we can grow significantly in this environment.

Ross Seymore -- Deutsche Bank -- Analyst

Thank you.

Lisa Su -- President and Chief Executive Officer

Thanks, Ross.

Operator

Thank you. Our next question today is coming from Vivek Arya from Bank of America. Your line is now live.

Vivek Arya -- Bank of America Merrill Lynch -- Analyst


Video: AMD earnings reflect chip maker's ‘competitiveness and ability to execute,’ analyst says (Yahoo! Finance)

Replay Video

Thanks for taking my question. Lisa, I wanted to get your thoughts on the competitive landscape in the server market this year versus last. You know, your competitor at Intel is launching their Sapphire Rapids platform. They seem to be very excited about that.

You know, they're adding a lot of capacity in their fabs. Their enterprise spending, which has tended to favor them in the past, right, is also coming back. So I'm just curious, how are you thinking about AMD's ability to gain more share in servers this year?

Lisa Su -- President and Chief Executive Officer

Yeah, Vivek. So, look, we always expect the competitive environment to be very strong and very aggressive, and that's the way we plan our business. That being the case, I think we're, you know, very happy with the growth that we've seen in the business, you know, sort of last year. And as we look forward, you know, we see opportunities in both cloud and enterprise.

You know, on the cloud side, we're in -- 10 of the largest hyperscalers in the world are using AMD. As they get familiar with us over multiple generations, they're expanding the workloads that they're using AMD on. So we see that across internal and external workloads. In the enterprise segment, you know, we doubled year over year here in 2021.

We continue to add more field support to have more people get familiar with our architecture. We have very strong OEM relationships. So I feel very good about our server trajectory. And, yes, it's very competitive out there, but we think the data center business is a secular growth business.

And within that, we can grow significantly faster than the market.

Vivek Arya -- Bank of America Merrill Lynch -- Analyst

All right. So my follow-up, Lisa, you know, the semiconductor industry just went through a very tough time last year and even into this year, given all the supply shortages. I'm curious, what has that done to help you build, you know, stronger relationships with your customers who are perhaps looking for a more consistent execution on the road map and more reliable sources of supply? So how is, you know, the shortage environment in semis changed the way customers are looking at AMD today than, you know, how they used to look at you historically?

Lisa Su -- President and Chief Executive Officer

Yeah. I think, Vivek, the most important thing that we are, you know, sort of working on with our customers is really consistent execution. And so when you look at, you know, the last year and sort of some of the supply demand imbalance, you know, it has actually caused us to work much, much more closely with our customers. I think we have -- you know, we're talking about visibility now, multiple quarters and, in some cases, multiple years out.

For the type of capacity that we're talking about for the size of the customers that we're talking to, we need to do that to plan to have the capability to support all of that capability. So, overall, I think we have definitely deepened the relationship with the customers. And by the way, also, we've deepened the relationships with our supply chain partners. So I think the entire sort of -- the entire food chain needs to come together to deliver on the very strong demand that's out there.

So, you know, that's certainly what we've been working on.

Vivek Arya -- Bank of America Merrill Lynch -- Analyst

Thanks.

Lisa Su -- President and Chief Executive Officer

Thanks, Vivek.

Operator

Thank you. Our next question today is coming from Toshiya Hari from Goldman Sachs. Your line is now live.

Toshiya Hari -- Goldman Sachs -- Analyst

Great. Thank you. Congrats on the strong results, Lisa. I had two questions as well.

One, relatively short-term and one on Xilinx. The short-term question, just on Q1 revenue, you're obviously guiding total company revenue up on a sequential basis. Your nearest competitor talked about CPU inventory corrections in the quarter. Is that something that you're seeing in the market? And if so, is that contemplated in your guidance?

Lisa Su -- President and Chief Executive Officer

Sure, Toshiya. Thanks for the question. So, yeah, our guide in Q1 actually is up sequentially. You know, usually, we're down sequentially, just given normal seasonality, but the demand patterns are such that demand is strong and we have additional supply coming on board, and so that's why we're guiding sequentially up.

As it relates to CPU inventory, whether in PCs or in servers, we don't believe there is, you know, any significant inventory of our products, whether at, you know, our customers or sort of in the retailer channel. So from that standpoint, I think we've been watching very carefully the, you know, sell-in and sell-through patterns, and we believe we're matched to end-user demand.

Toshiya Hari -- Goldman Sachs -- Analyst

Great. And as my quick follow-up on Xilinx, you know, it's been a while since your initial announcement. I'm sure you've had, you know, quite a bit of back and forth with your customers. You've had time to monitor how they've been performing as a stand-alone company.

You know, how has your view on the company and sort of the technology and the potential revenue synergies going forward evolved at all? I know, you're still waiting to close this thing, so maybe, you know, you can't say too much, but just curious how your view on things have evolved as it relates to Xilinx. Thank you.

Lisa Su -- President and Chief Executive Officer

Yeah, absolutely. Look, I'm extremely excited about Xilinx. I mean, I would say that we very much have been, you know, planning for the integration over this period of time. You know, we've had customers anxious to talk to us about combined road maps.

You know, when we think about sort of the technology that they have, it's very complementary to ours, very, very strong team. And their business results were just posted, you know, last week, and their business is also doing it very, very well. So I think the combination is going to be very exciting. We look forward to telling you a lot more about it, as we get to close and beyond.

Operator

Thank you. Our next question today is coming from John Pitzer from Credit Suisse. Your line is now live.

John Pitzer -- Credit Suisse -- Analyst

Yeah. Good afternoon, guys. Lisa, thanks for letting me ask a question. Lisa, a couple of questions.

First, I'm wondering if you could just help me better understand the fungibility of your capacity planning throughout the year, i.e., I understand that your view on the PC market this year is sort of flattish with a better mix and you gaining share. But in the event that come mid-year that were to change and perhaps be a little bit worse than thought, do you have the ability to rejigger your sort of supply chain to move toward server and CPU? How does that kind of math work?

Lisa Su -- President and Chief Executive Officer

Yeah, John. So we've certainly worked very hard to give ourselves fungibility among the various capacity corridors that we have. So we've done, you know, numerous cross qualifications and new factory bring-ups and all of that stuff. So I would say it's not 100% fungible, but there -- you know, it is -- there is an ability to move across the different businesses.

And we make that a dynamic allocation decision, you know, sort of like weekly, you know, based on what we see going on. So I think we have a pretty good pulse on the market, and we sort of understand sort of what's going on. And, you know, our customers are giving us signals on a regular basis. And so, I think, we'll be able to manage through, you know, all of the puts and takes as we go through the year.

John Pitzer -- Credit Suisse -- Analyst

That's helpful. And then my second question, just on data center and GPU. Where does that factor into kind of your growth expectations for this year? And now that you've created sort of a strong beachhead of EPYC inside the data center, does that help the sales cycle at all to get more GPU penetration?

Lisa Su -- President and Chief Executive Officer

Yes, sure. So our data center GPU had a very strong year in 2021. It was, you know, sort of a key year for us as we launched the MI200 family, and we had several large supercomputing wins. This year, for data center GPU, it's about the cloud and about sort of expanding beyond sort of the large HPC wins.

You know, I view it as a strategic growth vector for us over the next several years. I think your question is a good one about sort of the pull now that EPYC is very, you know, sort of well established in these accounts. I do think that helps us with data center GPU. But the way to think about it is, you know, this is a long-term investment for us.

You know, the hardware is very, very good. We've been investing more in the software. We've been working with our customers to ensure that our toolchain gets them the performance that they need. And so I would say, this is a longer-term driver, but I'm pleased with the progress that we made, you know, certainly through this last year.

John Pitzer -- Credit Suisse -- Analyst

Thanks a lot.

Lisa Su -- President and Chief Executive Officer

Thanks.

Operator

Thank you. Our next question is coming from Blayne Curtis from Barclays. Your line is now live.

Blayne Curtis -- Barclays -- Analyst

Hey, thanks for taking my question. I was curious on the EPYC side and the preamble you kept clearly strong trends in cloud, enterprise, and HPC. Just curious on the comp channel. You had a press release recently with Nokia.

I know it's kind of early days, but any kind of comments you had in terms of your design progress there? It's kind of the last area that you haven't really penetrated in servers.

Lisa Su -- President and Chief Executive Officer

Yeah, sure, Blayne. It's still very early but, yeah, we're very happy with the partnership with Nokia that was announced. You know, we -- as you said, this is an area where, you know, we're early in the cycle. It's an area where we're building relationships.

And so, you know, I feel good about the progress there but, you know, I would say it's still quite early. And then, you know, you didn't ask this, but just one of the other things with the communications and 5G, you know, as we bring Xilinx into the equation, you know, they also have very deep relationships with a number of these accounts. And so, you know, we see that as an incremental positive as we think about EPYC in communications.

Blayne Curtis -- Barclays -- Analyst

Thanks. And then maybe for my follow-up, just on the March guidance. Semi-custom typically has a pretty seasonal decline. It's been anything but typical, and you had very strong trends, it seems like in the end of the year.

So I'm just kind of curious, within that March guidance, anything you can provide in terms of -- you know, I'm assuming it's probably down, but I am just kind of curious versus normal levels. If you could just tell us anything, that would be helpful.

Lisa Su -- President and Chief Executive Officer

Sure. So for the Q1 guide, you know, the sequential up is being driven by -- primarily by server and then also by client. For semi-custom, it is normally significantly down. And this year, it is flattish into the first quarter.

And it's -- as you said, the seasonal patterns aren't there. Demand continues to be strong and, you know, we continue to support our customers with additional, you know, product there.

Blayne Curtis -- Barclays -- Analyst

Thanks, Lisa.

Lisa Su -- President and Chief Executive Officer

Sure.

Operator

Thank you. Our next question is coming from Stacy Rasgon from Bernstein Research. Your line is now live.

Stacy Rasgon -- Bernstein Research -- Analyst

Hi, guys. Thanks for taking my questions. First, I want to revisit the pricing question. I don't think you quite answered it.

I get the inflationary environment, I get your costs are going up, you know, it's fair to pass those along. But of the 31% growth in 2022, how much of a tailwind is pricing? I mean, is it none? Is it some? Like how much? What's the number?

Lisa Su -- President and Chief Executive Officer

Stacy, I don't think I'm going to answer that exactly. But what I will say is what I said before. Look, we are sharing. You know, as we go through this environment, the key is to have long-term relationships, both on the supply chain side and on the customer side.

But, you know, without a doubt, the predominant growth is, you know, products. So it's units and ASPs from the mix of the product and, you know, it's -- that's the predominant growth.

Stacy Rasgon -- Bernstein Research -- Analyst

OK. OK. For my follow-up, look, I feel really bad about me picking on a 51% gross margin, but I am going to, so I apologize in advance. But I'll be honest, just given the mix seemingly should be getting quite a bit better year over year in 2022 versus 2021, and you're almost sitting at 51%, I mean, even going into Q1 anyway.

It's like -- why doesn't that margin go higher? Can you give us some feeling of the drivers, I guess, from where you're sitting right now in Q4 to Q1 guide through the year? Like why shouldn't we expect more upside to that gross margin, given where the mix is going?

Devinder Kumar -- Executive Vice President, Chief Financial Officer, and Treasurer

Yeah, Stacy, I can take that. You know, as you heard Lisa talk about semi-custom in Q4 to Q1, you would expect an increase, but it is flattish and, really, it's product mix-dependent, right? I think looking at any particular quarter is sometimes not the way to do it. It's kind of looking at the long-term. You know, we did 48-plus percent in 2020, and we're going to 51% as a guide in 2022.

And if you look at it from that standpoint, the margin of the company continues to go up in a very steady way as data center grows, as we get to a better mix of product within the client and graphics business, and that's, I think, the better way to look at it, Stacy.

Stacy Rasgon -- Bernstein Research -- Analyst

OK, got it. Thank you, guys.

Operator

Thank you. Our next question is coming from Mark Lipacis from Jefferies. Your line is now live.

Mark Lipacis -- Jefferies -- Analyst

Hi, thanks for taking my questions. I had one for Lisa and one for Devinder, if I may. Lisa, on -- you know, it seems like one of the potential threats to the merchant processor players like yourself is that your own customers are designing their own processors. And I'm wondering, does AMD have a role working with your customers to provide, you know, customized solutions, be it tweaking x86 or co-designing something more specific together hand in hand? You know, I don't know if Xilinx would play a role in that.

Could you just talk about what you're doing on -- with your customers on that effort?

Lisa Su -- President and Chief Executive Officer

Yeah, sure, Mark. So, you know, actually, it's a very exciting area. It's, you know, just consider it an evolution of -- you know, we've always had a semi-custom model, like the work that we do with the console guys to design specifically for their application. As we look at the broader set of applications, you know, including some of these data center applications, we do believe that there's a sort of the next leg of the stool in terms of deep customer relationships.

So we already do a lot of customization around product SKUs and, you know, specific optimization points, but we can certainly imagine both customer IP or different incarnations of our IP to really optimize because, you know, as these applications end up really requiring so much volume, it really does justify, you know, additional customization for those cases.

Mark Lipacis -- Jefferies -- Analyst

Yeah, got you. Thank you. And then a follow-up for Devinder, if I may. Devinder, you know, five, 10 years ago, I don't think a lot of people would have expected to hear you talk about buying back billions of dollars worth of stock, so congratulations on that progress.

The question on this topic is, you know, is -- where are -- where is AMD in terms of evolving this recent capital return push into a policy? Are you at a point where you're just looking opportunistically to buying back stock or, you know, some companies say, we're going to return, you know, X percent of our cash flow to shareholders? Where is AMD in this -- in the evolution of capital return? Thank you.

Devinder Kumar -- Executive Vice President, Chief Financial Officer, and Treasurer

You know, I think we just started in 2021, $1.8 billion. We did another $1 billion early in 2022. And certainly, that -- those purchases are part of our long-term $4 billion share repurchase program. To your question about policy, I don't think we're quite there yet.

We just started. We'll evaluate it as we close the volume transaction and also in our outlook of the business, confidence in the business, and then evaluate what we do from an overall standpoint as we look out to the future, the next few years here.

Mark Lipacis -- Jefferies -- Analyst

Fair enough. Thank you.

Laura Graves -- Corporate Vice President, Investor Relations

Thank you.

Lisa Su -- President and Chief Executive Officer

Thanks, Mark

Operator

Thank you. Our next question is coming from Joe Moore from Morgan Stanley. Your line is now live.

Joe Moore -- Morgan Stanley -- Analyst

Great. Thank you. You've obviously done a great job of bringing on supply. But it seems like AMD product is still relatively tight kind of everywhere.

Do you see the constraints being more severe in any of the end markets versus any of the others?

Lisa Su -- President and Chief Executive Officer

Sure, Joe. Well, I think overall, you know, we have been in a mode of demand is larger than supply. Although, we made a lot of progress through 2021. And I expect to make more progress, you know, really incremental capacity will come online through 2022, especially in the second half.

So, you know, I think it's really about sort of our prioritization decisions and trying to ensure that we spend -- that we're, you know, satisfying our customers' needs. But, you know, we're definitely working on getting more supply as we go through the year. And I think you should see it loosen up a bit.

Joe Moore -- Morgan Stanley -- Analyst

Great. Thank you. And then for my follow-up, you mentioned, I think, within server that both enterprise and cloud were up over 100%, which is pretty good. Can you talk about the mix of enterprise versus cloud within that business, give us some qualitative sense of how big enterprise has become?

Lisa Su -- President and Chief Executive Officer

Yeah. So enterprise has grown nicely. I mean, we're still cloud-weighted. So, you know, if you look -- sometimes these patterns, you know, it's better to look on a full year basis.

So we are still cloud-weighted relative to enterprise. But enterprise has made a really, you know, nice progress. It's a sizable business, and the -- we've made progress, you know, with the larger OEMs, as well as, you know, across a number of regional OEMs.

Joe Moore -- Morgan Stanley -- Analyst

Great. Thank you very much.

Lisa Su -- President and Chief Executive Officer

Thanks.

Laura Graves -- Corporate Vice President, Investor Relations

Operator, we have time for two more, please.

Operator

Certainly. Our next question is coming from Chris Caso from Raymond James. Your line is now live.

Chris Caso -- Raymond James -- Analyst

Yes, thank you. Good evening. First question is -- if you could give some indication of the strategy behind some of the processor variants that have come out, most recently Milan-X and Bergamo coming up. Do those variants represent incremental revenue to AMD? You know, what's the strategy behind it? How does that help you -- help the product line?

Lisa Su -- President and Chief Executive Officer

Sure, Chris. Well, I think the strategy is, you know, as we have gotten more scale in the business, we can invest more and we see ways to, you know, further differentiate our product portfolio. So I mean, I think, you know, Milan-X is really, you know, sort of the highest of the highest end. And we see that for, you know, technical computing and some of these EDA workloads that, you know, that does give us a very differentiated product.

And then we have the regular Milan product line, we'll have Genoa, and Bergamo is really optimized for cloud. So I do believe it gives us more opportunity to expand from a market share and a footprint standpoint. And I think the broader statement, Chris, is that the data center is so large. There are so many different workloads that you can optimize.

Like, you know, by doing these variants, we will actually get a better solution for the customer, give them better total cost of ownership and, you know, hopefully, give us a larger footprint in that workload as well.

Chris Caso -- Raymond James -- Analyst

Thank you. As a follow-up -- the follow-up question is about supply and just following up on some of your earlier comments. But can you tell us how you're approaching that now with getting the additional supply? Is it a factor of your customers coming to you with the requirements and then you going back to the foundry? And obviously, you need to make commitments to the foundries right now. Are those backed up by customer commitments? And, you know, in the event that business turns out to be better, you know, as it was last year, are you able to procure that additional supply in time for when the business needs it?

Lisa Su -- President and Chief Executive Officer

Yeah. We've set out a road map for, frankly, not just 2022 but beyond, which allows, you know, let's call it, very aggressive growth goals. You know, we work that on a regular basis with our customers and our supply chain partners. I would say we have better visibility than we have ever had from a customer demand standpoint.

And so that gives us pretty good confidence in terms of what is needed, but there are always going to be some puts and takes. And so we have enough flexibility to do that. But, you know, our goal is the dimension for success, right? At the end of the day, that's what we want to do is we want to satisfy customer demand, and so we're dimensioning for success and, you know, we work with our customers as their demand evolves.

Chris Caso -- Raymond James -- Analyst

Thank you.

Operator

Thank you. Our final question today is coming from Harlan Sur from J.P. Morgan. Your line is now live.

Harlan Sur -- J.P. Morgan -- Analyst

Hi, good afternoon. Just wanted to ask about your embedded business. You know, it's not often talked about, but it's a great market, right, diversified across various end markets, you can also leverage your leading edge and mature portfolio. You've got a pretty good lineup of that FX-based and Ryzen-based processors targeting embedded.

You've also gotten some pretty good design win traction in automotive with guys like Tesla. You've got wins in retail with digital signage, wins in networking, IoT edge platforms. And then with Xilinx, you can sort of really leverage their exposure in industrial automotive coming consumer end markets. It's a small part of the business today, but how do you see the embedded opportunity for AMD looking out over the next several years?

Lisa Su -- President and Chief Executive Officer

Yes. Thanks for the question, Harlan. Look, I like the embedded business. You know, I've always liked the embedded business.

It's a nice, sticky business over many years. It is smaller, but it has grown nicely. And, you know, the volume design wins in automotive and they've now sort of expanded their usage. You know, they've recently expanded their usage over a broader part of their product portfolio.

We've focused on networking and storage as key markets. I do think there is a very good synergy with Xilinx in terms of just the customer set and the channels. And so I do see it as a nice grower for us as we go through it, and there's very good reuse from our server products as well as our client products. So we'll talk -- again, we'll talk a little bit more about it as the business gets to more size.

And that will be part of, you know, our Financial Analyst Day conversation when we get to that in June.

Harlan Sur -- J.P. Morgan -- Analyst

Perfect. Thanks, Lisa.

Lisa Su -- President and Chief Executive Officer

Thank you, Harlan.

Operator

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Laura Graves -- Corporate Vice President, Investor Relations

Everyone, thank you very much for joining us for our fourth quarter and full year 2021 earnings call. We appreciate your support of our company and look forward to seeing you again soon. As a reminder, we will have our Financial Analyst Day this year on June the 9th. Thank you, everyone.

Have a great day.

Operator

[Operator signoff]

Duration: 59 minutes

Call participants:

Laura Graves -- Corporate Vice President, Investor Relations

Lisa Su -- President and Chief Executive Officer

Devinder Kumar -- Executive Vice President, Chief Financial Officer, and Treasurer

Aaron Rakers -- Wells Fargo Securities -- Analyst

Matt Ramsay -- Cowen and Company -- Analyst

Ross Seymore -- Deutsche Bank -- Analyst

Vivek Arya -- Bank of America Merrill Lynch -- Analyst

Toshiya Hari -- Goldman Sachs -- Analyst

John Pitzer -- Credit Suisse -- Analyst

Blayne Curtis -- Barclays -- Analyst

Stacy Rasgon -- Bernstein Research -- Analyst

Mark Lipacis -- Jefferies -- Analyst

Joe Moore -- Morgan Stanley -- Analyst

Chris Caso -- Raymond James -- Analyst

Harlan Sur -- J.P. Morgan -- Analyst

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