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ABNB
| 1
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Ellie Mertz: Yes, thanks, Richard. Let me just talk a little bit about the trends that we've seen here today to help answer your question. So first, as you point out, as we were heading into 2024, we were widely aware that last January was particularly strong. And so the guide that we've provided back in February included a step down in growth from Q4 to Q1 that was reflective of that hard comp from a year ago. We did experience it. And then since then, we've seen relatively stable growth, which I see as frankly, a really strong statement in terms of both the stability and resilience of leisure travel demand so far this year. I think, something that we've seen this year that is contrasting to last year there was a lot of volatility in terms of the timing of when people booked relative to their check-ins. And so far this year, it's been, frankly, much more stable. Lead times on our platform have been, frankly, generally in line with a year ago, and it just hasn't been at the same level of volatility, again, that we saw a year ago. And so heading into Q2, our guidance reflects this continued stability of booking. Obviously, we'd like to deliver higher growth and stable growth, but our outlook obviously reflects the trends that we have seen quarter to date. To your question on Q2 margins, obviously, we guided, the Q1 results reflect a pretty meaningful year-over-year margin expansion. A big portion of that is due to the timing of Easter. So Easter is not only a benefit to revenue growth in Q1, but it's obviously also a benefit to margin expansion. Those two factors reverse in Q2. It is a headwind to revenue growth, and it is a headwind to overall margins. Two other components in terms of what's putting pressure on margins in Q2. One is just some one-time credits that we had in payment processing a year ago that will not recur this year. And then third, we shifted slightly the timing of our marketing spend, a little bit heavier in Q2 than in Q1, and that will be reflected in terms of marketing as a percent of
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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of our marketing spend, a little bit heavier in Q2 than in Q1, and that will be reflected in terms of marketing as a percent of revenue growing in the quarter on a year-over-year basis.
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ABNB
| 1
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Richard Clarke: Very helpful. Thank you.
Operator: Your next question will come from the line of Jed Kelly with Oppenheimer. Please go ahead.
Jed Kelly: Hey, great. Thanks for taking my question. Just one on ADRs. They seem to be relatively sticky, and I think a couple quarters ago, you talked about driving value to the consumer. So can you just give us an update on where you are in sort of some of your value initiatives? And then on supply, great supply growth again. Can you talk about how we should think about supply and nights eventually converging to similar growth rates? Thank you.
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ABNB
| 1
| 2,024
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Brian Chesky: Yes. Hey, Jed. Why don't I take the first one on value initiatives, and I'll let Ellie take the second one. So on providing value, when we started Airbnb, our original tagline was a cheap, affordable alternative to a hotel. And the majority of the primary reason people came to us is because it was a better value than a hotel. And we still think that's a core value proposition that we have to offer. Now, a year and a half ago, we noticed that, there was a lot of concern about Airbnb prices increasing. And so we created a whole team to identify a series of initiatives to modulate our prices, and they're working. And I'll go down the list. One is total price display. So as you know, in travel, especially online travel, there's a lot of progressive fee disclosures. And we decided to have a toggle right on the homepage that you can turn on to show the total price display. Since we've done that, not only do consumers -- not only are consumers going toward the best total value, but it's begun to change behavior in our host community because 300,000 or 300,000 listeners, say, have removed or lowered their cleaning fee as a result. So that was the first thing we did. The next thing we did is we started offering monthly and weekly discounts and much more robust tools for that. Now, this is important because, nearly half of our nights booked are for stays of a week or longer. And now more than two-thirds of our hosts offer a monthly or weekly discount. We also noticed that a lot of hosts that weren't getting booked weren't getting booked because their prices were too high. And they just didn't have really good concepts. So we created a tool called the Compare Listing Tool where people can see how much other people are charging the neighborhood. And they can actually see people who are getting booked, not getting booked. And no surprise, the people getting booked generally have lower prices. We have nearly 2 million hosts that now use the Compare Listing Tool. So those are just a few of the initiatives we've
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ABNB
| 1
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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prices. We have nearly 2 million hosts that now use the Compare Listing Tool. So those are just a few of the initiatives we've done. We actually have many others as well. The net of all of it is that hotel prices are up year-over-year and Airbnb listings on a like-for-like basis are down. So today the value of Airbnb versus a hotel is better than it was a year ago. And I think that trend line is going to continue given all of our efforts. And maybe the only other thing I'll just say on this is, as we know, loss of supply and demand, as supply grows faster and demand prices go down a little bit. And supply is growing faster in demand. I think that's also relieving some pressure. Ellie, over to you.
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Ellie Mertz: Yes, so Jed, to your question with regard to the relative growth rates of supply and demand, just a few comments. I would say first, something that we've shared previously is that in any given quarter, we would not expect supply and demand to grow exactly in line. But when we look over a longer time period, either the last decade or more specifically from pre-pandemic to today, what we do see is that over a period of years, they do grow generally in line. And I would say that continues to be the case. Where we are right now, I would say we're very encouraged to be able to deliver this continued level of very strong supply growth for a couple of reasons. I would say one, we know that more unique, differentiated supply wins and differentiated supply is why people come to Airbnb. I would say second, and Brian made this point, but growing supply allows us to, it really benefits our affordability measures in that more supply obviously but gets more competitive pricing. And then I would say third, relevant to our recent quality initiatives, we see it as an opportunity for, as supply growth is stronger than demand growth, for us to continue to be driving quality. What you saw in the quarters, we obviously did some one-time takedowns of supply that frankly just did not meet our community's expectations. And the fact that supply is growing so rapidly, it allows us to make those cuts, if you will, to the supply base and to be continually upgrading the level of quality that we deliver to our guests.
Jed Kelly: Thank you.
Operator: Your next question comes from the line of Ron Josey with Citi. Please go ahead.
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ABNB
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Jed Kelly: Thank you.
Operator: Your next question comes from the line of Ron Josey with Citi. Please go ahead.
Ron Josey: Great, thanks for taking the question. Brian, I wanted to ask you about search on Airbnb, just following the strength and the benefits of guest favorites. I wanted to better understand sort of, talk to us about post-guest favorites, how search and really conversion rates have improved and really how you feel search can just evolve over time. And then as a follow-up to what we were just talking about around inventory quality, we'd love to hear just the process to ensure that quality listings continue to come on the platform. I think we've talked about verified listings and trophies, but any other thoughts there would be helpful. Thank you.
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ABNB
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Brian Chesky: Oh yes, Ron. These are really, really good questions, Ron. So yes, let's start with search. So, we did approximately $10 billion last year in revenue. So the way to think about this is if we can just drive an incremental 100 basis points in growth, that's $100 million. So like the way we look at our conversion rate is like we have teams dedicated to the search experience. And we, over the last year, we, the last 12 months, we've likely driven at least a few 100 basis points of incremental growth just through optimizations of the search flow, because we just get so much traffic. And so just to call out a couple of things that we did, I mean, there's been dozens of dozens, I'll just name a couple. One I already mentioned, mobile app downloads. Now, why do mobile app downloads lead to also more bookings? Because the conversion rate on a native application is typically a lot higher than a mobile website. Number two, just to give you a couple of examples, one of the challenges of Airbnb compared to a hotel is you may type in a location and certain dates and maybe you're on vacation and you don't see exactly the home you need and you might not book a home. You might now open a different app. And we have this carousel that basically offers, hey, if you change your dates by one or two days, here are other listings you can find. And that led to a huge increase in booking. We made improvements to filters. We've made improvements to search input, the search box, making the search box more prominent. So there are quite literally dozens and dozens of improvements that we've made. And I see hundreds of basis points of incremental growth just through essentially optimizing the end-to-end guest flow for our core business. So it's really, really exciting. And a couple of big areas would be maps and location. There's a huge opportunity around that area. So that's on search. On inventory and quality, this is a great question. I mean, we have a really extensive roadmap. Last year we launched guest favorites, as you
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ABNB
| 1
| 2,024
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
|
quality, this is a great question. I mean, we have a really extensive roadmap. Last year we launched guest favorites, as you know. In November, 100 million nights booked have been booked through them. I would say the response to guest favorites has even been greater than I anticipated. We're seeing more people not only book guest favorites, but we're seeing that guest favorites have a fraction of the trip issue and contact rate as non-guest favorites. So guest favorites have between a fifth and a 10th the contact rate as our bottom quartile of listings. And the rebooking rates are much higher. And I also think what Guest Favorites is doing is it's changing behavior to encourage more hosts to become better. And so after that we launched quality highlights in March. Quality highlights, basically what happened was Guest Favorites was the top 2 million listings in Airbnb. But a bunch of people were saying, well how do we know which are the best within those 2 million? So what we did is we have a top 1%, top 5%, and top 10% trophy classification. And this is also really I think popular with guests. We've now removed hundreds of thousands of listings. And we are going to be doing a number of new things. One of the things we are experimenting with is showing to percentile where something falls in a quality distribution as a percentile basis. And then continually adding a lot more supply, and then tightening up our quality control, and really giving a lot more feedback to hosts to become better. I think that a really good opportunity here is to get a lot more listings in Guest Favorites, and to provide host education, host tools for the hosts that are struggling to be much more successful. So there's a pretty big and extensive roadmap to go. And just the last thing I'll say about this is, as big as Airbnb is, and we are approaching half a billion room nights a year, for everyone who stays in Airbnb, somewhere around 8 or 9 people stay in hotels. And when you ask people, why are you staying in a hotel? Airbnb is
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ABNB
| 1
| 2,024
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
|
in Airbnb, somewhere around 8 or 9 people stay in hotels. And when you ask people, why are you staying in a hotel? Airbnb is typically more affordable. It's a more local experience. It's much better for groups and families. People say yes, but hotels are historically a more consistent experience. And so if we can just get one of those travelers from hotels to stay in Airbnb, that would double the size of our business to a billion nights a year. And so we think quality and reliability is a multi-year roadmap. So you're going to be hearing every year major updates from us on quality and reliability.
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ABNB
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Ron Josey: Thank you, Brian. Super helpful.
Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.
Eric Sheridan: Thanks so much for taking the question. Maybe coming back and putting a finer point on some of the topics we've talked about already, Brian. When you think about your top investment priorities for 2024 and beyond, how would you categorize those investments if we put them in buckets such as demand generation, supply growth, and platform and product innovation over the long-term? And in that last bucket, how should we increasingly think about what you're learning about testing and deploying AI across the platform and how it might reduce friction over the longer term? Thanks so much.
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ABNB
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Brian Chesky: Hey, Eric. Good to hear from you. So maybe I can just – you had three buckets. Maybe I can give you three slightly different buckets to give you our framework. The way I think about deploying our resources – and when I say resources, probably the most precious resources we have is product and engineering resources. And the way I think about that is we have our core business, we have international expansion, and we have expanding our core business of accommodation. So that's kind of the way we think about our portfolio. And you can imagine they're all totally different horizons. So the majority of our people are still focused on the core business. And I believe that we are just scratching the surface of the size of our core business. Within our core business, we typically have about three different areas of focus. One I just talked about, which is quality and reliability. The next one is affordability, making sure Airbnbs are more affordable hotels. And the third is usability, what I also talked about with search and reducing friction. So that's the first bucket of our investment. And that really will pay off within this year. And so there's – you can get a return on those efforts within a matter of months, because a lot of that – a lot of those changes are software changes. They're immediate. They touch 100% of our user base. And they touch a very large base, our entire GBV. Next is international expansion. International expansion is really supply, demand, and platform. It's all three within international. And you can really bucket into two things. We have to localize the product, and then we have to have a global marketing strategy to go one market at a time. And we've done a lot of really good work over the last few years on international expansion. But I think at this moment, we are ready to step on the gas. And by stepping on the gas, I don't mean it's going to be a significantly greater investment, but a much greater velocity, because we spend a lot of energy updating our products. So most
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ABNB
| 1
| 2,024
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
|
significantly greater investment, but a much greater velocity, because we spend a lot of energy updating our products. So most recently, we just – we just updated our application in Asia, specifically in China. And we're bringing a lot of those improvements to Japan and Korea, because the applications work fairly similarly. And so getting these products onto a better standard is a really good first thing that you want to do before you actually step on the gas for marketing. So that's international. And of course, the final thing is expanding the inter-corporate business accommodation. So from dollars and number of people, this is by far the smallest area that we're putting people on now, because it's a small base. But it's actually where I'm spending the majority of my time. And I think the majority of the leadership's time is now being spent focused on transforming the company from an accommodations business to a multi-vertical or multi-category company. And over the next three years, you're going to see this play out quite substantially. So that's the way we think about it, core, international, and then expanding beyond our core.
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ABNB
| 1
| 2,024
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Eric Sheridan: Great. Thank you.
Brian Chesky: And then I think the other question, sorry, I have to answer the question about how are you, what are we learning about AI and reducing friction? So just a couple of things in AI. First of all, like, we've been using AI for a long time. In the last 12 months, we've made a lot of progress. I'll just give you three examples of things we've done with AI. We've made it easier to host. We have a computer vision model that we trained in 100 million photos, and that allows hosts to, like the AI model, to organize all their photos by room. Why would you want to do this? Because this increases conversion rate when you do this. Number two, we launched last week AI-powered quick replies for hosts. So it basically predicts the right kind of question or answer for a host to pre-generate to provide to guests. And this has been really helpful. And then we've made a really big impact on reducing partisan Airbnb with our reservation screening technology. So now we're going much bigger on generative AI. I think we're going to see, I think we're going to see the biggest impact is going to be on, customer service in the near term. I think more than hotels, probably even more than OTA, Airbnb will benefit from generative AI. And the reason why is just a simple structural reason. We have the most, like, varied inventory. We don't have any SKUs. And we're an incredibly global platform. So it's a very difficult customer service challenge. But imagine an AI agent that can actually, like, read a corpus of a thousand pages of policies and be able to help adjudicate and help a customer service agent help a guest from Germany staying with a host in Japan. It's a very difficult problem and AI can really supplement. Over time, we're going to bring the AI capabilities from customer service to search and to the broader experience. And the end game is to provide basically an AI-powered concierge. So that's where it's going. But it's really focused on customer service at this very moment.
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Operator: Your next question will come from the line of Brian Nowak with Morgan Stanley. Please go ahead.
Brian Nowak: Thanks for taking my questions. I have two just to sort of come back to a couple of the topics we talked about. The comp did get easier. So with the comps getting modestly harder in the back half, can you just sort of walk us through maybe micro levels of innovation that can sort of drive stability? Or how do we think about reasonable ranges of outcomes for room-night growth in the second half? And then the second one, you know, Brian, you talked about how like-for-like pricing is more attractive versus hotels. I don't have the transcript exactly yet. But if I look at Marriott and Hilton and their ADRs are up 2% to 3% and your ADRs are also up 2% to 3%, is there something else that you're seeing where the relative pricing is actually becoming more attractive that you can help us understand a little bit more? Thanks.
Brian Chesky: Yes. Why don't I take the second question? And I think, Brian, either you or I cut out. We didn't hear the first part of your question.
Brian Nowak: So do you want to just repeat the first question? Yes. Yes, absolutely. The first question was more for Ellie, where she has – you talked about how you have stable room-night growth now, but I think the comp is a little bit easier from 1Q to 2Q. And with the comps getting a little more difficult in the back half, can you just sort of walk us through some reasonable ranges of outcomes of growth in the back half and maybe micro-level drivers to kind of keep the stability versus drive deceleration?
Brian Chesky: Ellie, you want to take the first one, and I'll take the second one?
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ABNB
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Brian Chesky: Ellie, you want to take the first one, and I'll take the second one?
Ellie Mertz: Yes. So I think you were right in terms of the thinking was that the comparison in Q2 would be a little bit softer. I think what we've seen so far, just to repeat what I said previously, is that, yes, it was clear that there was a hard comp in January. Since then, we've seen, I would just say, a general stability. We are not so far this year seeing the same level of volatility that we saw in 2023 in terms of either movement of lead times or consumer, I would say, hesitancy to book during kind of macro dislocation. So general statement is that, year-to-date, just the trends have been stable, and that's what our Q2 reflects. In terms of the back half of the year, I would say – I don't know if I would characterize the back half of the year as harder comps. I think if you recall, actually, some of the volatility that we and others saw in the back half of the year, there was a bit of a moment of dislocation end of summer heading into October, and in particular, in the month of October related to the conflict breaking out in Israel. So I wouldn't necessarily characterize the back half of the year as being a harder comp. Instead, I think if you think through the growth initiatives that Brian talked about in terms of thinking about where our portfolio of investments lie, I would say we are optimistic that a lot of the core optimizations could have near-term impact as well as the international investments. So those are the places where we're really looking to drive in-year growth above where we are today.
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ABNB
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Brian Chesky: And Brian, I'll take the like-for-like question. So specifically, the data we're citing is global like-for-like basis. So what we're comparing is the average price of a global hotel room to a one-bedroom listing on Airbnb in March. And in March, our prices were down 2% and hotel prices were up 3%. So our prices were, again, one-bedroom globally on Airbnb in March was $114, down 2%. Hotels were $148, up 3%. So that's what we're talking about, one-bedroom global. When our ADRs move, obviously the other thing to take into consideration is mix shift. Oftentimes our ADRs do go up because people increasingly, more and more of our travel is group travel. 81% of our trips now have two or more guests and increasingly we're seeing people booking more space, larger homes, just as travel's mixing towards larger groups.
Brian Nowak: That's helpful. Thank you both.
Ellie Mertz: And Brian, that was particularly the case in North America this quarter. On an absolute basis, ADRs were up, but if you exclude the impact of mix, they were flat.
Brian Nowak: Oh, okay. Great. Thank you both.
Operator: Your next question will come from the line of James Lee with Mizuho. Please go ahead.
James Lee: Great. Thanks for taking my question. And just want to follow up the prior question on supply and demand growth. And in other segments of the gig economy services, they seem to benefit when supply exceeding demand. So if you think about, ride sharing and food delivery, because they drive prices down and therefore increasing consumer demand. Should we, think about it in the same path for home accommodation? Are you thinking, expecting maybe a similar trend for your business as well? Thanks.
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2024-05-08 16:30:00
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Airbnb, Inc.
| 115,705,393
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Ellie Mertz: I would say generally speaking, when we see growth in supply, it is additive to demand. It means that, when people are searching for a particular night in a particular city, if we have more that we can provide them, it is obviously net beneficial. I think I would just, repeat the prior comments that we don't always see kind of in period equivalence by market in terms of the respective growth rates. And that I would say that, there's a primary difference in terms of our business model relative to some of the others that you mentioned in that the frequency of the activity is simply lower and the lead time is also much longer.
James Lee: Great, thank you.
Operator: Your next question comes from the line of Stephen Ju with UBS. Please go ahead.
Stephen Ju: Okay, thank you so much. So Brian, would we be overreaching if we were to think that Icons is a leading indicator of what should be, I guess, a revitalization or re-imagining of experiences? So, maybe the overnight stay in the [Indiscernible] generates all the media and consumer attention, but maybe this affords you the opportunity to expose the users you're getting to the more everyday experiences. And also secondarily, you've talked about this and the letter talks about this also, the Olympics and the Euro's bump, and there's going to be travelers who are probably not sports fans and who might want to be avoiding Paris and the host cities in Germany altogether. So, is there anything you can share in terms of how additive these two events may be? Thanks.
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2024-05-08 16:30:00
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Airbnb, Inc.
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Brian Chesky: All right, Stephen. Well, that was, you are absolutely not overreaching on Icons. So let me give you a sense. You can think of a company as going through a few phases, especially to start a company. You have an idea, you get product market fit, that's phase one. Phase two is you try to go into hyper growth. We've done that. Phase three, you become a real company, you go public, you generate a return for shareholders. And then the fourth frontier, and very few companies have ever done this, is you reinvent yourself and you go from offering one thing to many things. And a lot of the big tech companies have done this. But one of the companies that I think is a really interesting one to look at is Nike. In the late 70s and early 80s, my recollection, I was born in 81, but my recollection is, I remember, Nike was mostly a running shoe company. And then the 80s, they became more popular with basketball and other things. But at the time, people didn't really think of Nike as a serious basketball shoe. And so they had to not only create a great product for basketball, but they had to actually stretch the brand and open up in people's minds what Nike stands for. And a lot of brands have had to do this. I mean Apple had to do this with the iPod. And I think Airbnb, one of the strengths of our brand also is something that we have to manage which is Airbnb is a noun and a verb. It's synonymous with a category, kind of like Kleenex or Xerox. People say, I'm going to get an Airbnb. I'm going to Airbnb my place. Literally, the name Airbnb has the name B&B in it. So one of the challenges is that people open our app to expect to see stays. And so what we want to do in addition to bringing back experiences, you are totally right, is we wanted to expand Airbnb's brand positioning to include more than just a place to stay. And one of the things you'll notice is when we launched Icons, we said these are extraordinary experiences. We didn't say these are extraordinary stays. We positioned them as experiences. And so you
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Airbnb, Inc.
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these are extraordinary experiences. We didn't say these are extraordinary stays. We positioned them as experiences. And so you can almost imagine Icons is like we are a car company, but we are starting with a Formula 1 car. And very few people can experience a Formula 1 car, but it captures the magic. It captures the demand. It really expands the brand and increases our permission to be able to go into experiences. And then you kind of move down market. And one of our goals is going to be to bring the magic of Icons to everyone. So I can't probably say too much more about experiences, but absolutely it's not a leap or a stretch whatsoever. Icons is primarily a brand positioning and a brand investment. It obviously wasn't a business. There's only about 4,000 tickets. But we are seeing some really encouraging signs in the last week, a big bump in traffic. It's a lot more top of mind. A lot more people are opening our app. And I just think we are being positioned as more aspirational. And I think people are now starting to think of us for experiences. So I think we've really paved the way for next year. Ellie, do you want to take the Olympics in your own?
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2024-05-08 16:30:00
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Airbnb, Inc.
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Ellie Mertz: Yes, certainly. So if you look at our history, I would say that special events have always been kind of a good moment for Airbnb to shine and have been overall additive in terms of both our brand perception as well as supply growth. I think what we've seen from prior events, and I'm talking about pre-COVID Olympics, World Cup, Super Bowl, those type of events, what we see is that it should bring a ton of supply onto the platform. And while not all of that supply will persist, a good portion of it does. And so it's a nice supply acquisition moment for us. I would also say it's really additive in terms of signaling to cities how helpful and additive Airbnb can be to those cities to ramp up supply in a very organic and easy way without adding incremental hotel infrastructure that will not be necessarily needed long-term. And I think you see that in particular in Paris right now. We're going to be hugely additive in terms of hosting travelers for the games, whereas the existing infrastructure would not be able to manage such a large inflow.
Stephen Ju: Thank you.
Operator: Your next question will come from the line of Doug Anmuth with JPMorgan. Please go ahead.
Unidentified Analyst: Hey, this is Dave [ph] on for Doug. Thanks for taking the questions. One for you, Ellie. Can you talk about how you're thinking about the investment levers that provide flexibility and shape your 35% plus EBITDA margin guide for the full year? And can we expect to see these levers get pulled more through the year?
Ellie Mertz: Yes, so I couldn't hear entirely, but a question about our guide for full year EBITDA margins, a floor of 35%. Let me just talk a little bit. Yes, the investment level.
Unidentified Analyst: Yes, and how you're thinking about investment levers.
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Ellie Mertz: Yes, of course. So let me just step back and provide a little bit more color in terms of why the 35%. If you look at our performance since the IPO, pre-IPO, we had a negative 5% EBITDA margin. And behold, three years after the IPO, we delivered nearly 37% EBITDA margins last year. I think we have repeatedly demonstrated the increased strength of this business model in terms of very strong profitability, inclusive of GAAP, net income profitability, as well as free cash flow. And at the same time, where we sit today, we see a huge opportunity in driving incremental growth. And so as we kicked off the year last quarter and looked at our opportunity set, we've identified a handful of areas where we'd like the flexibility to lean in and drive incremental growth beyond what we're seeing today. So where would you see those investment levers on the P&L? It's really two areas. So first, not surprisingly, is marketing. In marketing, we've been very disciplined over the last couple of years. We continue to have a much lower level of marketing intensity than really anyone else in travel. And at the same time, at the margin, we have seen some incremental opportunities to lean in on channels where we're seeing higher ROIs. In Q1, we saw nice, very high ROIs in performance marketing. To the extent that that continues, we would lean in modestly over the course of the year. Additionally, and probably more importantly, Brian talked a little bit about our opportunity set in international markets. And that's also an area where, to the extent that our full funnel marketing investments are working, we would look to top off those investments and to therefore accelerate growth. So marketing is one line item. You will potentially see some margin compression in order to drive growth. The second area, Brian talked about prioritizing our resources and identified that, in many cases, our product development team is our kind of scarcest resource. And I think when you hear us talk about our roadmap, you can obviously infer that
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team is our kind of scarcest resource. And I think when you hear us talk about our roadmap, you can obviously infer that we have a very robust list of initiatives that we would like to tackle. And so there's an opportunity to, at the margin, add more personnel over the course of the year to allow us to accelerate that roadmap. And you would see that in particular on the product development line item. So grand scheme of things, no material pivot in terms of our overall financial discipline, but instead a bit of lean into those areas where we believe we can accelerate growth.
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Unidentified Analyst: Thank you for the detailed response.
Operator: Your next question will come from the line of Kevin Kopelman with TD Cowen. Please go ahead.
Kevin Kopelman: Great, thanks a lot. I had a question on the May release. You added a couple of small new features to the user profiles, I think on the photos and the travel stamps. Can we see that as a first step towards some of the profile enhancements and community features that you've talked about being interested in in the past and where does kind of building out potentially new community features stand in your priority list? Thanks.
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Brian Chesky: Yes, hey Kevin. We spoke in this call mostly about Icons, but I mean, I am equally excited for the results that we've seen for group travel. I'm not going to go through all the metrics, but the metrics have been all really, really positive for group travel features. And in particular, one of the things we've seen is, when people book an Airbnb, the average number of guests is two. So that means that typically for every booking, there's another guest. But typically the other guest hasn't connected their account to Airbnb. So if you travel with a partner or a friend, maybe if you book, the other person doesn't actually have an account or they haven't connected their account. So as we've, and it's strategic for us to get more accounts, that would make sense, right? Especially as you want to sell more things beyond home. We want to have a point of sale for every single person on a trip, not just a point of sale for the booker. So this is really, really critical for us. And what we've seen is a major jump in the number of co-travelers that are now creating accounts in Airbnb and not only creating accounts, but filling out their profile. And so to answer your question, yes, this is the beginning of something much bigger. To probably zoom out, when we started Airbnb, there already were vacation rentals, but they were mostly on classified sites like Craigslist [ph] or there were like paid subscription services like Vrbo. And one of the innovations we brought is we added profiles, payments, two-sided reviews and messaging and those capabilities unlocked really this whole new category. This was what we may call the system of trust. So what we're now doing is we're going to be investing a lot more in increasing our profiles and our profile capabilities, both our account structure, cleaning it up, our identity verification, making, getting more people to complete more robust profiles, increasing their preferences so we have more information about people. And this is so strategic because as trust goes up, more,
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increasing their preferences so we have more information about people. And this is so strategic because as trust goes up, more, you can unlock more things for people. And as we know more about you, we can match you better. So, I think in the future, right now, if you think of like the Airbnb solar system, the home is like the sun at the center of the solar system. I think in the future, the profile will be at the center of the solar system of Airbnb and the home will be one of many categories orbiting the profile.
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Kevin Kopelman: Great, thanks so much.
Operator: Your next question comes from the line of Nick Jones with Citizens JMP. Please go ahead.
Nick Jones: Great, thanks for taking the questions. I guess maybe going back to supply and your effort to remove low quality supply. I guess, can you speak to the percentage of the supply that you've removed over time? I think you said 100 to 1,000 that I guess maybe take the removal and I guess the learnings and come back and try to list and provide a kind of a higher quality or better experience. I guess as you continue to remove lower quality supplies, it's becoming a tool to kind of nudge hosts into the behavior you're looking for without actually having to remove them.
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Brian Chesky: Yes, I mean, hey Nick, why don't I take the first one? So, the first thing I'll say is the global occupancy on Airbnb is so much lower than hotels. So, even though you type in a certain date and a location, when it's a popular day and location, occupancy can rise at a global level. We are still like, not even close to high occupancy. And so, one of the games we need to do is we want to point them in to the best supply on Airbnb. So, we don't, and so having removed all this supply, we haven't seen a fundamental shift or impact on global bookings because a lot of them either weren't getting as many bookings in the first place, or they were eating up page views, they were lower converting listings, or people were booking them, they were really expensive because they were leading to customer service contacts, which were expensive. And if you went through all that, the revoking rate for them was much lower. Now, as far as the answer to your question about like how many of them come back, I don't have the stats on top of my head. But, I think that like this quality control program, one of the things we've noticed is that a lot of hosts are very coachable and learnable. They're very coachable and they can learn. So I think one of the problems in this category is historically there's these marketplaces have been so hands off that people don't know what it takes to be successful. And as you give them more like metrics, as you give them more incentive to be good, and as you create more boundaries about what's not acceptable in Airbnb, it actually does change behavior and people do come back. So, we're seeing that for sure. And we're seeing that the good people reward and they tend to expand their business. So, I don't have the exact numbers of people that come back, but absolutely, we do think people will come back, if they've remediated some of their issues. And some of what we do too is we'll give warnings to people. So, we don't always have to remove people. We can give warnings first. And warnings are
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too is we'll give warnings to people. So, we don't always have to remove people. We can give warnings first. And warnings are like very, very effective. We're just giving them a heads up. And that actually has a way of increasing the quality of our platform. The last thing I'll just say on this is, we've, what I think makes Airbnb different than our competitors, we have a much more hands-on approach to quality than our competitors. But we are getting more and more hands-on every single year. As we want to get bigger, and we want to capture more of the hotel traveling market, our quality has to go up. And that means that we need to just continue to raise the bar of quality. So, we have a multi-year roadmap where we're going to continue to do so and continue to invest in host education.
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Nick Jones: Thanks for the color, Brian.
Operator: Your next question will come from the line of Naved Khan with B. Riley Securities. Please go ahead.
Naved Khan: Yes. Hi. Thanks a lot. Maybe a clarification from Ellie. I think, I heard you say you saw really good ROIs on the performance marketing channels. I wanted to understand better where that came from. And maybe on a related topic, was there any effect from either the rollout of the DMA in Europe in March, or maybe changes to Google search in late March and early April? And then I have a follow-up.
Ellie Mertz: Yes. So, in terms of first, the higher ROIs that we're seeing on marketing, I would say we over the last year have just been frankly very encouraged with the ROIs that we've been able to deliver from that channel. In particular, like what has been driving that? Well, we've been continually testing, improving our performance marketing execution. We have expanded the target audiences. We've expanded our keyword coverage. We've made general improvements to the landing pages. And all of that has been, I would say, quite successful in terms of allowing us to spend marginally more and maintain really great efficiencies. So, really good channel for us, even though it is obviously a minority of our overall marketing spend or strategy. In terms of your second question, impact from the D&A rollout, I would say we haven't seen any meaningful impact. I think primarily that is because the majority, 90% of our traffic is coming to us through direct or unpaid traffic. And so, we have not seen any noticeable impact there yet or at all, I should say.
Naved Khan: Okay. And then, yes, I know it does help. So, maybe just on the changes to the extenuating circumstances policy, I wanted to kind of understand better what kind of led to that change and what kind of impact we can expect from the outside looking in?
Ellie Mertz: I didn't hear that question. Sorry.
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Ellie Mertz: I didn't hear that question. Sorry.
Naved Khan: Sorry, the changes to the extenuating circumstances policy, I think it was tweaked recently to kind of maybe raise the bar on the cancellation.
Ellie Mertz: Extenuating circumstance policy. Brian, do you have any comments on that? I would say we just tried to clarify over time and make that more equitable for our guests and hosts, but no meaningful impact to the business.
Naved Khan: Yes, I agree.
Operator: Your next question will come from the line of Conor Cunningham with Melius Research. Please go ahead.
Conor Cunningham: Hi everyone. Thank you. Just on the under-penetrated international markets, as you develop those, I'm just curious if they're producing the, what you'd expect in terms of key KPIs from, take rate ADR profits, just trying to understand how the mixed changes are going to impact the overall company. And then just one on the 2Q to 3Q re-acceleration. I would assume that the booking window is a little bit more extended this year, given some of the events. Just curious on where you're booked into 3Q right now, just trying to understand the confidence interval there. Thank you.
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Ellie Mertz: Yes, sure. So first the question is around economics of our international expansion markets. So if you think about the various factors on our economics, so first there's virtually no change in terms of our underlying take rates by market. So that's not a factor. I would say second, depending on the market that we're targeting, many of these markets will have lower ADRs than our averages. So over time, to the extent that we were incrementally more successful in higher, seeing higher penetration in places like Latin America or Asia Pacific, we would anticipate that the global ADR would come down. And yet all of those nights would be accretive. So it would be market expanding, even if the nights were coming in at a lower ADR. And what we've been able to achieve over time is very strong economics at the booking level for a wide range of ADRs. So it is not a concern for us to be expanding in markets where the average ADRs are lower. It is again, just accretive in terms of the top line and the volume of the business. Your second question is around lead time. I would say generally speaking, as I said previously, our lead times year-to-date have been pretty flat on a year-over-year basis. We did not see a pull forward that maybe some others in the industry mentioned. And yet when we look forward in terms of the backlog for Q3, it's quite strong. And it's that backlog that gives us quite a bit of confidence around the comments we made in the outlook that Q3 revenue should accelerate above the Q2 outlook.
Conor Cunningham: Appreciate it, thank you.
Operator: I will now turn the call back over to Brian Chesky for closing remarks.
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Conor Cunningham: Appreciate it, thank you.
Operator: I will now turn the call back over to Brian Chesky for closing remarks.
Brian Chesky: All right, well, thank you all for joining us today. And I just wanted to say before I wrap up, this was Ellie's first earning call as CFO and the transition has gone incredibly well. Her, Dave and I are really, really focused on this next chapter of growth. So to recap, revenue was $2.1 billion, this is 18% higher than a year ago. Net income and adjusted EBITDA were both Q1 records and our trailing 12 month free cash flow was $4.2 billion, representing a free cash flow margin of 41%. Now we've made a tremendous amount of progress over the past few years. And with the launch of Icons, we're now laying the foundation for our plan to expand beyond our core business. This is just the beginning. Thank you all and we'll see you next quarter.
Operator: That concludes our call for today. We thank you all for joining and you may now disconnect.
Brian Chesky: For business. This is just the beginning. Thank you all and we'll see you next quarter.
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Operator: Good afternoon, and thank you for joining Airbnb's Earnings Conference Call for the First Quarter of 2025. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb's website following this call. I will now hand the call over to Angela Yang, Director of Investor Relations. Please go ahead.
Angela Yang: Good afternoon, and welcome to Airbnb's first quarter of 2025 earnings call. Thank you for joining us today. On the call today, we have Airbnb's Co-Founder and CEO, Brian Chesky; and our Chief Financial Officer, Ellie Mertz. Earlier today, we issued a shareholder letter with our financial results and commentary for our first quarter of 2025. These items were also posted on the Investor Relations section of Airbnb's website. During the call, we'll make brief opening remarks and then spend the remainder of time on Q&A. Before I turn it over to Brian, I would like to remind everyone that we will be making forward-looking statements on this call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also, during this call, we will discuss some non-GAAP financial measures. We've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to the Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. With that, I'll pass the call to Brian.
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Brian Chesky: Well, good afternoon, everyone, and thanks for joining. We had a strong start to 2025. In Q1, guests on Airbnb spent nearly $25 billion. These results show that no matter what's happening in the world, people continue to choose Airbnb, and that's because our model is inherently adaptable. It's something we've proven time and time again. We started Airbnb during the Great Recession of 2008. People turned to us for a more affordable way to travel, and they started hosting Airbnb to earn extra income. Then, in 2020, when the pandemic hit, we provided a way for people to travel close to home. And as a result, our business quickly rebounded. And by the end of that year, we went public. Today, things feel uncertain once again. But just as we've shown in the past, as the world changes, Airbnb will continue to adapt. And that's because we have millions of hosts offering nearly every type of home at nearly every price point from budget to luxury in neighborhoods and cities all over the world. And for hosts, Airbnb remains a great way to earn meaningful income. Now, before we get into Q1 results, I want to just talk for a moment about where we are as a company. We've been focused on driving long-term growth, as well as preparing for Airbnb's next chapter when we'll offer more than a place to stay. And we've been laying the groundwork to make this transformation for years. And there are two key things we've done to get ready. First, we want to make sure that people loved our core service before we launched anything new. So, we spent the last few years rolling out hundreds of upgrades to make Airbnb better for guests and hosts. It's now easier to use, more affordable and more reliable. And just one example of this is the launch of Guest Favorites, which is a way for people to easily find the best places to stay on Airbnb. Since launch, over 350 million nights booked, have been booked at Guest Favorites listings. We've also worked hard to improve affordability and price transparency, which are especially top of
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Guest Favorites listings. We've also worked hard to improve affordability and price transparency, which are especially top of mind for people today. When guests told us prices weren't transparent enough, we introduced a toggle that let them see the total price upfront. Over 17 million guests have used it over the past two years. And last month, we rolled-out total price display globally. So, now the price you see upfront includes all fees. But perfecting our core service wasn't enough. To expand beyond homes, we needed an app that could support new offerings. Until now, our app has really done one thing, which is, it lets you book a home. So, we rebuilt the app from the ground-up on a new technology stack. And now, we can innovate faster and offer much more than homes. So, we're ready for Airbnb's next chapter. On Tuesday, May 13th, we'll unveil the 2025 Summer Release, and you can visit our website that day to watch the announcement and see all the details. So with that, I'm going to turn the call over to Ellie for a financial update.
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Ellie Mertz: Thanks, Brian, and good afternoon, everyone. I'll start with a review of our Q1 financial results, and then I'll walk through our outlook for Q2. As Brian mentioned, we had a strong first quarter. We had 143 million nights and experiences booked, up 8% year-over-year. Looking at this year-over-year growth by region, Latin America grew in the low-20%s, Asia Pacific grew in the mid-teens, Europe in the mid-single-digits, and North America in the low-single-digits. Revenue for the quarter was $2.3 billion, up 6% year-over-year. If you exclude the impact of FX and calendar factors, revenue would have grown 11%. As a reminder, those calendar factors include Easter falling in Q1 2024 and the extra day from Leap Day last year. We generated $417 million of adjusted EBITDA, which represents an 18% margin. Next, I'll turn to our balance sheet and cash flow. We continue to generate significant cash in Q1, delivering $1.8 billion of free cash flow. Over the past 12 months, we've generated $4.4 billion, representing a free cash flow margin of 39%. At the end of Q1, we had $11.5 billion of corporate cash and investments as well as $9.2 billion of funds held on behalf of guests. Our strong balance sheet allowed us to repurchase $807 million of our common stock during the quarter. And at the end of Q1, we had $2.5 billion remaining on our repurchase authorization. Now, let's shift to our Q2 and full year 2025 outlook. Despite the recent volatility in the global economy, we believe we're positioned to deliver strong results in Q2. We expect to deliver revenue between $2.99 billion to $3.05 billion, representing 9% to 11% year-over-year growth. This includes a benefit of approximately 2 percentage points due to the timing of Easter. For nights and experiences booked, we expect year-over-year growth in Q2 to moderate relative to Q1. So far in Q2, we saw strong guest demand for Easter travel in Europe and continued momentum in Latin America, which remains our fastest growing region. In the US, we've seen relatively
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in Europe and continued momentum in Latin America, which remains our fastest growing region. In the US, we've seen relatively softer trends, which we believe is largely driven by broader economic uncertainty. On profitability, we expect adjusted EBITDA to increase year-over-year with adjusted EBITDA margin expected to be flat to slightly down compared to Q2 2024. Marketing expense will grow faster than revenue in Q2, mostly due to our upcoming summer release and investments in growth initiatives. For the full year, we continue to expect an adjusted EBITDA margin of at least 34.5%, in line with what we shared in February. Now that includes $200 million to $250 million of investment to launch and scale new businesses in 2025. These investments will have the biggest impact on our margins in the second half of the year, since our new offerings go live on May 13. Now, as these new businesses scale over the coming years, we expect them to be significant drivers of future revenue growth. Now looking ahead, our priorities remain consistent with last quarter. As a reminder, we're continuing to drive long-term growth and deliver market share gains through three key growth levers. First, we are perfecting our core service. As Brian mentioned, we've made significant -- we've made Airbnb significantly better for both guests and hosts. We've been driving growth from product improvements like enhanced search and better merchandising. One example is the newly redesigned Rare Find feature that better highlights popular high-quality listing. We also simplified our checkout page to make booking easier. These are just a few examples of the product optimizations that are contributing to our top line, but we know there's still more work to do. Second, we are accelerating growth in global market. We're taking a much more localized approach to product and marketing in underpenetrated markets around the world. This is a multi-year strategy, but we've already seen encouraging results. For the fifth quarter in a row, growth in these
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This is a multi-year strategy, but we've already seen encouraging results. For the fifth quarter in a row, growth in these expansion markets significantly outperformed our core markets. In fact, the average growth rate in Q1 in expansion markets was more than double that of our core markets. Brazil continues to lead the way. In Q1, origin nights in Brazil grew 27% and first-time bookers grew over 30%, both accelerating from Q4. Third, we are launching and scaling new offerings. This begins on May 13th, so expect more on that soon. Now, to wrap-up before we go to questions, we're staying close to geopolitical and macroeconomic uncertainty and monitoring any short-term impact they could have. As Brian mentioned in his remarks, we have an adaptable and diversified business that has been resilient during periods of uncertainty, most recently is COVID. Despite signs of near-term volatility, we remain focused on the long-term opportunity to both grow our core business and expand into new ones. We believe that our efficient operating model, financial strength and significant liquidity give us the ability to pursue these multi-year initiatives in the current environment. And with that, I will open it up to Q&A.
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Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Justin Post from Bank of America. Your line is open.
Justin Post: Great. Thank you. I wonder if you could expand a little bit on the letter on travel corridor changes. Are you seeing any differences in like total volumes of bookings from quarter changes like in Europe? And I know you already mentioned Canada. Is that driving any change for you? And then, do you think there's any market share impact in the US? Or do you think you're holding in your share, it's just the whole kind of country is a little depressed? Thank you.
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Ellie Mertz: Great. Brian, why don't I take this? Let me first talk a little bit about travel corridors, and in particular you mentioned Canada, we called it out in the letter. Let me tell you a little bit about what we are seeing, in particular with regard to the inbound corridor to the US. We absolutely have seen a decline in popularity of foreign travelers coming to the US. What we have seen is that, number one, it's less popular to come to the US from a year ago also relative to the beginning of the year. And what we're seeing in that segment is two things. One is that, that segment is a very small portion of our overall business. As a reminder, US travel is predominantly domestic. And as a result, that corridor of foreign travelers coming to the US is approximately 2% to 3% of our overall business. So, it's frankly not quite material. At the same time, what we're seeing is, within that corridor, guest who would have in a prior year come to the US are simply choosing a different location? So, I think, Canada is the most obvious example where we see Canadians are traveling at a much lower rate to the US, but they're traveling more domestically, they are traveling to Mexico, they are going to Brazil, they're going to France, they're going to Japan. And I think what that tells you about the distribution is that, in this moment, it's not necessarily that people don't want to travel, they are just using different destinations. And Airbnb is a platform, given our distributed supply, it provides an adaptable way for them to find a new location. So that's the comment I would say on the corridors. In terms of market share in the US, I would say that, we continue to have very strong market share in the US. We are not seeing any losses in market share. Much to the contrary, we continue to gain market share in the US, but we do see generally that as a market, North America for the last several quarters has been the slowest grower across the industry.
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Operator: Your next question comes from the line of Richard Clarke from Bernstein. Your line is open.
Richard Clarke: Hi, thanks for taking my question. Just wanted to delve a little bit into what is the behavior you're actually seeing from the US guests to slow down? Is it delayed booking windows? Is it higher cancellation rates, shorter trips, trading down, some nature of what you're actually seeing? And I guess, we've heard from maybe a few travel companies that things got a little bit better towards the end of April. Are you seeing that? Is there any sort of light at the end of the tunnel there with regard to bookings picking up in the last few days or weeks?
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Ellie Mertz: Yeah. Thanks for the question, Richard. So, let me double-click. I just talked about the quarter that is inbound to the US. Let me talk now about what we're seeing with regard to US domestic travel, which again is the lion's share of overall US destination. A couple of things to comment on. One is, we are seeing the higher-income traveler somewhat unimpacted by the current macro conditions. We see in particular, the higher ADRs of our bookings, the growth is very stable and very healthy for the US traveler. In terms of lead times, we're seeing something else. We're seeing that the short lead times, so that would be bookings that are just around the quarter, they could be in two days or a week or two weeks, we're seeing relatively strong growth there, whereas in the longer lead times, and in particular, those bookings that are for more than say a month out, that is where we're seeing the relative softness. And so, I think what you take from that double-click in terms of the lead times is that, we do have some US consumers that are waiting and seen before they book their summer travel. And I think the one thing that gives us some amount of comfort in terms of seeing the weakness at the longer lead times is that, we have seen movements in terms of lead time shift, many times in the past. I think the most recent to call-out was last summer, where we saw in June and July, a truncation of lead times, somewhat similar to what we're seeing today. And what we saw then is that, people waited for a while, but they did end up booking that trip. It was just closer to the check-in day. And so that's something that we're obviously monitoring quite closely, both globally, but also in particular to the US, as we believe the US is obviously the most impacted by a lot of the headline noise currently. The one thing I would also add is, we haven't particularly seen consumers trade down in terms of choose a lower ADR booking or a shorter trip that has not been any behavior that we've seen.
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Operator: Your next question comes from the line of Mark Mahaney from Evercore ISI. Your line is open.
Mark Mahaney: I wanted to ask about what you think are the best chances for reaccelerating your units, your nights and experiences. If we just leave aside experiences for now, like what -- in terms of the core accommodations unit growth, I think you're investing to get back to double-digit unit growth. And of the different things you're rolling out, co-hosting, is it really leaning into the expansion markets? Is there something else, maybe marketing? What are those do you -- are you counting on to be most impactful in order to get that recovery back to double-digit nights growth? Thank you very much.
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Brian Chesky: Yeah. Hey, Mark. I will take this. So, yeah, I guess I would just say, we think we're just scratching the surface of how much bigger our core business could be. And there's no reason to think it could not be double the size that it is today. And then, the question is, well, what would you have to believe? I think the first thing we want to do is to continue to perfect the core service. To do that, we really have to do three things. We got to make Airbnb easy to use, we got to make it more affordable, and we got to make it more reliable. So just for example, starting with reliability. For every person who books an Airbnb, we estimate about nine people are booking hotels. So, if we could just get one of those nine people to book an Airbnb, that essentially would double the size of our business. And the number one reason people say they don't use an Airbnb is, they don't find it historically as reliable as a hotel. That's why we're really trying to elevate the best homes in Airbnb and remove the worst. So, we now Guest Favorites, 350 million nights have been booked in Guest Favorites. We've also removed 450,000 listings. This has created a lot higher customer satisfaction, reduced customer service tickets. And we think over time, more and more people are going to come to Airbnb. So we're going to do a lot more, Mark, on making Airbnb more reliable. On affordability, we know that that's a big driver of growth. Airbnb started as affordable alternative to hotels. We lost, I think, a little ground versus hotels during the pandemic, but I think in the last couple of years, hotel prices have gone up more than Airbnb. I want to call out that as of last month, we have rolled out total price displays globally. So, now, the price you see before taxes in the United States and really inclusive taxes, say, in Europe, include all fees. So -- and I think this is really important, because it drives customers to the best value Airbnb's, which we rank higher and incentivize the best behavior for host. On the usability
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drives customers to the best value Airbnb's, which we rank higher and incentivize the best behavior for host. On the usability standpoint, the vast majority of our people come to Airbnb, don't find a booking. Airbnb last year was accessed by over 1.5 billion devices. So, think about like how many people come to Airbnb, they don't find a place to stay. Part of this is having the right homes for them, but also having the right tools. So, we think perfecting the core is a huge driver to growth, but that is really going to be a big driver in our core markets. Our core markets are US, Australia, Canada, UK and France, the four English-speaking countries, plus France, which make about 70% of our growth -- our business. But the more growth markets, emerging markets would be Spain, Italy, Germany, Mexico, Brazil, and then the big four countries in Asia are China, India, Korea and Japan. And these markets are actually growing twice as fast as the aforementioned five core markets. And we're going to step on the gas. And I think that international will be one of the biggest growth drivers that will get us back to double-digit growth on Airbnb. So that's just a little bit. It's really three horizons. Horizon one, the biggest near-term opportunity is continue to increase conversion rate by making Airbnb easier to use, more affordable, more reliable. Horizon two, really is international growth. And then, of course, the longest horizon will be expanding our core business to offering [beyond a place to stay] (ph).
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Operator: Your next question comes from the line of Jed Kelly from Oppenheimer. Your line is open.
Jed Kelly: Hey, great. Thanks for taking my questions. Just two, just circling back on the US, I think I've asked this before, but just in some of these urban markets, do you think about leaning more into hotels? And then just on the full year guidance, you reiterated your margin guidance. But any reason given the macro uncertainty for not widening the margin range? Thanks.
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Brian Chesky: Yeah, I can take hotels, and I'll let Ellie take the second part, Jed. So, yeah, we think hotels is a massive opportunity for Airbnb. In 2019, we acquired HotelTonight, and that was basically under the philosophy that while people came to Airbnb looking for a unique place to stay, typically a home, the vast majority of people come to Airbnb don't end-up booking and one of the reasons is they're window shopping and they're not ready to book. But sometimes, especially in popular markets, urban areas, when a lot of people are traveling, Airbnb homes are booked. And we have a fairly high occupancy and we need other place to stay and hotels are a great way to fill-in network gaps. During the pandemic, we had to pause some of our efforts and some of our progress, because we really want to focus on getting back to the basics. But now that we've made a huge amount of progress on our core business, making over 500 improvements in upgrades over the last three years. We are prepared to expand beyond our core. And actually one of those expansions is hotels. One of the things you saw was we just did a promotional HotelTonight. So, now if you book a hotel in HotelTonight, we're offering 10% credit towards an Airbnb booking. This of course, increases conversion rate on HotelTonight, but also introduces the number of hotel travelers to Airbnb. Over the coming years, we're going to be doing a lot more though on Airbnb's application to bring more great hotels onto Airbnb. We think almost all the hoteliers in the world would love to have Airbnb as a distribution channel. And so, we think there's a lot of opportunity over the coming year. So, absolutely going to be part of our strategy.
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Ellie Mertz: And then, on the second question with regard to the margin guidance, we reiterated the plan that we had shared in February. We believe that gives us considerable room to continue to focus on strengthening the core business, while investing in growth initiatives, and no material change in terms of that investment profile for the year.
Operator: Your next question comes from the line of John Colantuoni from Jefferies. Your line is open.
John Colantuoni: Hey. Thanks for the question. I wanted to start with sort of momentum in the business with growth in 2024 peaking in December and strength continuing in early 2025, I'm curious how growth has trended throughout the quarter and into April. Is growth sort of at a low-point right now for the year, or did it sort of dip a little bit earlier in the quarter and it's since improved from there? And second question, just sort of looking specifically at the expansion markets. I'm curious if you could just sort of characterize how growth has progressed there specifically this quarter compared to last quarter when you called it out as a key contributor to the strength that you saw? Thanks.
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Ellie Mertz: Thanks, John. Let me start with the first question, in terms of how growth has trended effectively year-to-date. So, I think it's actually interesting to understand the path that both we and I think the industry went through in Q1. If you recall, January was a very strong month, followed by softness in February. You'll recall, there was a bunch of revisions to guidance in terms of the airlines. And I think what they saw, but we saw a slightly less degree of it was, there was a step-down from January to February that coincided with a pretty meaningful decline in consumer sentiment over that sequential month-to-month period. And yet, when we look at our full-quarter results for Q1, that softness that we saw in February, effectively rebounded and recovered in March such that the full-quarter was generally in line with our expectations. So, I think when we fast-forward today and the headlines are quite volatile. I think we do have to recall that, since the beginning of the year. There has been some temporal shift in terms of when people are booking. But from that Q1 period, what you gauge is that people may pause on the booking, but what we've seen today is that they come back into it. So, I wouldn't say that April is necessarily below. There has been some week-to-week and month-to-month volatility, since the beginning of the year. On the expansion markets, what would I say? I would say, generally speaking, we see nice momentum in those markets. I think in particular, what I would say is that, Latin America accelerated over the course of full year 2024. And if you look at Latin America's growth in Q1 is actually above where we were in Q1 of last year, which I think gives you a sense of, if we're able to achieve momentum in a particular market based on our product and marketing localization, we can maintain it and accelerate it over time. Obviously, the nuance of every country is slightly different, but I think anchoring on the performance that we've had across Latin America, but in Brazil, in particular
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slightly different, but I think anchoring on the performance that we've had across Latin America, but in Brazil, in particular gives you a sense of the ability to build momentum in these relatively underpenetrated markets.
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Operator: Your next question comes from the line of Lee Horowitz from Deutsche Bank. Your line is open.
Lee Horowitz: Thanks for taking the question. Two, if I could. Last quarter, you guys talked about the ability to leverage marketing expense in some of your core markets, which gives you the ability to invest in the growth markets. I guess as things perhaps slow a little bit, how do you think about perhaps leaning into that slowness to take some more share to take advantage of a weaker market to pick-up share, particularly relative to, say, some of your competitors that have talked to trying to be more aggressive as things slow? Do you still think you can leverage marketing in your core markets under those assumptions?
Ellie Mertz: Yeah, I would say, absolutely. Obviously, we start the year with a full-year marketing plan and yet every month, we're looking at the relative efficiencies by channel, by market and adjusting accordingly. So, I would say, broadly speaking for the year, we retain quite a bit of flexibility to put more money into channels that are working and markets that are working and to cut where we see less desirable results. And so, far this year, we've been doing that on a regular basis as we would in prior years.
Operator: Your next question comes from the line of Ron Josey from Citi. Your line is open.
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Operator: Your next question comes from the line of Ron Josey from Citi. Your line is open.
Ron Josey: Hi, thanks for taking the question. Two please. I want to ask just on the new product launch on May 13th in experiences or something else. Talk to us a little bit more about the plans, integration plans across the site and how you think or whether any contribution from these new products are included in guidance? And then, on the affordability or just the volatile headlines that we've been talking about, would love your thoughts on just how Airbnb's affordability initiatives could drive greater bookings. We saw the summer travel data, where I think US guests are prioritizing staycations and more prone to drive. Maybe that's an opportunity for the team. Talk to us about that, please. Thank you.
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Ellie Mertz: Okay. So, on the first question, I believe it was, what's the impact of the new business launches with regard to our guidance. So, I would say, the launch date is M 13, and we're extremely excited in terms of what is to come and what is to start on that day, but it is just the beginning. And so, the impact from a top line in the current quarter will be relatively modest, whereas as we scale those offerings, they will obviously increasingly contribute to the top line. In terms of the expense and the investments associated with that launch, they are building over the course of the beginning of the year. And as we said in the guidance language, you will see them more meaningfully hit EBITDA in terms of compression in the back half of the year as we scale the investments behind the launch. In terms of affordability, I think your thesis here is exactly right. What we saw, and it's not a perfect comp, but I do think it is instructive here. What we saw five years ago in terms of the pandemic was when certain portions of travel were inaccessible, people found other things to do on our platform. As Brian and I shared in terms of the opening, just to remind everyone, this business model has a huge amount of diversity in its offering, which allows us to be extremely resilient and adaptable as consumer behavior changes. And so, as I think about the current environment that we are in, you can think about, for example, the US guest, there's an opportunity for us to merchandise the lower-cost listing or the more proximate listing where the guest doesn't need to travel for -- doesn't need to take a flight for the summer, but they can drive. There's a huge amount of optionality with regard to the diversity of our offering that can allow us to better merchandise what is applicable to the guests in the current moment.
Operator: Your next question comes from the line of Justin Patterson from KeyBanc. Your line is open.
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Operator: Your next question comes from the line of Justin Patterson from KeyBanc. Your line is open.
Justin Patterson: Great. Thank you. Could you talk more about the behavior of the guests who are booking primarily in app versus those who are arriving through the web? Are you just seeing greater frequency rates, repeat rates and so on and so forth? Thank you.
Ellie Mertz: So, probably I would say, the demo is slightly different in terms of the app relative to the web. I would say, the broader thing to takeaway in terms of the movements we've made in terms of booking share moving to the app is that we know the app is a much better experience for the consumer. We see this most notably just in terms of conversion rates and getting people to use our apps as compared to in particular [mo web] (ph). It's a much better experience that we have designed. And so, we want to migrate people to that experience. You can see that the booking share has gone up quite dramatically over the last couple of years as we've encouraged people to use our app. And as a result, it's additive in terms of the consolidated conversion levels.
Operator: Your next question comes from the line of Doug Anmuth from JPMorgan. Your line is open.
Unidentified Analyst: Great. Thanks for taking my questions. And this is [Dave] (ph) on for Doug. I have two. So, first one, Brian, you've been pretty vocal about user experience in travel. So, curious to hear how you experience on the Airbnb to change as you move beyond places to stay and new choices introduce new frictions? And then, secondly, how do you guys think about the long-term sustainability of your margins as your efforts to move beyond the core scales over time? Thank you.
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Brian Chesky: Hey, Doug. I -- let me just start by saying, I think one of the super powers of Airbnb is our design team and our ability to make something incredibly easy to use. When we started Airbnb, we didn't really invent the idea of vacation rentals. They existed before us, but what was true is that they were very hard to book. Before Airbnb, you couldn't actually book a vacation rental online. The messaging platforms really were non-existent or very rudimentary. Very few people actually left reviews, people didn't really have an account. And so kind of one of the things we really tried to do when we created Airbnb was designed the system of trust. And as something is easier, more people do it. So, what we're noticing, for example is many of the new business we're going into, they also have similar frictions as our core business did or vacation [house] (ph) did before we basically created a category, which is, what we now call Airbnb. And so that's one of the things is we're going to try to -- the things we're going to offer want to be Instant book, we want to be like really easy. We want to have that great Airbnb design. But the other thing is a couple of other things with user experience. I think a lot of companies have tried to like design an end-to-end travel. I think designing end-to-end travel is very, very hard. It's funny. There's a funny thing. One of the most common startup ideas for entrepreneurs is to do a travel planning app. And yet travel planning apps almost always fail. So, it's almost like a riddle. Why do travel planning apps fail and everyone really tries to do it. And the reason why is, because to plan travel is very complicated. In fact, it's so complicated, many people have assistance and a big part of the job is to plan travel for them. And yet you use it infrequently. So, it's a very difficult thing to do and you do it infrequently. And so therefore, a lot of companies have failed to design like a so-called connected trip. So, I think, to do this, a lot of it is to design a really
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of companies have failed to design like a so-called connected trip. So, I think, to do this, a lot of it is to design a really good user experience. And I think that's one of the things that we're going to try to do to really design a great end-to-end experience to be able to book your entire trip and much more. I think the user interface will be important. I think AI will be an important way to do this as well. AI is -- I think as I said before, we're really focused on customer service and solving the most difficult problems for customers and working backwards towards travel inspiration. Just one thing I'll say about AI, which is definitely making the customer experience easier is, we just rolled-out our AI customer service agent this past month. 50% of US users are now using the agent and will roll it out to 100% of US users this month. We believe this is the best AI supported customers travel agent in travel. It's already led to a 15% reduction in people needing to contact live human agents, and it's going to get significantly more personalized and agentic over the years to come. So essentially, that's what we're focused on. We're focused on making everything instant book and easy-to-use. We're trying to make sure that the end-to-end travel experience is really, really wonderful with great Airbnb design, and we're going to bring more AI into the application, so that Airbnb, you can really solve your own problems with great self-solve through AI customer service agents.
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Ellie Mertz: Great. Let me talk a little bit about long-term margins. I think just starting with our core business, obviously, our core business has extremely strong EBITDA margins and cash flow generation abilities. I think you've seen us bring that up over time, in particular subsequent to the pandemic. And where we sit today, we see incremental efficiencies that we can continue to drive across that core business. And every year what we're seeking to do is strengthen and make more efficient that core business, so that we have incremental room to invest in growth. From year-to-year, we may choose to invest more in growth relative to the efficiencies that we generate. I think you're seeing that in the current year. But the intent both with the core and the new businesses is to invest in growth upfront and to optimize the margins over time. I think that the portfolio over time, we expect to have quite compelling margins.
Operator: Your next question comes from the line of Nick Jones from Citizens. Your line is open. Your next question comes from the line of Ken Gawrelski from Wells Fargo. Your line is open.
Ken Gawrelski: Thank you very much. Appreciate the question. Brian, a question for you on, as you think about the ADRs and the opportunity, the balance, if you go back over the last couple of years, you've talked about making Airbnb's more affordable. And there's been various initiatives, including the Rooms initiative to make Airbnb's more affordable. Do you expect maybe more flexibility in ADRs and room night prices on Airbnb's relative to hotels in a period of weaker consumer spending, especially in the US, maybe in urban areas? I'm just curious as how you think about the balance between potential ADRs versus room nights in North America? Thank you.
Brian Chesky: Sorry, I'm not clear what the question is.
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Brian Chesky: Sorry, I'm not clear what the question is.
Ken Gawrelski: I'm sorry, let me rephrase. Do you -- as you think about the opportunity -- if you just think about the balance between pricing ADRs, average daily room nights, relative to total room nights volume, do you think that there is an opportunity to have more for your hosts to have more flexibility on ADRs and to see more affordability, drive better room nights and ultimately greater share over the long-term in a period where there's maybe more consumer weakness or some pressure on the consumer wallet?
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Brian Chesky: Yeah. Okay. Yeah, absolutely. The answer is yes, and I'll try to explain why this is the case. Hotels, let's just contrast two hotels. I assume you're referring to Airbnbs versus hotels. So, hotels have -- most hotels -- hotel rooms -- all hotel rooms have a cost base, right? And so, they need to build in a profit margin on their room, they call this RevPAR, revenue per -- and it's really important that for them that they stay within some margin. The vast majority of people on Airbnb list only their home only on Airbnb. We believe most listings are exclusive to Airbnb and most of these homes are either primary homes or the second homes, but the homes don't exist to list on Airbnb, they exist for somebody to live in summer all the time. And so, most of the income that people make on Airbnb, the average host in Airbnb in the United States, for example makes about $15,000 a year. This is supplemental income. And so, it's all-up, it's typically all upside to them. So, what this means is there's typically a little bit more flexibility on the Airbnb host, let's say, hotel to be able to move their prices up or down, because like if they didn't rent on Airbnb -- before Airbnb, they didn't rent that night was completely lost. So really any price is upside for them as compared to hotel. One of the things we do is, we try to build really great host tools for them. And four out of five hosts on Airbnb are now using our host tools. To give you a couple of examples, Compare Listings. More than 2 million listings in Airbnb have used the Compare Listings tool. What the Compare Listings tool does is shows you how your price compares to prices of similar Airbnbs in your area. We found that when hosts have more visibility, they tend to provide more competitive prices. Another is weekly and monthly discounts. Now, the vast majority of hosts on Airbnb offer a discount, if you rent by the week, or if you rent by the month. So these are just some of the tools that we offer and we're going to continue to offer more and
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or if you rent by the month. So these are just some of the tools that we offer and we're going to continue to offer more and more tools. So our hosts are increasingly responsive. But yes, to answer your question, we do believe that there's more flexibility. And ultimately, while a higher ADR can benefit Airbnb's financial outlook on the short-term, in the long-run, affordability aligns our interest with customers, which is the best long-term incentive to alignment to align with shareholders. So we always want to drive as much value as possible to our guests.
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Ellie Mertz: Ken, I would just also add that when we test elasticity, we often see that driving down prices is more than compensated by increased volume. And that's why when we think about our pricing tools, we are not trying to necessarily drive host who offer higher prices. We're trying to get them to the best price for their listing that will drive more bookings. And in many cases, that will be to reduce your price.
Operator: Your next question comes from the line of Kevin Kopelman from TD Cowen. Your line is open.
Kevin Kopelman: Thanks. Another one on ADRs. Given FX, the guide seems to point to softer ADRs for Q2, how much of that is geo mix versus softening within the key regions or other factors, and what are you assuming for FX benefit in Q2? Thanks.
Ellie Mertz: Yeah. So, if we look at the guide for Q2, what is happening? We're seeing a couple of different factors. One is, there is underlying real price appreciation, which is a tailwind in terms of bringing prices up. There is a movement in terms of the FX headwinds. So, the FX headwind relative to Q1 is dissipating in Q2. And then, the third component is, as our business mix shifts away from North America in particular, that is a headwind, right? It moderates prices because the US prices are significantly above, frankly, ADRs around the world. I would note, we do not get the same FX benefit as maybe other platforms in that our exposure to, for example, the euro is much more limited than some other platforms.
Operator: Your next question comes from the line of Tom White from D.A. Davidson. Your line is open.
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Operator: Your next question comes from the line of Tom White from D.A. Davidson. Your line is open.
Tom White: Great. Thanks for taking my questions. Just one on the international expansion markets. I was hoping you guys could just update us on kind of how those markets are tracking in terms of profitability relative to your kind of core markets, both in terms of like absolute level and also just curious about the kind of the pace at which they're tracking that way. I mean, if you could just share a little color on exactly what kind of investments you guys are finding are helping -- in those markets are helping drive the acceleration in growth you talked about? Thanks.
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Ellie Mertz: Sure. So, when we think about our expansion markets, what I would say generally about this business is, we're able to generate very attractive contribution profit at a variety of ADRs and that typically is the biggest determinant on the overall level of profitability at a market level, like the relative ADR. I would say, broadly speaking, when we think about investing in a new market, there is some fixed cost upfront in terms of say, launching brand campaigns and that does drag margins down. But over time, we are able to scale into the marketing load as well as make some efficiencies in terms of the underlying variable costs if they have not already been localized. And so, I would go back to my first comment that, independent of a pretty wide range of ADRs, we're able to deliver very attractive unit economics across the globe. In terms of like what the types of investments we're making in those markets are, it really falls into two very simple buckets. One is product, and the other is marketing. On the product side, we have been taking a localized approach to look at specific markets to say, what do we need to do to either the global product or, for example, the payment stack to enable more local customers to use Airbnb. And we've been very choiceful with those localizations to make sure they're worth the effort and they aren't too localized, but when they're important, they can be quite meaningful in terms of driving growth in a particular market. I think some of the obvious cases are around adjusting the booking flow to be locally nuanced, and in particular to offer the right payment methods for a specific type of customer. So that's one area of investment on product. The next is obviously marketing. When we talk about going into a particular expansion market, what that means is that, we are applying effectively the full funnel of our marketing approach to that market. So, it's inclusive of some amount of brand marketing, performance marketing, comms, policy, et cetera, such that we are hands on
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it's inclusive of some amount of brand marketing, performance marketing, comms, policy, et cetera, such that we are hands on to deliver a differential outcome for that market versus the light touch approach of some of our long-tail markets.
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Operator: Your next question comes from the line of Stephen Ju from UBS. Your line is open.
Stephen Ju: Great. Thank you. So, Brian and Ellie, I think we and the analyst community sort of outside looking in, are always probably overly focused on the advertising and the monetization angle of product development. And -- but can we talk about like in re-center where your priorities are, because based on everything that you're talking about, whether it's experiences or the international expansion, the co-hosting and Brian, your prior analogy with lateral things to sell like Amazon, it does sound like we should be thinking more about transaction growth versus things that you are doing to capture a greater portion of the unit economics. So, can you kind of recenter us in terms of like what do you think the primary drivers of gross bookings will be and revenue will be? Thanks.
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Brian Chesky: I mean, maybe I can talk at a high-level, Ellie, feel free to elaborate. But yeah, you have the right mental model. I've always believed that what we should do is, focus on the things that are either most perishable opportunities or things that our guests and hosts are asking for. And so, most of what we've done is to try to do one of those two things. So, whether we're increasing reliability, affordability, making it be more easier to use, those are really in response to what our guests and hosts are telling us. That's, I'd say, the first priority is being responsive to their feedback and listening to them. And the vast majority of the 500 improvements we made over the last three years was based on feedback from our guests and hosts. So then, everything else is really a matter of just a sequencing. And the sequencing that we've chosen is just based on some of the opportunities that are most perishable. And so frankly, number one would actually be beyond improving our core business, it would be international expansion. And so, the international markets are critical. We think like what Latin America and what Asia have in common, for example, is that the average population is younger in these markets, they're more likely to be on social media, and therefore, also less predisposed to staying in hotels. And there's huge populations, huge economies growing very, very quickly. So, we think these are huge opportunities for investment. And one of the most important things that we can do at Airbnb is to continue to grow our network effect. And this network effect is really a global network. And so we really wanted to match the travel corridors. And then obviously, expanding beyond a place to stay, we are prioritizing things that increase, yeah, volume growth versus unit economics. That being said, there are a number of things that we are looking at that would increase monetization of Airbnb, especially on the host side. And the reason why is, because almost everything we've done for host, we've given away
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of Airbnb, especially on the host side. And the reason why is, because almost everything we've done for host, we've given away without charging anything incremental from a take rate standpoint in the last five years. We've increased air cover coverage to $3 million. We don't charge more. We can go down the list of other things that we offer. We don't take any additional take rate on co-host listings. They just host an Airbnb, we want to grow unit volume. So, we think that growing network effect, increasing market share is the most important priority for us in the near term.
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Operator: Your next question comes from the line of Deepak Mathivanan from Cantor Fitzgerald. Your line is open.
Unidentified Analyst: Thanks, guys. This is Jack on for Deepak. Just one for you real quick. Are you guys seeing hosts adjust pricing for some of the early demand softness in the US? And kind of moreover, do you expect the marketplace to be relatively price sticky? Or is it going to be more dynamic should the macro get any worse from here? Thank you.
Ellie Mertz: I would say, we haven't seen any meaningful shift to the downside in terms of hosts resetting their pricing. But two parts of the call earlier, I do think there is considerable opportunity for us to encourage hosts to bring down their prices generally, but certainly in this macro to capture more demand. So, I would call it an opportunity as opposed to something that we're seeing hosts actively do today.
Operator: Your next question comes from the line of Conor Cunningham from Melius Research. Your line is open.
Conor Cunningham: Hi, everyone. Thank you. So airlines and hotels spend a ton of time talking about the resiliency of loyalty programs during downturns. And I know you guys don't want to copy them, but can you just give us some updated thoughts on a subscription model or a loyalty program? It just seems much more likely that thing is -- that type of opportunity is on the table after you move into experiences or something else along that line. So, if you could just talk about that, that would be helpful. Thank you.
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Brian Chesky: Yeah. I mean, totally agree with you. I think it is absolutely something that we're looking at. I've been actively thinking about this as well. What I've always was very intentional about was that we never wanted to necessarily have essentially like a point subsidy program, which to me, is in a way the price for not having a lot of loyalty on your platform. And we have a lot of loyalty. A lot of these other programs, they try to get people to join loyalty programs, they even have an account information, they even have a relationship with the guest. Everyone at Airbnb, we verify their identity. The vast majority of people have profiles. We have 200 million verified identities on the platform on Airbnb today. I think there's more than any or almost any other platform in the United States for any -- not just travel, but beyond travel, around two out of three people who book intermediary leave a review. So we have really good retention. We have really good participation. But I've always thought that there could be a membership program, potentially even a paid subscription or membership program, Airbnb, where you pay more to get differentiated offerings and better service. And I think we're looking at a variety of models there, where it's not necessarily subsidizing the business we already have, but really increasing usage and increasing share of wallet. And I think that Amazon Prime, one of the things that's compelling about it is, they actually were able to get people not just to come back to Amazon, but to use it more frequently. And so, I think any program that increase the share of wallet or gets people not necessarily to come back to Airbnb, but to use it more frequently for a greater part of their lives, not necessarily just every year, but imagine every month or every week, including in your own city would be really, really compelling to us.
Operator: Your next question comes from the line of Alex Brignall from Redburn Atlantic. Your line is open.
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Operator: Your next question comes from the line of Alex Brignall from Redburn Atlantic. Your line is open.
Alex Brignall: Good evening. Thank you very much for taking the question. At the Q4 results, when you talked about the margin target, you said that FX was a headwind because of the transaction exposure that you have, more of your costs are in dollars. That's obviously, and I think, I'm not 100%. I think you said that margins certainly wouldn't have gone down as much, maybe not even down, if FX wasn't going against. Tell me I'm wrong, if I am on that. Obviously, FX has gone entirely the other way now and it would be a tailwind to your numbers. So, I would have imagined that all else equal, which of course is not, that the margin target for the full-year would have seen a tailwind from the fact that FX will benefit your US dollar cost base relative to your revenues. Could you just talk about why that's not happening? Thank you.
Ellie Mertz: Yeah. Thanks for the question, Alex. So certainly, yes, between now and February, ever since -- sorry, since February, we have seen a change in the FX rates. As of February, we were assuming that, FX would be a pretty meaningful headwind for the remainder of the year. Fast forward to where we are today, it's obviously less of a headwind. A couple of things that I would note. One is that, we, the positivity we've seen out of Europe in terms of the weakening of the dollar is not necessarily relevant for our entire portfolio. We do have some -- we do continue to have some FX headwinds out of Latin America that do impact a certain portion of our business. Second is, we do some revenue hedging such that the tailwind that some are seeing does not entirely materialize in terms of our hedged portfolio for revenue. And then I would say, third, in terms of managing to the guidance that we provided you, there are some puts and takes with regard to overall volume underlying ADR as well as FX-adjusted ADR.
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Operator: And that concludes our question-and-answer session. I will now turn the call back over to Brian for closing remarks.
Brian Chesky: All right, everyone. Well, thanks for joining us today. We're incredibly proud of our results, and I'm really excited to share what we've been working on at Airbnb. So, make sure to watch our 2025 Summer Release to see what's next. Until then, thank you.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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Operator: Greetings, and welcome to the AMD Fourth Quarter and Full Year 2024 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] And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Matt Ramsey, Vice President of Investor Relations. Thank you, Matt. You may begin.
Matt Ramsey: Thank you, and welcome to AMD's fourth quarter and full year 2024 financial results conference call. By now, you should have had the opportunity to review a copy of our earnings press release and accompanying slides. If you have not had the chance to review these materials, they can be found on the Investor Relations page of amd.com. We will refer primarily to non-GAAP financial measures during today's call. The full non-GAAP to GAAP reconciliations are available in today's press release and slides posted on our website. Participants in today's conference call are Dr. Lisa Su, our Chair and Chief Executive Officer; and Jean Hu, our Executive Vice President and 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 Jean Hu will attend the Morgan Stanley Global TMT Conference on Monday, March 3. Today's discussion contains forward-looking statements based on our 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 our actual results to differ materially. With that, I will hand the call over to Lisa. Lisa?
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Lisa Su: Thank you, Matt, and good afternoon to all those listening today. 2024 was a transformative year for AMD. We successfully established our multi-billion dollar data center AI franchise. Launched a broad set of leadership products and gained significant server and PC market share. As a result, we delivered record annual revenue, grew net income 26% for the year and more than doubled free cash flow from 2023. Importantly, the data center segment contributed roughly 50% of annual revenue, as Instinct and EPYC processor adoption expanded significantly with cloud, enterprise and supercomputing customers. Looking at our financial results. Fourth quarter revenue increased 24% year-over-year to a record $7.7 billion, led by record quarterly data center and client segment revenue both of which grew by a significant double-digit percentage. On a full year basis, annual revenue grew 14% to $25.8 billion as data center revenue nearly doubled and client segment revenue grew 52%, more than offsetting declines in our Gaming and Embedded segments. Turning to the segments. Data center segment revenue increased 69% year-over-year to a record $3.9 billion. 2024 marks another major inflection point for our server business, as share gains accelerated, driven by the ramp of fifth-gen EPYC Turin and strong double-digit percentage year-over-year growth in fourth-gen EPYC sales. In cloud, we exited 2024 with well over 50% share at the majority of our largest hyperscale customers. Hyperscaler demand for EPYC CPUs was very strong, driven by expanded deployments powering both their internal compute infrastructure and online services. Public cloud demand was also very strong with a number of EPYC instances increasing 27% in 2024 to more than 1,000. AWS, Alibaba, Google, Microsoft and Tencent launched more than 100 AMD general purpose in AI instances in the fourth quarter alone. This includes new Azure instances powered by a custom-built EPYC processor with HBM memory that delivers leadership HPC performance based on offering 8x
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powered by a custom-built EPYC processor with HBM memory that delivers leadership HPC performance based on offering 8x higher memory bandwidth compared to competitive offerings. We also built significant momentum with Forbes 2000 Global Businesses using EPYC in the cloud, as enterprise customers activated more than double the number of EPYC cloud instances from the prior quarter. This capped-off a strong year of growth as enterprise consumption of EPYC in the cloud nearly tripled from 2023. Turning to enterprise on-prem adoption. EPYC CPU sales grew by a strong double-digit percentage year-over-year, as sales grew increased, and we closed high-volume deployments with Akamai, Hitachi, LG, ServiceNow, Verizon, Visa and others. We are seeing growing enterprise pull based on the expanding number of EPYC platforms available and our increased go-to-market investments. Exiting 2024, there are more than 450 EPYC platforms available from the leading server OEMs and ODMs, including more than 120 Turin platforms that went into production in the fourth quarter from Cisco, Dell, HPE, Lenovo, Super Micro and others. Looking forward, Turin is clearly the best server processor in the world with more than 540 performance records across a broad range of industry standard benchmarks. At the same time, we are seeing sustained demand for both fourth and third gen-EPYC processors as our consistent road map execution has made AMD the dependable and safe choice. As a result, we see clear growth opportunities in 2025 across both cloud and enterprise based on our full portfolio of EPYC processors, optimized for leadership performance across the entire range of data center workloads and system price points. Turning to our data center AI business. 2024 was an outstanding year, as we accelerated our AI hardware road map to deliver an annual cadence of new Instinct accelerators, expanded our ROCm software suite with significant uplifts in inferencing and training performance, built strong customer relationships with key industry leaders and
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significant uplifts in inferencing and training performance, built strong customer relationships with key industry leaders and delivered greater than $5 billion of data center AI revenue for the year. Looking at the fourth quarter, MI300X production deployments expanded with our largest cloud partners. Meta exclusively used MI300X to serve their Llama 405B frontier model on meta.ai and added instinct GPUs to its OCP-compliant Grand Teton platform, designed for deep learning recommendation models and large-scale AI inferencing workloads. Microsoft is using MI300X to power multiple GPT 4-based Copilot services, and launched flagship instances that scale up to thousands of GPUs for AI training and inference and HPC workloads. IBM, Digital Ocean, [Vulture] (ph) and several other AI-focused CSPs have begun deploying AMD Instinct accelerators for new instances. IBM also announced plans to enable MI300X on their Watson X AI and data platform for training and deploying enterprise-ready generative AI applications. Instinct platforms are currently being deployed across more than a dozen CSPs globally, and we expect this number to grow in 2025. For enterprise customers, more than 25 MI300 series platforms are in production with the largest OEMs and ODMs. To simplify and accelerate enterprise adoption of AMD Instinct platforms, Dell began offering MI300X as a part of their AI factory solution suite and is providing multiple ready-to-deploy containers via the Dell Enterprise Hub on hugging face. HPC adoption also grew in the quarter. AMD now powers five of the 10 fastest and 15 of the 25 most energy efficient systems in the world, on the latest top 500 supercomputer list. Notably, the El Capitan system at Lawrence Livermore National Labs, debuted as the world's fastest supercomputer, using over 44,000 MI300 AI APUs to deliver more than 1.7 exaflops of compute performance. Earlier this month, the high-performance computer center at the University of Stuttgart, launched the Hunter supercomputer that also uses MI300A. Like El
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computer center at the University of Stuttgart, launched the Hunter supercomputer that also uses MI300A. Like El Capitan, Hunter will be used for both foundational scientific research and advanced AI projects, including training LOMs in 24 different European languages. On the AI software front, we made significant progress across all layers of the ROCm stack in 2024. Our strategy is to establish AMD ROCm as the industry's leading open software stack for AI, providing developers with greater choice and accelerating the pace of industry innovation. More than 1 million models on hugging face now run out of the box on AMD. And our platforms are supported in the leading frameworks like PyTorch and JAX, serving solutions like VLLM and compilers like OpenAI Triton. We have also successfully ramped large-scale production deployments with numerous customers using ROCm, including our lead hyperscale partners. We ended the year with the release of ROCm 6.3 that included multiple performance optimizations, including support for the latest flash attention algorithm that runs up to 3 times faster than prior versions and SG Lang run time that enabled day-zero support for state-of-the-art models like DeepSeek V3. As a result of these latest enhancements, MI300X inferencing performance has increased 2.7 times since launch. Looking forward, we're continuing to accelerate our software investments to improve the out-of-the-box experience for a growing number of customers adopting Instinct to power their diverse AI workloads. For example, in January we began delivering biweekly container releases that provide more frequent performance and feature updates and ready to deploy packages, and we continue adding resources dedicated to the open source community that enable us to build, test and launch new software enhancements at a faster pace. On the product front, we began volume production of MI325X in the fourth quarter. The production ramp is progressing very well to support new customer wins. MI325 is well-positioned in market,
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fourth quarter. The production ramp is progressing very well to support new customer wins. MI325 is well-positioned in market, delivering significant performance and TCO advantages compared to competitive offerings. We have also made significant progress with a number of customers adopting AMD Instinct. For example, we recently closed several large wins with MI300 and MI325 at Lighthouse AI customers that are deploying instinct at scale across both their inferencing and training production environments for the first time. Looking ahead, our next-generation MI350 series featuring our CDNA 4 architecture is looking very strong. CDNA 4 will deliver the biggest generational leap in AI performance in our history, with a 35 times increase in AI compute performance compared to CDNA 3. The silicon has come up really well. We were running large-scale LLMs within 24 hours of receiving first silicon and validation work is progressing ahead of schedule. The customer feedback on MI350 series has been strong, driving deeper and broader customer engagements with both existing and net new hyperscale customers in preparation for at-scale MI350 deployments. Based on early silicon progress and the strong customer interest in the MI350 series, we now plan to sample lead customers this quarter and are on track to accelerate production shipments to mid-year. As we look forward into our multiyear AMD Instinct road map, I'm excited to share that MI400 series development is also progressing very well. The CDNA next architecture takes another major leap enabling powerful rackscale solutions that tightly integrate networking CPU and GPU capabilities at the silicon level to support Instinct solutions at data center scale. We designed CDNA next to deliver leadership AI and HPC flops while expanding our memory capacity and bandwidth advantages and supporting an open ecosystem of scale up and scale out networking products. We are seeing strong customer interest in the MI400 series for large-scale training and inference deployments and remain
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We are seeing strong customer interest in the MI400 series for large-scale training and inference deployments and remain on track to launch in 2026. Turning to our acquisition of ZTE Systems. We passed key milestones in the quarter and received unconditional regulatory approvals in multiple jurisdictions, including Japan, Singapore and Taiwan. Cloud and OEM customer response to the acquisition has been very positive, as ZTE's Systems expertise can accelerate time to market for future Instinct accelerator platforms. We have also received significant interest in ZTE's manufacturing business. We expect to successfully divest ZTE's industry-leading U.S.-based data center infrastructure production capabilities, shortly after we closed the acquisition, which remains on track for the first half of the year. Turning to our client segment. Revenue increased 58% year-over-year to a record $2.3 billion. We gained client revenue share for the fourth straight quarter, driven by significantly higher demand for both Ryzen desktop and mobile processors. We had record desktop channel sell-out in the fourth quarter in multiple regions, as Ryzen dominated the best-selling CPU list at many retailers globally. Exceeding 70% share at Amazon, Newegg, [MineFactory] (ph) and numerous others over the holiday period. In mobile, we believe we had a record OEM PC sell-through share in the fourth quarter as Ryzen AI 300 Series notebooks ramp. In addition to growing share with our existing PC partners, we were very excited to announce a new strategic collaboration with Dell that marks the first time they will offer a full portfolio of commercial PCs powered by Ryzen Pro processors. The initial wave of Ryzen-powered Dell commercial notebooks is planned to launch this spring with the full portfolio ramping in the second half of the year, as we focus on growing commercial PC share. At CES, we expanded our Ryzen portfolio with the launch of 22 new mobile processors that deliver leadership compute, graphics and AI capabilities. Our Ryzen processor
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with the launch of 22 new mobile processors that deliver leadership compute, graphics and AI capabilities. Our Ryzen processor portfolio has never been stronger with leadership compute performance across the stack. For AI PCs, we are the only provider that offers a complete portfolio of CPUs, enabling Windows Copilot plus experiences on premium ultrathin, commercial, gaming and mainstream notebooks. Looking into 2025, we are planning for the PC TAM to grow by a mid-single-digit percentage year-on-year. Based on the breadth of our leadership client CPU portfolio and strong design win momentum, we believe we can grow client segment revenue well ahead of the market. Now turning to our Gaming segment. Revenue declined 59% year-over-year to $563 million. Semi-custom sales declined as expected as Microsoft and Sony focused on reducing channel inventory. Overall, this console generation has been very strong. Highlighted by cumulative unit shipments surpassing $100 million in the fourth quarter. Looking forward, we believe channel inventories have now normalized and semi-custom sales will return to more historical patterns in 2025. In Gaming Graphics, revenue declined year-over-year, as we accelerated channel sellout in preparation for the launch of our next-gen Radeon 9000 series GPUs. Our focus with this generation is to address the highest volume portion of the enthusiast gaming market with our new RDNA 4 architecture. RDNA 4 delivers significantly better rate tracing performance and add support for AI-powered upscaling technology that will bring high-quality 4K gaming to mainstream players when the first Radeon 9070 series GPUs go on sale in early March. Now turning to our Embedded segment. Fourth quarter revenue decreased 13% year-over-year to $923 million. The demand environment remains mixed, with the overall market recovering slower than expected as strength in aerospace and defense and test and emulation is offset by softness in the industrial and communications markets. We continue expanding our adaptive
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and test and emulation is offset by softness in the industrial and communications markets. We continue expanding our adaptive computing portfolio in the quarter with differentiated solutions for key markets. We launched our Versal RF series with industry-leading compute performance for aerospace and defense markets, introduced our Versal premium series Gen 2, as the industry's first adaptive compute devices supporting CXL 3.1 and PCI Gen 6 and began shipping our next-gen Alveo card with leadership performance for ultra-low latency trading. We believe we gained adaptive computing share in 2024 and are well-positioned for ongoing share gains based on our design win momentum. We closed a record $14 billion of design wins in 2024, up more than 25% year-over-year, as customer adoption of our industry-leading adaptive computing platforms expands and we won large new embedded processor designs. In summary, we ended 2024 with significant momentum, delivering record quarterly and full-year revenue. EPYC and Ryzen processor share gains grew throughout the year, and we are well-positioned to continue outgrowing the market based on having the strongest CPU portfolio in our history. We established our multibillion-dollar data center AI business and accelerated both our Instinct hardware and ROCm software road maps. For 2025, we expect the demand environment to strengthen across all of our businesses, driving strong growth in our data center and client businesses and modest increases in our gaming and Embedded businesses. Against this backdrop, we believe we can deliver strong double-digit percentage revenue and EPS growth year-over-year. Looking further ahead, the recent announcements of significant AI infrastructure investments like Stargate, and latest model breakthroughs from DeepSeek and the Allen Institute highlight the incredibly rapid pace of AI innovation across every layer of the stack, from silicon to algorithms to models, systems and applications. These are exactly the types of advances we want to see as the
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from silicon to algorithms to models, systems and applications. These are exactly the types of advances we want to see as the industry invests in increased compute capacity, while pushing the envelope on software innovation to make AI more accessible and enable breakthrough generative and agentic AI experiences that can run on virtually every digital device. All of these initiatives require massive amounts of new compute and create unprecedented growth opportunities for AMD across our businesses. AMD is the only provider with the breadth of products and software expertise needed to power AI from end-to-end across data center, edge and client devices. We have made outstanding progress building the foundational product, technology and customer relationships needed to capture a meaningful portion of this market. And we believe this places AMD on a steep long-term growth trajectory, led by the rapid scaling of our data center AI franchise for more than $5 billion of revenue in 2024 to tens of billions of dollars of annual revenue over the coming years. Now I'd like to turn the call over to Jean to provide some additional color on our fourth quarter and full year results. Jean?
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Jean Hu: Thank you, Lisa, and good afternoon, everyone. I'll start with a review of our financial results and then provide our current outlook for the first quarter of fiscal 2025. AMD executed very well in 2024, delivering record revenue of $25.8 billion, up 14%, driven by 94% growth in our data center segment and a 52% growth in our client segment, which more than offset headwinds in our gaming and embedded segments. We expanded gross margin by 300 basis points and achieved earnings per share growth of 25% while investing aggressively in AI to fuel our future growth. For the fourth quarter of 2024, Revenue was a record $7.7 billion, growing 24% year-over-year as strong revenue growth in the data center and client segment was partially offset by lower revenue in our gaming and embedded segments. Revenue was up 12% sequentially, primarily driven by the growth of client, data center and the gaming segments. Gross margin was 54%, up 330 basis points year-over-year due to a favorable shift in revenue mix with higher data center and client revenues lower gaming revenue, partially offset by the impact of lower embedded revenue. Operating expenses were $2.1 billion, an increase of 23% year-over-year, as we invest in R&D and marketing activities to address our significant growth opportunities. Operating income was a record of $2 billion, representing 26% operating margin. Taxes, interest and other was $249 million net expense. For the fourth quarter of 2024 diluted earnings per share was $1.09, an increase of 42% year-over-year, reflecting the significant operating leverage of our business model. Now turning to our reportable segment, starting with the data center segment. Revenue was a record of $3.9 billion, up 69% year-over-year driven by strong growth, both AMD Instinct GPU and the fourth and the fifth generation AMD EPYC CPU sales. Data Center segment operating income was $1.2 billion or 30% of revenue compared to $666 million or 29% a year ago. Client segment revenue was a record of $2.3 billion, up 58%
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or 30% of revenue compared to $666 million or 29% a year ago. Client segment revenue was a record of $2.3 billion, up 58% year-over-year, driven by strong demand for AMD Ryzen processors. Client segment operating income was $446 million or 19% of revenue compared to operating income of $55 million or 4% of revenue a year ago, driven primarily by operating leverage due from higher revenue. Gaming segment revenue was $563 million, down 59% year-over-year, primarily due to a decrease in semi customer revenue. Gaming segment operating income was $50 million or 9% of revenue compared to $224 million or 16% a year ago. Embedded segment revenue was $923 million, down 13% year-over-year, as end market demand continues to be mixed. Embedded segment operating income was $362 million or 39% of revenue compared to $461 million or 44% a year ago. Turning to the balance sheet and cash flow. During the quarter, we generated $1.3 billion in cash from operations and a record $1.1 billion for free cash flow. Inventory increased sequentially by $360 million to $5.7 billion. In the end of the quarter, cash, cash equivalent and short-term investments were $5.1 billion. In the fourth quarter, we repurchased 1.8 million shares and returned 256 million to shareholders. For the year, we repurchased 5.9 million shares and returned 862 million to shareholders. We have a $4.7 billion remaining in our share repurchase authorization. Before I turn to our financial outlook, let me cover our financial segment reporting. Beginning with our first quarter fiscal year 2025 financial statement disclosures. We plan to combine the client and the gaming segment into one single reportable segment to align with how we manage the business. Therefore, reporting three segments: data center, client with gaming and the embedded. We'll continue to provide distinct revenue disclosures for our data center, client, gaming and embedded businesses, consistent with our current reporting. Now turning to our first quarter of 2025 outlook. We expect revenue to be
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businesses, consistent with our current reporting. Now turning to our first quarter of 2025 outlook. We expect revenue to be approximately $7.1 billion plus or minus $300 million, up 30% year-over-year, driven by strong growth in our data center and the client business. More than offsetting a significant decline in our gaming business and a modest decline in our embedded business. We expect revenue to be down sequentially approximately 7%, driven primarily by seasonality across our businesses. In addition, we expect first quarter non-GAAP gross margin to be approximately 54%. Non-GAAP operating expenses to be approximately $2.1 billion. Non-GAAP other net income to be $24 million, non-GAAP effective tax rate to be 13% and the diluted share count is expected to be approximately 1.64 billion shares. In closing, 2024 was a strong year for AMD, demonstrating our disciplined execution to deliver revenue growth and expand earnings at a faster rate than revenue. All while investing in AI and the innovation to fuel long-term growth. Looking ahead, we will build on the momentum to drive double-digit percentage revenue growth and further accelerated earnings in 2025 and beyond. With that, I'll turn it back to Matt for the Q&A session.
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Matt Ramsey: Thank you very much, Jean. We're now ready to start the Q&A session. As the operator pulls for questions, we remind each participant to please ask one question and a brief follow-up. Operator, please poll for questions. Thanks.
Operator: Thank you Matt. We will now be conducting a question-and-answer session. [Operator Instructions]. And the first question comes from the line of Aaron Rakers with Wells Fargo. Please proceed.
Aaron Rakers : Yeah. Thanks for taking the question. I guess I'll just ask it right out of the gate is, as we think about the GPU business, and I appreciate you talked about delivering north of $5 billion of revenue, which is extremely impressive in 2024. I'm curious if you -- how we should think about framing the GPU, the instinct business, as we think about 2025? And any kind of color you can provide us as far as kind of the progression of revenue, the pace of revenue first half versus second half as we think about some of the product cycle dynamics. Thank you.
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Lisa Su : Sure, Aaron. Thanks for the question. So first of all, look we were very pleased with how we finished 2024 in terms of the data center GPU business. I think the ramp was steep as we went throughout the year, and the team executed well. Going into 2025, as I mentioned in the prepared remarks, we are actually very happy with the progress that we're making on both the hardware road maps and the software road maps. So on the hardware side, we launched MI325 at the end of the fourth quarter, started shipments then. We have new designs that have come on both MI300 and MI325 that we'll deploy in the first half of the year. And then the big news is on the MI350 series. So we had previously stated that we thought we would launch that in the second half of the year. And frankly, that bring-up has come up better than we expected, and there is very strong customer demand for that. So we are actually going to pull that production ramp into the middle of the year, which improves our relative competitiveness. So as it relates to how data center -- so the overall data center business will grow strong double digits certainly, both the server product line as well as the data center GPU product line will grow strong double digits. And from the shape of the revenue you would expect that the second half would be stronger than the first half, just given MI350 will be a catalyst for the data center GPU business. But overall, I think we are very pleased with the trajectory of the data center business in both 2024 and then going into full year 2025.
Aaron Rakers : Yes. Thank you very much. And as a quick follow-up, just thinking about the guidance overall relative to that down 7% sequential I know you mentioned seasonality across the business segments. Are you assuming that you are down sequentially in data center in total in 1Q? And how do I frame that relative to seasonality? Thank you.
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Lisa Su: Yes, sure, Aaron. So let me give you some more color on the Q1 guide. So Q1 guide was down 7% sequentially, as Jean mentioned. And the way that breaks out in each of the segments assume that data center would be down just about that average, so the corporate average. We would expect the client business and the embedded business to be down more than that. Just given where seasonality is for those businesses. And then we would expect gaming business will be down a little less than that. And that's a little atypical from a seasonality standpoint, but we are coming-off of a year when there was a lot of let’s call it, inventory normalization. And now that inventory has normalized, we would expect that, that would be down a little bit less than the corporate average.
Operator: And the next question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.
Timothy Arcuri : Thanks a lot. I wanted to ask about the server CPU business. Jean, I think you have said in the past that core count is going to grow mid-to-high teens. And as long as your competitor is not super aggressive on pricing that your business should grow roughly that much as well. Are you expecting or are you already seeing them become a little more aggressive on pricing as they attempt to shore up their share. It sounds like they're getting a bit more aggressive on pricing. So wondering if you still think that the server CPU business can grow in line with that core kind of mid-to-high teens.
Jean Hu : Yes. First, we always assume server CPU is a very competitive market but we currently have the best lineup portfolio from not only Turin generation, but Genoa and then even Milan, we provide the best TCO for our customers based on the product portfolio. So overall, we are actually quite confident about continuing to drive the server CPU businesses not only growing from a unit perspective, ASP perspective and continue to gain share.
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Timothy Arcuri : Thanks a lot. And then, Jean can you just give us a sense of where data center GPU came in for December? I'm thinking it's probably in the $2 billion range. And then is it assumed to be down, flat or up, would you be willing to give a number for March? Thanks.
Jean Hu : Yes. I think the way to look at our Q4 performance is our data center business overall did really well. actually is consistent with our expectations. Of course, when we look at the server and the data center GPU, server did better than data center GPU. But overall, it's very consistent with our performance.
Lisa Su : Yes. Maybe I'll just add, Tim, on your question as to what you would expect as we go into 2025. I think you should assume that the first half of 2025 data center segment will be consistent with the second half of '24. And that's true for both businesses on the server side as well as the data center GPU side.
Operator: And the next question comes from the line of Vivek Arya with Bank of America Securities. Please proceed with your question.
Vivek Arya : Thanks for taking my question. Lisa, a few questions on the data center GPU business. I think last year, AMD was very explicit about setting and beating or meeting expectations. This year, you have not set a specific forecast, and I'm curious what has changed. And then if I go back to your Analyst Day in December, I think at that time, you are sort of long-term 60% CAGR. Is it fair to assume that you can grow at that for '25, right, versus the $5 billion plus that you did last year. So just contrast the two years and then whether AMD can grow at that 60% trendline.
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Lisa Su : Sure. So Vivek, thanks for the question. I think what we look at is certainly for the first year of the data center GPU business, we wanted to give some clear progression as it was going. The business is now at scale, actually now at over $5 billion. And as we go into 2025, I think our guidance will be more at the segment level with some color as to some qualitative color as to what's going on between the two businesses. And relative to your question about long-term growth rates, you are absolutely right. I mean I believe that the demand for AI compute is strong. And we've talked about a data center accelerator TAM upwards of $500 billion by the time we get out to 2028. I think all of the recent data points would suggest that there is a strong demand out there. Without guiding for a specific number in 2025, one of the comments that we made is we see this business growing to tens of billions, as we go through the next couple of years. And that gives you a view of the confidence that we have in the business and particularly our road map is getting stronger with each generation, right? So MI300 was a great start. MI350 series is stronger and addresses a broader set of workloads including both inference, as well as training. And then as we get into MI400 series, we see significant traction and excitement around what we can do there with rackscale designs, and address the innovation that's going on there. So yes, we are bullish on the long-term, and we'll certainly give you progress as we go through each quarter in 2025.
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Vivek Arya : Thank you, Lisa. And for my follow-up, I would love your perspective on the news from DeepSeek recently, right? And there are kind of two parts to that. One is once you heard the news, do you think that should make us more confident or more conservative about the semiconductor opportunity going forward? Like is there something so disruptive in what they have done, that reduces the overall market opportunity. And then within that, have your views about GPU versus ASIC how that share develops over the next few years? Have those evolved in any way at all? Thank you.
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Lisa Su : Yes. Great. Thanks for the question, Vivek. Yes, it's been a pretty exciting first few weeks of the year. I think the DeepSeek announcements, Allen Institute as well as some of the Stargate announcements, talk about just how much the rate and pace of innovation that's happening in the AI world. So specifically relative to DeepSeek. Look, we think that innovation on the models and the algorithms is good for AI adoption. The fact that there are new ways to bring about training and inference capabilities with less infrastructure actually is a good thing because it allows us to continue to deploy AI compute and broader application space and more adoption. I think from our standpoint, we also like very much the fact that – we are big believers in open source. And from that standpoint, having open source models, looking at the rate and pace of adoption there, I think is pretty amazing. And that is how we expect things to go. So to the overall question, of how should we feel about it. I mean, we feel bullish about the overall cycle. And similarly, on some of the infrastructure investments that were announced with open AI and Stargate and building out, let's call it, massive infrastructure for next-generation AI. I think all of those say that AI is certainly on the very steep part of the curve. And as a result we should expect a lot more innovation. And then on the ASIC point, let me address that because I think that is also a place where there is a good amount of discussion. I've always been a believer in you need the right compute for the right workload. And so with AI, given the diversity of workloads, large models, media models, small models, training, inference when you are talking about broad foundational models or very specific models, you're going to need all types of compute. And that includes CPUs, GPUs, ASICs and FPGAs. Relative to our $500 billion plus TAM going out in time, we've always had ASIC as a piece of that. But my belief is, given how much change there is still going on in AI algorithms
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we've always had ASIC as a piece of that. But my belief is, given how much change there is still going on in AI algorithms that ASICs will still be the smaller part of that TAM because it is a more, call it, specific workload optimized, whereas GPUs will enable significant programmability and adjustments to all of these algorithm changes. But when I look at the AMD portfolio, it really is across all of those pieces. So CPUs, GPUs. And we are also involved in a number of ASIC conversations, as well as customers want to really have an overall compute partner.
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Operator: And the next question comes from the line of Joshua Buchalter with TD Cowen. Please proceed with your question.
Joshua Buchalter: Hi, guys. Thanks for taking my question. Obviously, it was good to see MI355X pulled into midyear. But I wanted to clarify, you said first half '25 data center GPU likely consistent with second half '24, and I was wondering if you could speak to whether or not the shape of the first half changed over the last few months and is potentially related to this pulled in time line, it could be a potential air pocket ahead of that launch? Or this was sort of consistent with how you saw things playing out as MI350 and MI325X ramps more fully? Thank you.
Lisa Su : Yes. Thanks for the question, Joshua. No, I would say from our standpoint, we've gotten incrementally more positive on the 2025 data center GPU ramp. I think MI350 series was in second half always, but pulling it into midyear is an incremental positive. And from a first half, second half statement, as I mentioned, we have some new important AI design wins that are going to be deployed with and MI300 and MI325 in the first half of the year. But with MI350 series, we end up with more content. I mean it is a more powerful GPU, ASPs go up, and you would expect larger deployments that include training and inference in that time frame. So the shape is similar to what we would have expected before.
Joshua Buchalter: Thank you. And believe it or not, I could ask a question on client. Obviously, the growth number in the fourth quarter, I mean, it was certainly higher than our model. Could you clarify the drivers of the strength across desktop, notebook and enterprise? And how we should think about 1Q, and in particular, to put it bluntly, I mean are you worried at all about inventory buildup, given how much your client revenue has outperformed the broader PC market in the second half of the year? Thank you.
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Lisa Su : Yes. Thanks for the question. Our client business performed really well throughout 2024 and Q4 was a very strong quarter. There are a couple of reasons for that. So we should go through that. We don't believe there is some substantial inventory buildup. We actually think that what we're seeing is very strong adoption of our new products. So on the desktop side, we saw our highest sell-out in many years, as we went through the holiday season, launching our new gaming CPUs, frankly, they have been constrained in the market, and we've continued shipping very strongly through the month of January as we are catching up with some demand there. So desktop business was very strong. And on the notebook side, we also saw a number of our OEM partners launching new AI PCs with the slew of new bulk mobile part numbers that we announced at CES. We have our strongest PC portfolio on the mobile side with top to bottom Copilot+ PC compatible products, and those are playing very well into the market. So I think Q4 was strong. I know that there was some commentary about whether there were pull-ins relative to tariffs. We didn't see that in the fourth quarter. I think, as I said, we saw strong sellout. Going into the first quarter, we do expect seasonality in there. But the part of our business that is performing better than seasonality is the desktop portion of the business. And the mobile portion of the business is, let's call it, more typical seasonality. But overall, I think we are very bullish on our prospects to grow clients in 2025. Just given all of the drivers from product portfolio to some of the market dynamics, as well as our new commercial PCs portfolio.
Operator: The next question comes from the line of Harlan Sur with JPMorgan. Please proceed with your question.
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Operator: The next question comes from the line of Harlan Sur with JPMorgan. Please proceed with your question.
Harlan Sur : Hi, good afternoon. Thanks for taking my question. For the fourth quarter, did your overall server CPU business grow double digits sequentially. And as a follow-on to that, I think Q4 was the sixth consecutive quarter of double-digit year-over-year increases for your on-prem service solutions. On a sequential basis, I know you guys did start to see recovery in enterprise in the second quarter of last year, I think it was strongly up sequentially in the third quarter, a pretty broad base. Did enterprise service grow sequentially in Q4? And Lisa how do you see the share prospects in this segment as you step into 2025?
Lisa Su : Yes, Harlan, thanks for the question. So I think as Jean mentioned earlier, so in the fourth quarter, we did see a sequential double-digit growth in our server business. We saw that in both cloud and enterprise. I think the server business has been performing extremely well. We are continuing to grow our cloud footprint with more workloads, as we have the strength of the churn portfolio in addition to Genoa and Milan. And then to your question on enterprise, I do believe we are seeing some strong traction in the enterprise. I think what's helping us there is, frankly, we've invested a lot more in go-to-market and the go-to-market investments are paying-off. The enterprise sales cycle is often a 6-month to 9-month sales cycle. But as we've invested more resources in it throughout 2024, we've seen that convert into a significant number of new POCs that are now converting into volume deployments. And as we go through into 2025, from a competitiveness standpoint, we have a very strong portfolio across every price point, every core count, every workload. So I think, we see a strong 2025 for [server GPUs] (ph).
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Harlan Sur : I appreciate that. Networking is a very critical part of the AI infrastructure becoming even more important. There seems to be this misconception that AMD is behind the curve here, you you're keeping pace kind of leveraging the incumbent Ethernet technology, strong installed ecosystem. You guys are spearheading the UltraNET Ethernet Consortium. You've got your Infinity Fabric technology for scale-up connectivity does you continue to drive customer adoption of your overall AI platforms. What's the feedback been like on your AI networking architectures? And any networking-related innovations the team is going to be bringing to the market this year?
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Lisa Su : Yes. Thanks, Harlan, for that question. No question. Networking is an extremely important part of the AI solution, and it's an area that we have been investing and spending quite a bit of effort with our customers and our partners jointly. The way to think about it is that our networking proof points are actually increasing as we are going from MI300 to MI325 to MI350 to MI400. So in each of those points, we are increasing with a number of proof points. I think people want to see more clusters of ours. Certainly, on inference, we've shown great performance and total cost of ownership. We are now also have a number of training systems that we are putting on board. And the important part there is the networking. We have worked very closely with our partners on Ethernet. We believe that this is the right technology for the future. In addition to third-party networking solutions, we are also with our Pensando team developing our own in-house AI NIC that Forrest mentioned at our Q4 advancing AI event. And as we look forward, working with our customers, we are actually standing up full rack solutions at both the MI350 level as well as in the MI400 series. So I think the net of it is we believe that, yes, it is absolutely very important. And in addition to all of the hardware and software work, the system level scaling is super important and we are on track to deliver that with our road map.
Operator: And the next question comes from the line of Blayne Curtis with Jefferies. Please proceed with your question.
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Operator: And the next question comes from the line of Blayne Curtis with Jefferies. Please proceed with your question.
Blayne Curtis: Hi, thanks for taking my question. Lisa, I just want to follow up the data center GPU business, obviously, very strongly year-over-year, but it seems for your commentary kind of the sequential growth kind of slows for the next kind of three quarters. So I just want to understand the why. Obviously, you have some new products coming. So maybe it's just the shift to the new products. I also want to just ping your brain on in terms of when you look at the ASIC story lines, there tends to be kind of a shift to focus on training versus inference. So just your perspective, I know a lot of your workloads initially were inference. Are you seeing any shift in terms of the demand from your customers between training inference as well?
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Lisa Su : Yes. Sure, Blayne. Look, the way I would say it is, we saw a tremendous growth as we build up the data center GPU business throughout 2024. So I think what we're seeing is we are continuing to do new deployments. We're continuing to bring on new customers. Clearly, we are going through a little bit of a product transition time frame in the first-half of the year. But the key is bringing in the MI350 series was very, very important for us and for the customer set. So the fact that, that hardware has come on clean. And we've learned a lot from the initial deployments of MI300, I think, is very positive. And this is as we might expect, given the overall landscape of deployments. And then to the second part of your question, as it relates to ASICs, I really haven't seen a big shift at all in the conversation. I will say that the conversation as it relates to AMD, is kind of the following. People like the work that we've done in inference. But certainly, our customers want to see us as a strong training solution. And that's consistent with what we've said, right? We've said that we have like a step-wise road map to really show each one of those solutions. On the software side, we've invested significantly more in some of those sort of the trading libraries. We talked -- Harlan's question earlier about networking. And then this is about just getting into data centers and ramping up tens of thousands of GPUs. So from my standpoint, I think we are making very good progress there. And I just want to reiterate on the ASIC side, look, I think ASICs are a part of the solution, but there -- I want to remind everyone, they are also a very strong part of the AMD sort of toolbox. So we've done semi-custom solutions for a long-time. We are very involved in a number of ASIC discussions with our customers as well. And what they like to do is, they'd like to take our baseline IP and really innovate on top of that. And that's what I think differentiates our capability is that we do have all of the building blocks of CPUs,
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