Q1 2024 Intel Corp Earnings Call

Operator: Thank you for standing by. This is Intel Corporation's first quarter 2024 earnings call. At this time, all participants are in listen-only mode.

Thank you for standing by and welcome to the Intel corporations first quarter 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been answered.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

And you'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Mr. John Pitzer, corporate Vice President of Investor Relations.

Operator: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Mr. John Pitzer, Corporate Vice President of Investor Relations. Thank you, Jonathan.

John William Pitzer: Thank you Jonathan by now you Should've received a copy of the Q1 earnings release and earnings presentation, both of which are available on our Investor Relations website <unk> dot com for those joining us online today. The earnings presentation is also available in our webcast window.

John William Pitzer: By now, you should have received a copy of the Q1 earnings release and earnings presentation, both of which are available on our investor relations website, intc.com. For those joining us online today, the earnings presentation is also available in our webcast window. I'm joined today by our CEO, Pat Gelsinger, and our CFO, David Zinsner. In a moment, we will hear brief comments from both, followed by a Q&A session. Before we begin, please note that today's discussion does contain forward-looking statements based on the environment as we currently see it, and as such, they are subject to various risks and uncertainties.

John William Pitzer: I'm joined today by our CEO, Pat Gelsinger, and our CFO, David <unk> in a moment, we will hear brief comments from both followed by a Q&A session.

Before we begin please note that today's discussion does contain forward looking statements based on the environment as we currently see it and as such are subject to various risks and uncertainties.

John William Pitzer: It also contains reference to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release, most recent quarterly report on Form 10-Q, and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures, including reconciliations where appropriate to corresponding GAAP financial measures. With that, I will turn things over to Pat.

John William Pitzer: It also contains reference to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release. Most recent quarterly report on Form 10-Q, and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations.

John William Pitzer: They also provide additional information on our non-GAAP financial measures, including reconciliations where appropriate to corresponding GAAP financial measures.

John William Pitzer: With that let me turn things over to Pat.

Patrick P. Gelsinger: Thanks, John, and welcome, everyone. We've reported solid Q1 results, delivering revenue in line with and EPS above our guidance as we continue to focus on operating leverage and expense management. Our results reflect our disciplined approach to reducing costs, as well as the steady progress we are making against our long-term priorities. While first-half trends are modestly weaker than we originally anticipated, they are consistent with what others have said and also reflect some of our own near-term supply constraints.

Pat: Thanks, John and welcome everyone. We reported solid Q1 results delivering revenue in line and EPS above our guidance as we continue to focus on the operating leverage and expense management.

Pat: Our results reflect our disciplined approach on reducing costs as well as the steady progress we are making against our long term priorities.

Pat: Well first half trends are modestly weaker than we originally anticipated they are consistent with what others have said and also reflects some of our own near term supply constraints.

Patrick P. Gelsinger: We continue to see Q1 as the bottom, and we expect sequential revenue growth to strengthen throughout the year and into 2025, underpinned by one, the beginnings of an enterprise refresh cycle and growing momentum for AI PCs, two, a data center recovery with a return to more normal CPU buying patterns and ramping of our accelerator offerings, and three, cyclical recoveries in NEX, Mobileye, and Altera. We had an extremely productive Q1 and achieved several important milestones along our journey to reposition the company for improved execution, competitiveness, and, perhaps most importantly, financial results.

We continue to see Q1 as the bottom and we expect sequential revenue growth to strengthen throughout the year and into 2025 underpinned by one the beginnings of an enterprise refresh cycle and growing momentum for a I P. CS to a data center recovery with a return to more normal CPU buying patterns and ramping.

Pat: <unk> of our accelerator offerings and three cyclical recoveries in any ex mobile ly and altera.

Pat: We had an extremely productive Q1 and achieved several important milestones along our journey to reposition the company for improved execution competitiveness and perhaps most importantly financial results.

Patrick P. Gelsinger: We hosted our first ever Intel Foundry Direct Connect, which drew nearly 300 partners, customers, and potential customers to hear about the momentum we are building with our Foundry offerings. We were pleased to announce Microsoft as our fifth Intel 18A customer.

Pat: We hosted our first ever Intel foundry direct connect which drew nearly 300 partners customers and potential customers to hear about the momentum. We are building with our foundry offerings. We were pleased to announce Microsoft as our fifth until 18, a customer. We also updated our lifetime deal value to greater than 15 billion and <unk>.

Patrick P. Gelsinger: We also updated our lifetime deal value to greater than $15 billion and extended our roadmap with Intel 14A, the first process node in the industry to use high NA EUV technology. Shortly following Direct Connect, we were thrilled to join with President Biden and Commerce Secretary Raimondo to announce our position as the National Semiconductor Champion along with the single largest award from the Chips and Science Act of more than $45 billion in proposed grants, tax incentives, and loans.

I ended our roadmap with Intel 14, eight the first process node in the industry to use high in a UV technology.

Pat: Shortly following direct connect we were thrilled to join with President Biden, and Commerce Secretary Rimando to announce our position as the National semiconductor champion along with the single largest award from the chips and find in fact of more than 45 billion of proposed grants tax incentives and loans.

Patrick P. Gelsinger: During the second week of April, we brought together more than a thousand of our top customers and partners at Intel Vision 2024, where we introduced our next-generation Gaudi3 Accelerator. We were joined by Naver, Dell, Bosch, Supermicro, and Roche, among many others who shared how they are benefiting from Intel solutions. Intel Vision 2024 went straight into Open Source Summit, where we led the launch of the Open Platform for Enterprise AI project.

During the second week of April we brought together more than a thousand of our top customers and partners that Intel vision 2024, where we introduced our next generation Goudy three accelerator, we were joined by neighbor Dell Bosch Supermicro and Roche among many others, who shared how they are benefiting from Intel solutions.

John William Pitzer: Visit what straight into open source summit, where we led the launch of the open platform for Enterprise AI project. This industry initiative aims to accelerate Gen AI deployments and what will be the largest market for AI applications, starting with retrieval augmented generation or Reg our xeon plus goudy use cases are.

John William Pitzer: Along with our established enterprise ecosystem.

John William Pitzer: Big role to play here.

John William Pitzer: Lastly, we hosted the industry's first sustainability summit underscoring our deep commitment to building a more geographically diverse resilient trusted and of course sustainable supply chain for semiconductors. We are proud of our leadership position in chemical conservation renewable energy and water reclamation.

Patrick P. Gelsinger: This industry initiative aims to accelerate Gen AI deployments in what will be the largest market for AI applications, starting with retrieval, augmented generation, or REG. Our Xeon plus Gaudi use cases, along with our established enterprise ecosystem, have a big role to play here. Lastly, we hosted the industry's first sustainability summit, underscoring our deep commitment to building a more geographically diverse, resilient, trusted, and, of course, sustainable supply chain for semiconductors. We are proud of our leadership position in chemical conservation, renewable energy, and water reclamation.

John William Pitzer: Our accomplishments year to date build on all the work we have done to execute on the strategy I laid out when I rejoined the company three years ago job number one was to accelerate our efforts to close the technology gap that was created by over a decade of Underinvestment.

John William Pitzer: At the heart of Phase one was five nodes into four years. The rallying cry was toward if combined accelerating our node transitions with improving our product execution and cadence to regain customer trust.

Patrick P. Gelsinger: Our accomplishments year-to-date build on all the work we have done to execute on the strategy I laid out when I rejoined the company three years ago. Job number one was to accelerate our efforts to close the technology gap that was created by over a decade of under-investment. The heart of phase one was five nodes in four years. The rallying cry was Torrid. It combined accelerating our node transitions with improving our product execution and cadence to regain customer trust.

John William Pitzer: We have rebuilt our rovian culture and execution engine and are on track to completing our five nodes four year goal, which many of our stakeholders thought impossible at inception.

John William Pitzer: So doing we are in a unique position with at scale E V technology Western base capacity and at the very least a level playing field with the market leader.

John William Pitzer: Until 'twenty, a which helps pave the way for until 18, a begins production ramp in the second half of this year with Arrow Lake we expect to release the 1.0 PDK for until the Q&A. This quarter. Furthermore, our lead products Clearwater Force and Panther Lake are already in fab and we expect to begin production ramp up the Intel <unk>.

Patrick P. Gelsinger: We have rebuilt our Grovian culture and execution engine and are on track to completing our five nodes, four year goal, which many of our stakeholders thought impossible at inception. In so doing, we are in a unique position with at scale EUV technology, Western-based capacity, and at the very least, a level playing field with the market leader. Intel 20A, which helps pave the way for Intel 18A, begins its production ramp in the second half of this year with Arrow Lake. We expect to release the 1.0 PDK for Intel 18A this quarter.

John William Pitzer: These products in the first half of 'twenty five for product release in the middle of next year.

John William Pitzer: Given this progress now is the time to turn our focus to matching technology leadership with a competitive cost structure.

John William Pitzer: Establishing a foundry relationship between our products group and our manufacturing group was a critical step to achieve better structural cost. This quarter, we officially transitioned to our new operating model and introduced Intel products and Intel foundry today for the first time, we are reporting our results to reflect the new way in which we are running.

John William Pitzer: The company set.

John William Pitzer: Separating the internal financial reporting between Intel foundry and Intel products was a critical step needed to provide transparency accountability and the proper incentives to allow both groups to make better decisions to optimize their own cost structures.

Patrick P. Gelsinger: Furthermore, our lead products Clearwater Forest and Panther Lake are already in fab, and we expect to begin production ramp-up of the Intel 18A in these products in the first half of 25 for product release in the middle of next year. Given this progress, now is the time to turn our focus to matching technology leadership with a competitive cost structure. Establishing a foundry relationship between our products group and our manufacturing group was a critical step to achieve better structural costs.

John William Pitzer: This change also provided the added benefit of giving more transparency to our outside owners, we knew that the day one P&L for Intel foundry was going to spark debate, but we also knew it was important to establish a baseline and provide a target model based on reasonable to conservative revenue and cost assumptions that we have a high degree of confidence we will.

John William Pitzer: To achieve.

John William Pitzer: I'm going to reiterate that point, so what is heard and understood. Our target model is reasonable conservative and reflects a high degree of confidence in our ability to deliver and you can rest assured that we will be working hard to beat these targets.

Patrick P. Gelsinger: This quarter, we officially transitioned to our new operating model and introduced Intel products and Intel Foundry. Today, for the first time, we are reporting our results to reflect the new way in which we are running the company. The separation of the internal financial reporting between Intel Foundry and Intel products was a critical step needed to provide transparency, accountability, and the proper incentives to allow both groups to make better decisions to optimize their own cost structure. This change also provided the added benefit of giving more transparency to our outside owners.

John William Pitzer: If we can move faster and do better we will and our new operating model is already catalyzing change and driving efficiencies across the organization.

Speaker Change: Let me highlight three important aspects of our business and our strategy that is underscored by the new model.

John William Pitzer: First within top products, we have exposed a solid fabulous franchise with established powerful and hard to displace install base in ecosystem across enterprise consumer and edge that provide meaningful benefits to our customers and partners Intel products is a solidly profitable business today. Despite.

John William Pitzer: Just recently emerging from a semiconductor downturn and still competing with legacy process technology that is changing rapidly as we ramp until three in 2024 and until 18 a in 2025.

Patrick P. Gelsinger: We knew that the day one P&L for Intel Foundry was going to spark debate, but we also knew it was important to establish a baseline and provide a target model based on reasonable to conservative revenue and cost assumptions that we have a high degree of confidence we will achieve. I'm going to reiterate that point so it is heard and understood. Our target model is reasonable and conservative and reflects a high degree of confidence in our ability to deliver, and you can rest assured that we will be working hard to beat these targets. If we can move faster and do better, we will, and our new operating model is already catalyzing change and driving efficiencies across the organization. Let me highlight three important aspects of our business and our strategy that are underpinned by the new model.

John William Pitzer: Within client, we are defining and leading the AI P. C category IDC indicates the overall PC market is now expanding and as stated earlier, our standards emerge and applications begin to take advantage of new AI embedded capabilities, we see demand signals, improving especially in second half of the year helped by a light.

John William Pitzer: Lee corporate refresh our core ultra ramp led by media like continues to accelerate beyond our original expectation with units expected to double sequentially in Q2 limited only by our supply of wafer level Assembly.

John William Pitzer: Improving second half Meteor like supply and the addition of lunar Lake in Aero Lake later, this year will allow us to ship in excess of our original 40 million AI PC CPU target in 2020 for next.

John William Pitzer: Next year with Panther late we will extend our lead with Intel <unk> and further product enhancements our share position is strong and continues to strengthen as we execute on our product roadmap.

John William Pitzer: Within D C. AI as committed we have achieved product release on our first Intel three server product. The first generation <unk> Z on six code names here Forest. The next generation P. Core Z on six product granite Rapids will be released in Q3 at vision, we demonstrated a 70 billion parameter.

Patrick P. Gelsinger: First, with Intel products, we have established a solid, fabulous franchise with an established, powerful, and hard-to-displace installed base and ecosystem across enterprise, consumer, and edge that provide meaningful benefits to our customers and partners. Intel is a solidly profitable business today, despite just recently emerging from a semiconductor downturn and still competing with legacy process technology. That is changing rapidly as we ramp up Intel 3 in 2024 and Intel 18A in 2025. With Incline, we are defining and leading the AI PC category.

John William Pitzer: Model running natively on Z on six with good performance, we continue to expect share trends to stabilize this year before improving in 2025.

John William Pitzer: Budgets are still being prioritized to general today, I build out where we have a strong position in the head node.

John William Pitzer: Conversations continue to show improving signs for traditional CPU refresh starting in late Q2 and into the second half or first until 18, a product Clearwater force. The slated to launch next year and will allow us to accelerate share gains.

John William Pitzer: Our Gabby three launch gave us a strong offering to improve our position in accelerated computing for the data center and cloud.

Patrick P. Gelsinger: IDC indicates the overall PC market is now expanding. And, as stated earlier, as standards emerge and applications begin to take advantage of new AI-embedded capabilities, we see demand signals improving, especially in the second half of the year, helped by a likely corporate refresh. Our core ultra-RAMP, led by Meteor Lake, continues to accelerate beyond our original expectation, with units expected to double sequentially in Q2, limited only by our supply of wafer-level assembly. Improving second half Meteor Lake supply and the addition of Lunar Lake and Arrow Lake later this year will allow us to ship in excess of our original 40 million AIPC CPU target in 2024, next year with Panther Lake.

John William Pitzer: We now expect over 500 million in accelerated revenue and second half of 2024 with increasing momentum into 2025 based on Goudy Three's vastly superior tcl as well as our own expanding supply.

John William Pitzer: In addition, we're finding good traction with the Intel developer cloud with customers Onboarding with this platform, including Dell and seeker or larger side, you see win to date.

John William Pitzer: We are encouraged by our progress but far from satisfied.

John William Pitzer: Lastly, within any ex the business has stabilized and beat our Q1 targets with channel inventories approaching normal levels and business acceleration expected through the year as a result.

John William Pitzer: We also recently announced our plans for scale up and scale out Ethernet based AI networking delivered us a discrete Nick and triplets for AI foundry customers with numerous key providers in the industry and market standardization through the Ultra Ethernet consortium.

John William Pitzer: So that is Intel products, good momentum and a lot for us to build a lot let me turn to Intel foundry.

Patrick P. Gelsinger: We will extend our lead with Intel 18a and further product enhancements. Our share position is strong and continues to strengthen as we execute on our product roadmap. Within DCAI, as committed, we have a chief product release for our first Intel 3 server product, the first generation E-core Xeon 6, codename Sierra Forest. The next generation P-core Xeon 6 product, Granite Rapids, will be released in Q3. At Vision, we demonstrated a 70 billion parameter model running natively on Xeon 6 with good performance.

John William Pitzer: We are executing on our strategy to drive meaningful improvement in profitability over time, we are obviously not there yet given the large upfront investment needed to build out this business, but we always said this was going to be a multi year plan and we are right on track with where we expect it to be right now as.

John William Pitzer: As we discussed during our webinar at the beginning of the month the transition from pre U V wafers to post do you view wafers as a powerful tailwind for US we expect our blended average wafer pricing to grow three X faster than costs over the decade driving significant margin expansion. In addition, we're competitive wafers will allow.

John William Pitzer: All of us to bring home many of the titles that today are being manufactured at external foundries. Both dynamics are in our control and not dependent on revenue growth in our key elements to drive the business to breakeven more than doubling our current earnings power at the Intel consolidated level.

Patrick P. Gelsinger: We continue to expect share trends to stabilize this year before improving in 2025. While budgets are still being prioritized for generative AI build-out, where we have a strong position in the head node, customer conversations continue to show improving signs for traditional CPU refresh starting in late Q2 and into the second half. Our first Intel 18A product, Clearwater Forest, is slated to launch next year and will allow us to accelerate share gains. Our Gaudi3 launch gave us a strong offering to improve our position in accelerated computing for the data center and cloud.

John William Pitzer: Of course more competitive the wafers combined with our position as the only company manufacturing with leading edge wafers outside of Asia is drawing strong interest from potential external customers. It is important to note that our leadership in advanced packaging creates more value in our wafer technologies and wafer level Assembly and based I opportunities.

John William Pitzer: Further fill our factories and extend the useful life of our tools for increased financial returns.

John William Pitzer: I am pleased to announce that this quarter, we signed another meaningful customer unintelligent, bringing our total to six <unk>.

Patrick P. Gelsinger: We now expect over $500 million in accelerated revenue in the second half of 2024, with increasing momentum into 2025 based on Gaudi3's vastly superior TCO, as well as our own expanding supply. In addition, we are finding good traction with the Intel Developer Cloud, with customers onboarding with this platform, including Dell and Seeker, our largest IDC win to date. We are encouraged by our progress, but far from satisfied.

John William Pitzer: Later in the aerospace and defense industry. This customer chose until foundry based not only on the process technology benefits of until late G&A, but also because of their desire to have a secure U S. Only supply base. Just this week, we were very pleased to announce that the D. O D awarded Intel foundry phase three of the ramp C program.

John William Pitzer: Which we're confident will lead to additional federal aerospace and defense customers.

John William Pitzer: More broadly we are seeing growing interest in until each in a and we continue to have a strong pipeline of nearly 50 test chips. The near term interest in Intel foundry continues to be strongest with advanced packaging, which now includes engagements with nearly every foundry customer in the industry, including five design awards.

Patrick P. Gelsinger: Lastly, within NEX, the business has stabilized and beat our Q1 targets with channel inventories approaching normal levels and business acceleration expected through the year as a result. We also recently announced our plans for scale up and scale out Ethernet-based AI networking delivered as a discrete NIC and chiplets for AI foundry customers with numerous key providers in the industry and market standardization through the Ultra Ethernet Consortium. So that is Intel products, good momentum, and a lot for us to build on. Let me turn to Intel Foundry.

John William Pitzer: While we are highly focused on improving the near term profitability of Intel foundry. It is also important that we keep sight of the long term opportunity here. The foundry market is expected to grow from 110 billion today to $240 billion by 2030 with almost 90% of the growth coming from E V nodes and advanced packaging.

John William Pitzer: Given this backdrop, we have clear line of sight to becoming the largest system foundry for the AI era and the second largest overall by 2030 building owner U V high in a process technology leadership in advanced packaging manufacturing capacity, our systems expertise and the surge in AI demand.

Patrick P. Gelsinger: We are executing on our strategy to drive meaningful improvement and profitability over time. But we are obviously not there yet, given the large upfront investment we needed to build out this business. But we always said this was going to be a multi-year plan, and we are right on track with where we expect it to be right now. As we discussed during our webinar at the beginning of the month, the transition from pre-EUV wafers to post-EUV wafers is a powerful tailwind for us.

John William Pitzer: Put another way our 15 billion of external revenue embedded in our Intel foundry target model would represent less than 15% of the leading edge foundry market. It is not a question of if but when Intel foundry achieves escape velocity and everyday we are proving to the market that Intel foundry is a resilient sustainable.

Patrick P. Gelsinger: We expect our blended average wafer pricing to grow 3x faster than cost over the decade, driving significant margin expansion. In addition, more competitive wafers will allow us to bring home many of the tiles that today are being manufactured at external foundries.

John William Pitzer: Untrusted alternative to serve as semi market on the path to top one trillion by the end of the decade.

John William Pitzer: Let me wrap up by speaking to our all other category, where our number one priority is to unlock shareholder value. This quarter, we formally rebranded our programmable solutions group Altera and Intel company.

Patrick P. Gelsinger: Both dynamics are in our control and not dependent on revenue growth and are key elements to drive the business to break even, more than doubling our current earnings power at the Intel consolidated level. Of course, more competitive wafers combined with our position as the only company manufacturing leading-edge wafers outside of Asia is drawing strong interest from potential external customers. It is important to note that our leadership in advanced packaging creates more value in our wafer technologies, and wafer level assembly and base dye opportunities further fill our factories and extend the useful life of our tools for increased financial returns.

John William Pitzer: We look forward to bringing in a private equity partner this year to help prepare the company for an IPO in the coming years. This puts alterra on a similar path as mobile Ly. We're excited about the future of both companies by providing them with separation and autonomy. We believe we enhance their ability to capitalize on their growth opportunities in their respective market.

John William Pitzer: And accelerate their path to create value combined with IMS, our mass riding equipment business. We believe these three assets represent more than a quarter of our overall market value today, along with a solid Intel products franchise, and an Intel foundry business rapidly approaching 100 billion and net tangible assets we saw.

Patrick P. Gelsinger: I am pleased to announce that this quarter we signed another meaningful customer on Intel 18a, bringing our total to six. A leader in the aerospace and defense industry, this customer chose Intel Foundry based not only on the process technology benefits of Intel 18A but also because of their desire to have a secure US-only supply base. Just this week, we were very pleased to announce that the DoD awarded Intel Foundry phase three of the RAMP-C program, which we are confident will lead to additional federal aerospace and defense customers. More broadly, we are seeing growing interest in Intel 18a, and we continue to have a strong pipeline of nearly 50 test chips.

John William Pitzer: The opportunity to unlock significant value for our shareholders as we meet our financial commitments stand up until foundry and drive it to profitability and further leverage our opportunity in AI.

John William Pitzer: So overall I will say that there is a lot for us to build on coming out of Q1, we are systematically executing to our strategy and we are making steady progress. We're maniacally focused on execution excellence and fiscal discipline and we are relentless in our drive to regain process leadership and bring next generation solutions to.

John William Pitzer: Solve our customers' hardest problems.

John William Pitzer: All of this gives me confidence in where we're headed.

John William Pitzer: Yes, we have a lot of hard work in front of us, but we know what we need to do and the payoff will be significant in the end semiconductors are the currency that will drive the global economy for decades to come we are one of two maybe three companies in the world that can continue to enable next generation chip technologies.

Patrick P. Gelsinger: The near-term interest in Intel Foundry continues to be strongest with advanced packaging, which now includes engagements with nearly every Foundry customer in the industry, including five design awards. While we are highly focused on improving the near-term profitability of Intel Foundry, it is also important that we keep sight of the long-term opportunity here. The Foundry market is expected to grow from $110 billion today to $240 billion by 2030, with almost 90% of the growth coming from EUV nodes and advanced packaging.

John William Pitzer: And the only one that has western capacity in R&D, and we will participate in the entire AI market.

John William Pitzer: By quarter, we are positioning ourselves well to capitalize on the immense opportunities ahead with.

John William Pitzer: With that let me turn things over to Dave.

Dave: Thank you Pat and good afternoon, everyone. We delivered solid results in the quarter with revenue, finishing in line in gross margin and EPS again, beating guidance.

Dave: Forward looking demand signals in our core markets improved at a measured pace through the first quarter and we expect to deliver full year revenue and EPS growth in 2024 with the pace of revenue growth accelerating in the second half.

Patrick P. Gelsinger: Given this backdrop, we have a clear line of sight to becoming the largest system foundry for the AI era and the second largest overall by 2030, building on our EUV high-end process technology, leadership, and advanced packaging, manufacturing capacity, our systems expertise, and the surge in AI demand. Put another way, our $15 billion of external revenue embedded in our Intel Foundry target model would represent less than 15% of the leading-edge Foundry market. It is not a question of if but when Intel Foundry achieves escape velocity.

Dave: First quarter revenue was $12 $7 billion up 9% year over year, and just above the midpoint of our guidance with product segments performing in line with expectations.

John William Pitzer: Intel products delivered 17% year over year growth.

John William Pitzer: Set by inventory headwinds impacting mobile I, alterra, and our <unk> customers as well as the sunsetting of several noncore lines of business, including the traditional packaging business within Intel foundry.

John William Pitzer: These noncore revenue headwinds drove a sequential decline of just over $1 billion in line with our Q1 guidance.

John William Pitzer: Gross margin was 45, 1% 60 basis points above guidance and EPS of <unk> 18 beat guidance by five cents on operating spending discipline and strong sell through of previously reserved inventory.

Patrick P. Gelsinger: And every day, we are proving to the market that Intel Foundry is a resilient, sustainable, and trusted alternative to serve a semi-market on the path to top $1 trillion by the end of the decade. Let me wrap up by speaking to our All Other category, where our number one priority is to unlock shareholder value. This quarter, we formally rebranded our programmable solutions group, Altera, an Intel company. We look forward to bringing in a private equity partner this year to help prepare the company for an IPO in the coming years. This puts Altera on a similar path to Mobileye.

John William Pitzer: Q1, operating cash flow was negative $1 $2 billion.

John William Pitzer: Net capex was $5 billion, resulting in an adjusted free cash flow of negative $6 $2 billion, and we paid dividends of a half a billion dollars in the quarter.

John William Pitzer: We expect Q1 to be the low point for adjusted free cash flow driven by seasonal factors, including timing of annual bonus payments along with upsides from larger capital offsets expected in the second half.

John William Pitzer: As Pat mentioned this is our first quarter reporting in the new operating segments.

John William Pitzer: The revised structure creates a foundry relationship between manufacturing and our products groups with Intel products purchasing wafers and services from Intel foundry at fair market prices.

Patrick P. Gelsinger: We are excited about the future of both companies. By providing them with separation and autonomy, we believe we enhance their ability to capitalize on their growth opportunities in their respective markets and accelerate their path to create value. Combined with IMS, our mass running equipment business, we believe these three assets represent more than a quarter of our overall market value today.

John William Pitzer: This quarter represents another important step in our transformation with increased transparency and accountability across all layers of the organization, which is already having a positive impact on decision, making efficiencies and financial discipline.

John William Pitzer: As I talk about our results I'll categorize them between Intel products, Intel foundry and all other with the all other category, including the results of mobile eye and Alterra.

Patrick P. Gelsinger: Along with a solid Intel products franchise and an Intel Foundry business rapidly approaching $100 billion in net tangible assets, we see the opportunity to unlock significant value for our shareholders as we meet our financial commitments, stand up Intel Foundry and drive it to profitability, and further leverage our opportunity in AI. So overall, I'll say that there's a lot for us to build on coming out of Q1. We are systematically executing on our strategy, and we are making steady progress.

John William Pitzer: Additional detail can be found in our earnings release and SEC filings.

John William Pitzer: Intel products revenue was $11 $9 billion up 17% year over year.

John William Pitzer: The client business grew by more than 30% year over year, with a strong product portfolio and share position and significantly improved customer inventory levels.

John William Pitzer: The data center and AI business contributed 5% year over year growth driven by higher Xeon Asps.

John William Pitzer: And improved enterprise demand.

John William Pitzer: And he asks revenue declined 8% year over year.

John William Pitzer: As discussed last quarter, we saw significant declines in the five T market, partially offset by approximately 10% year over year growth in our network and edge markets, which we expect to continue to recover through the year.

Patrick P. Gelsinger: We are maniacally focused on executional excellence and fiscal discipline, and we are relentless in our drive to regain process leadership and bring next-generation solutions to solve our customers' hardest problems. All of this gives me confidence in where we are headed. Yes, we have a lot of hard work in front of us, but we know what we need to do, and the payoff will be significant in the end.

John William Pitzer: Intel products operating profit expanded by more than $2 $1 billion year over year, driven by higher revenue better sell through of reserved inventory and operating spending discipline, resulting in an operating margin of approximately 28% in the quarter.

John William Pitzer: Intel foundry revenue was $4 $4 billion down 10% year over year on lower back end services and sample revenue along with lower IMS tool sales.

John William Pitzer: In addition, wafer volume was modestly higher in the quarter with Asps modestly down driven by pricing per mature nodes.

David A. Zinsner: Semiconductors are the currency that will drive the global economy for decades to come. We are one of two, maybe three companies in the world that can continue to enable next-generation chip technologies and the only one that has Western capacity and R&D. And we will participate in the entire AI market. Quarter by quarter, we are positioning ourselves well to capitalize on the immense opportunities ahead. With that, I will turn things over today.

John William Pitzer: Operating profit declined by approximately $100 million year over year with lower revenue being partially offset by improved factory utilization.

John William Pitzer: Op margin declined significantly quarter over quarter, driven by higher startup costs and the conclusion of the traditional packaging business impacting revenue.

John William Pitzer: The foundry P&L will remain challenged through the year and we expect operating margins to trough in 2024 and startup costs associated with five nodes in four years peak and the P&L absorbs an expected increase of roughly $2 billion in depreciation.

David A. Zinsner: Thank you, Pat, and good afternoon, everyone. We delivered solid results in the quarter, with revenue finishing in line and gross margin and EPS again beating guidance. Forward-looking demand signals in our core markets improved at a measured pace through the first quarter, and we expect to deliver full-year revenue and EPS growth in 2024, with the pace of revenue growth accelerating in the second half. First quarter revenue was $12.7 billion, up 9% year over year, and just above the midpoint of our guidance, with product segments performing in line with expectations.

John William Pitzer: Beyond 2024, as volume begins to shift towards leadership manufacturing nodes with a competitive cost structure scale improves including the return of compute tiles to internal process nodes and our efficiency actions begin to flow through the P&L, we expect to see rapid profitability improvement.

John William Pitzer: Mobile AD revenue of $239 million and an operating loss of $68 million were both down meaningfully year over year due to a well publicized drawdown of IQ customer inventory.

John William Pitzer: Mobile I reiterated full year guidance on their earnings call. This morning.

John William Pitzer: With the inventory digestion process on track financial results are expected to recover quickly.

John William Pitzer: Alterra revenue was $342 million down significantly year over year with results impacted by the industry wide inventory digestion following supply constraints in 2022 and 'twenty three.

David A. Zinsner: Intel products delivered 17% year-over-year growth, offset by inventory headwinds impacting Mobileye, Altera, and our 5G customers, as well as the sunsetting of several non-core lines of business, including the traditional packaging business within Intel Foundry. These non-core revenue headwinds drove a sequential decline of just over $1 billion, in line with our Q1 guidance. Gross margin was 45.1%, 60 basis points above guidance, and an EPS of $0.18. It beat guidance by $0.05 on operating spending discipline and strong sell-through of previously reserved inventory.

John William Pitzer: Alterra has $39 million operating loss is a result of lower revenue and spending associated with standing up alterra as a stand alone company.

John William Pitzer: We continue to expect Alterra to exit 2024 at a $2 billion revenue run rate as inventory positions normalize.

John William Pitzer: I want to acknowledge the hard work and focused execution across the company to transition our systems and processes to our new reporting structure. We're already seeing the results of the increased transparency catalyzing change and driving efficiencies across the company.

Speaker Change: Now turning to our Q2 guidance.

Speaker Change: We expect revenue of $12 five to $13 $5 billion in the second quarter with a mid point aligned to typical seasonal growth.

David A. Zinsner: Q1 operating cash flow was negative 1.2 billion dollars, Net CapEx was $5 billion, resulting in an adjusted free cash flow of negative $6.2 billion, and we paid dividends of a half a billion dollars in the quarter.

Speaker Change: At the midpoint of $13 billion, we expect gross margin of approximately 43, 5% with a tax rate of 13% and EPS of 10 cents all on a non-GAAP basis.

Speaker Change: We see the client and datacenter business roughly flat to Q1 results at the low end of seasonal.

David A. Zinsner: We expect Q1 to be the low point for adjusted free cash flow driven by seasonal factors, including the timing of annual bonus payments, along with upsides from larger capital offsets expected in the second half. As Pat mentioned, this is our first quarter reporting in the new operating segment. The revised structure creates a foundry relationship between manufacturing and our products groups, with Intel products purchasing wafers and services from Intel foundries at fair market prices.

Speaker Change: Q2 client revenue is constrained by wafer level assembly supply, which is impacting our ability to meet demand for our core ultra based AI Pcs.

Speaker Change: We do expect sequential growth from mobile I any acts and foundry services.

Speaker Change: As we look beyond Q2 guidance, we expect growth across all segments in the second half of the year led by improved demand for general purpose servers from both cloud and enterprise customers and increased core Altra assembly capacity to support a growing PC Tam driven by enterprise refresh and the AI P C.

Speaker Change: We should also see accelerating growth from our network and edge businesses, a return to growth for Alterra and a meaningful goudy ramp in the second half.

Speaker Change: Despite 2024, representing the peak for five node and four year driven factory startup costs, we expect roughly 200 basis points of FY 'twenty for gross margin improvement compared to FY2023.

David A. Zinsner: This quarter represents another important step in our transformation with increased transparency and accountability across all layers of the organization, which is already having a positive impact on decision making, efficiencies, and financial discipline. As I talk about our results, I'll categorize them between Intel products, Intel Foundry, and All Other, with the All Other category including the results of Mobileye and Altera. Additional detail can be found in our earnings release and SEC filing.

Speaker Change: Our net capital intensity forecast of mid thirties, as a percent of revenue across 2023 and 2024 in aggregate remains unchanged.

Speaker Change: With significant capital offsets expected to land in the second half of the year. We continue to expect approximately neutral 2024 adjusted free cash flow.

Speaker Change: While first half demand signals have been a bit weaker Q1 played out largely in line with our expectations. We achieved several important milestones towards our <unk> two point of vision and we're participating in a large and growing tam with encouraging market signals for the second half of the year and into 2025.

Speaker Change: By capturing margin at both the foundry level and the Fabulous product level, we have margin stacking advantage unique in the industry. We are three years into our transformation in 2024 represents the steepest part of the climb with five node and four year startup costs, peaking and the majority of our volume on pre EV process nodes with uncompetitive.

David A. Zinsner: Intel products revenue was $11.9 billion, up 17% year over year. The client business grew by more than 30% year over year with a strong product portfolio and share position and significantly improved customer inventory levels. The data center and AI business contributed 5% year-over-year growth driven by higher Xeon ASPs and improved enterprise demand, and EX revenue declined 8% year over year. As discussed last quarter, we saw significant declines in the 5G market, partially offset by approximately 10% year over year growth in our network and edge markets, which we expect to continue to recover through the year.

Speaker Change: I've economics.

Speaker Change: However, as we crest the hill and look toward the next few years, we have strong winds at our back and a clear path to achieving the mid and long term financial targets. We laid out earlier this month with that let me turn the call back over to John.

John William Pitzer: Thank you, Dave we will now transition to the Q&A portion of our call.

John William Pitzer: As a reminder, we request that each of you ask one question and a brief follow up where applicable so that we can get to as many of your questions as possible.

Speaker Change: With that Jonathan can we take the first question.

Speaker Change: Certainly and our first question comes from the line of Ross Seymore from Deutsche Bank. Your question. Please.

David A. Zinsner: Intel Products' operating profit expanded by more than $2.1 billion year-over-year, driven by higher revenue, better sell-through of reserved inventory, and operating spending discipline, resulting in an operating margin of approximately 28% in the quarter. Intel Foundry revenue was $4.4 billion, down 10% year-over-year on lower backend services and sample revenue, along with lower IMS tool sales. In addition, wafer volume was modestly higher in the quarter, with ASPs modestly down, driven by pricing for mature nodes.

Ross Clark Seymore: Hi, guys. Thanks for let me ask a question I guess for my first question I wanted to dive into the demand side of the equation what was weaker in the near term than you had expected.

Ross Clark Seymore: Much more importantly, it seems like the back half youre going to have double digit sequential growth in largely both quarters. So that's significantly above seasonal I know you went through some of the reasons at a high level, but can you dive a little bit deeper into what gives you that level of confidence in the second half ramp.

Speaker Change: Yeah, starting out sorry, Ross. Thanks for the question, Yeah, I'll have to say the market was weaker and you've seen that in a number of others that have commented as well so I'll say somewhat across the board a bit we've seen that oh cloud customers enterprise across Geos. So I'll, just say a bit weaker demand right and we'll just say at the low end of seasonality Q1 to Q2.

David A. Zinsner: Operating profit declined by approximately 100 million dollars year-over-year with lower revenue being partially offset by improved factory utilization. Operating margin declined significantly quarter over quarter driven by higher startup costs and the conclusion of the traditional packaging business impacting revenue.

Ross Clark Seymore: That we saw and as we go into the second half of the year you know, we're engaging deeply with our customers today, our OEM partners and we just see strength across the board right part of that is driven by our unique product position some of it driven by the market characteristics and client.

Ross Clark Seymore: See you in a second half windows upgrade cycle, we believe underway and core Ultra is hot you know and as we said we were even in Q2 were racing you know we're meeting all of our commitments, but not all of the upside requests that we're seeing from customers. So we see a very strong AI P C. Our outlook in the datacenter.

David A. Zinsner: The Foundry P&L will remain challenged through the year, and we expect operating margins to peak in 2024, as startup costs associated with five nodes in four years peak, and the P&L absorbs an expected increase of roughly $2 billion in depreciation. Beyond 2024, as volume begins to shift toward leadership manufacturing nodes with a competitive cost structure. Scale improves, including the return of compute tiles to internal process nodes, and our efficiency actions begin to flow through the P&L. We expect to see rapid profitability improvement. Mobileye revenue of $239 million dollars and an operating loss of 68 million dollars were both down meaningfully year over year due to a well-publicized drawdown of IQ customer inventory.

Speaker Change: We bring in our new products were seeing Asps increased a very healthy on a our datacenter products and with products like <unk> that we just went to production.

Speaker Change: <unk> with this week on Intel three overseeing improved product position us well for competitiveness, we have the half a billion of goudy right and most of that's a second half loaded.

Speaker Change: All other businesses coming out of inventory positions in the Alterra and mobilize and any actual all of those improved first half the second half as well and then incremental I'll just say Intel foundry.

Speaker Change: Every quarter from here till the decade ends we're seeing improvement in the Intel foundry and one by one we're seeing all of those business improvements both on a revenue and margin improvements over time. So we feel very comfortable that the second half outlook is quite strong for the business, our first half a bit weaker.

David A. Zinsner: Mobileye reiterated full-year guidance on their earnings call this morning. With the inventory digestion process on track, financial results are expected to recover quickly. Altera revenue was $342 million, down significantly year over year with results impacted by the industry-wide inventory digestion following supply constraints in 2022 and 23. Altera's $39 million operating loss is a result of lower revenue and spending associated with standing up Altera as a standalone company.

Speaker Change: But we think it's very understandable very explainable and our second half outlook that will be very comfortable for every business across until growing and a lot of momentum as we go into twenty-five Ross do you have a quick follow up.

Ross: I do maybe for Dave on the gross margin side.

Dave: Nice upside in the first quarter, but the drop in the second quarter is a little bit puzzling with revenues going up. So could you just talk a little bit about that second quarter drop and then the confidence in the rebound in the second half is that just revenue driven in the second half or what's the key metrics. There. Please yeah. Thanks Rod.

David A. Zinsner: We continue to expect Altera to exit 2024 at a $2 billion revenue run rate as inventory positions normalize. I want to acknowledge the hard work and focused execution across the company to transition our systems and processes to our new reporting structure. We're already seeing the results of increased transparency, catalyzing change and driving efficiencies across the company. Now, turning to our Q2 guidance. We expect revenue of $12.5 to $13.5 billion in the second quarter, with a midpoint aligned to typical seasonal growth. At the midpoint of $13 billion, we expect gross margin of approximately 43.5%, with a tax rate of 13%, and EPS of $0.10, all on a non-GAAP basis.

Speaker Change: Maybe start with Q1, because its somewhat explains Q2, we had better sell through.

Speaker Change: Product had even mentioned meteor like strength, you know that better sell through was on previously reserved.

Speaker Change: Material and so we just saw some upside in gross margins because of that we had a little bit more of a flattish plan between Q1 and Q2 in terms of how that would flow through and so it kind of pulled some of the benefit of gross margin improvement we've seen in Q2 and kind of pulled it into Q1. So that was part of it. The second part is as we talked about this year was going.

Speaker Change: A heavy year for startup costs for us.

Speaker Change: And it really shows up more meaningfully in the second quarter versus the first quarter and so that puts a little added pressure on gross margins.

Speaker Change: As you point out you know the the.

Speaker Change: Outside in the revenue we will have good fall through in.

Speaker Change: In Q3, and Q4 that will help lift the gross margins.

Speaker Change: From where they are today and then on top of that we will see some some areas, which have high gross margin, helping us like for example, mobile AG and we got quite a good gross margin for mobile ly and the strength that we will see through the year, there and products like that will also help drive drive better gross margins in the back half of the year.

David A. Zinsner: We see the client and data center business roughly flat to Q1 results at the low end of seasonal. Q2 client revenue is constrained by wafer level assembly supply, which is impacting our ability to meet demand for our core ultra-based AI PC. We do expect sequential growth from Mobileye, NEX, and Foundry services. As we look beyond Q2 guidance, we expect growth across all segments in the second half of the year, led by improved demand for general purpose servers from both cloud and enterprise customers and increased core ultra assembly capacity to support a growing PC TAM driven by enterprise refresh and the AIPC.

Speaker Change: As we look into 'twenty five I think we will have better gross margins and 25 than we had in 20 or so this should be a.

Speaker Change: An ongoing story for us on the gross margin front and as you know.

Speaker Change: We're driving to get a kind of mid fifties gross margins by the midpoint between now and 2030 and ultimately getting to 60%.

Speaker Change: Of course revenue will be part of that but I'll put a lot of that is within our control and things like that.

Speaker Change: 18, a wafer pricing going growing at three X the cost.

Speaker Change: Have a DNA that will help drive margin.

Speaker Change: Poland tiles as Pat mentioned internally is going to drive better gross margins for us overtime.

David A. Zinsner: We should also see accelerating growth from our network and edge businesses, a return to growth for Altera, and a meaningful Gaudi ramp in the second half. Furthermore, despite 2024 representing the peak for five node and four year-driven factory startup costs, we expect roughly 200 basis points of FY24 gross margin improvement compared to FY23. Our net capital intensity forecast of the mid-30s as a percent of revenue across 2023 and 2024 in aggregate remains unchanged.

Speaker Change: All of what we're doing in terms of re segmenting of the business is to drive better decision, making that better decision, making will translate into significant.

Speaker Change: Cost improvements for us, which should also be.

Speaker Change: Meaningful driver FERC for gross margins.

Speaker Change: Over time as well and of course, you know as Pat mentioned.

Speaker Change: We're happy to get the.

Speaker Change: The chips announcement.

Speaker Change: And of course that coupled with what we expect from the EU.

Speaker Change: And the investment tax credit will also be major tailwind on gross margins over a long term basis.

Speaker Change: Thank you Ross Jonathan can we have the next question. Please.

Speaker Change: Certainly and our next question comes from the line of Ben Reitzes from Melius. Your question. Please.

Benjamin Alexander Reitzes: Hey, guys. Thanks, a lot.

Speaker Change: <unk>.

Benjamin Alexander Reitzes: Chance to ask a question here.

David A. Zinsner: With significant capital offsets expected to land in the second half of the year, we continue to expect approximately neutral 2024 adjusted free cash flow. While first half demand signals have been a bit weaker, Q1 played out largely in line with our expectations. We achieved several important milestones towards our IDM 2.0 vision, and we're participating in a large and growing TAM with encouraging market signals for the second half of the year and into 2025.

Benjamin Alexander Reitzes: Pat can you talk a little bit more about servers.

Benjamin Alexander Reitzes: In the data center.

Benjamin Alexander Reitzes: There was there was talk of a bottom there.

Benjamin Alexander Reitzes: In previous discussions how do you see that kind of going throughout the year in light of your <unk> guidance.

Patrick P. Gelsinger: And whats the catalyst for the pick up there.

Speaker Change: Thanks, a lot.

Speaker Change: Thank you Ben and obviously as we look at our position in the datacenter up and say, we're stabilizing and with that we're improving our competitiveness. We also see as I mentioned in the comments that the asps are going up comfortably as well so socket fair.

Speaker Change: Fairly stable through the year, but the ASP per socket with increased core count improves our position.

David A. Zinsner: By capturing margin at both the foundry level and the fabulous product level, we have a margin stacking advantage unique in the industry. We are three years into our transformation, and 2024 represents the steepest part of the climb, with five-node and four-year startup costs peaking, and the majority of our volume on pre-EUV process nodes with uncompetitive economics. However, as we crest the hill and look toward the next few years, we have strong winds at our backs and a clear path to achieving the mid and long-term financial targets we laid out earlier this month. With that, I will turn the call back over to Jon.

Speaker Change: New products like our Sierra Forest or Z on Gen. Six product definitely gives us power performance capabilities. So overall, we're seeing a very healthy growth rate mid twenty's as we go through the year. We're also seeing increasing interest in the AI capabilities of Xeon <unk>.

Speaker Change: And we're winning head node positions and we're seeing a pretty extraordinary performance at our vision, we talked about the ability to now rub 70 billion parameter models directly on Xeon and these type of capability say for a lot of enterprise use cases E. On has a very strong product and as we laid.

Speaker Change: Out at vision, the ability for Xeon, plus goudy to start positioning. This open platform for enterprise AI is a very strong position for us. So overall, we feel like we're on a solid trajectory.

John William Pitzer: Thank you, Dave. We will now transition to the Q&A portion of our call. As a reminder, we request that each of you ask one question and a brief follow-up where applicable so that we can get to as many of your questions as possible. With that said, Jonathan, can we take the first question?

Speaker Change: Into a market that even though it's been dominated by the Gen. AI theme as enterprises are Oems and Odm's are communicating there's a growth year and the servers and we now have a much better product position, improving asp's and a better overall positioning in AI for a lot of these use cases, where.

Operator: Certainly. And our first question comes from the line of Ross Seymour from Deutsche Bank. Your question, please.

Speaker Change: There, it's xeon CPU plus GPU an accelerator.

Speaker Change: Ben do you have a quick follow up.

Ben: Yeah. Thanks, Tom can.

Ross Clark Seymore: Hi guys, thanks for letting me ask a question. I guess for my first question, I wanted to dive into the demand side of the equation. What was weaker in the near term than you had expected? And much more importantly, it seems like in the back half, you're going to have double digit sequential growth in largely both quarters. So that's significantly above seasonal. I know you went through some of the reasons at a high level, but can you dive a little bit deeper into what gives you that level of confidence in the second half RAMP? Yeah, starting out Ross, thanks for the question. You know, I'll just say the market was weaker. And you've seen that in a number of others that have commented as well.

Ben: Can we just double click also on goudy $500 million in the back half of the year.

Ben: I think you've previously talked about a couple of billion in the pipeline what does that say about your yield to revenue on an annualized basis with AI and is there an update on the on the pipeline and your confidence there heading into 2025 on the accelerator front.

Speaker Change: Thanks, Brendan obviously pipeline converting into revenue revenue is much more meaningful ones, who said greater than 500 million for.

Ben: For the year, and that's obviously quarter on quarter accelerating rapidly, which also gives a great indication.

Ben: For the business and 25.

Ben: As well at our vision event, we had over 20 customers publicly describing their embrace of goudy two in goudy, three and I was super pleased to see the breadth of those customers.

Patrick P. Gelsinger: So I'll say somewhat across the board a bit, you know, we've seen that, you know, cloud customers enterprise across geography. So I'll just say a bit weaker demand, right? And we'll just say at the low end of seasonality, Q1 to Q2, that we saw. And as we go into the second half of the year, you know, we're engaging deeply with our customers today, our OEM partners, and we just see strength across the board. Right?

Ben: Does the csp's like a neighbor and Ola and IBM cloud it was Isps like a seeker, alright, coming onboard, but maybe most importantly enterprise customers and ultimately.

Ben: AI training, okay, creating models, but enterprises are going to use models, and that's where our tcl benefits the ability for us to action customers' data and their enterprise environment is so powerful and you know customers like.

Patrick P. Gelsinger: Part of that is driven by our unique product position. Some of it's driven by the market characteristics and client, you know, AIPC, and a second half Windows upgrade cycle, we believe, is underway, and core ultra is hot. You know, and as we said, even in Q2, we're racing. We're meeting all of our commitments, but not all of the upside requests that we're seeing from customers. So we see a very strong AIPC outlook.

Ben: Bosch were coming forward and Roche to be able to demonstrate the true benefits of goudy and Xeon plus goudy. The roadmap is in good shape. The goudy three Falcon shores and twenty-five we're also seeing that the industry once open alternatives and we announced our AI.

Ben: Networking initiative Ultra Ethernet consortium standardizing on scale up and scale out to Ethernet, increasing our work for abstract levels of AI development with Pi torch and the embrace of the open platform for enterprise AI that we rolled out all of those.

Patrick P. Gelsinger: You know, in the data center, you know, as we bring in our new products, we're seeing ASPs increase very healthily on our data center products, and with products like Sierra forest that we just went to production with this week on Intel three, you know, we're seeing improved product position as well for competitiveness. So we feel very comfortable that the second half outlook is quite strong for the business, the first half a bit weaker, but we think it's very understandable, very explainable, and a second half outlook that will be very comfortable for every business across Intel growing and with a lot of momentum as we go into the twenty five. Ross, do you have a quick follow-up? I do,

Ben: Together the industry is looking for open enterprise alternatives for generative AI deployment, and then tells are quite well positioned and we're starting to really see that uptake in our accelerator ANZ on pipeline now thanks, Ben Jonathan can we have the next question. Please.

Ben: Certainly.

Ben: And our next question comes from the line of Joe Moore from Morgan Stanley. Your question. Please.

Joseph Lawrence Moore: Great. Thank you I Wonder if you could talk to the server roadmap, but it sounds like you are confirming the timeframe for both Sierra for US in Grand Rapids can you talk about.

Joseph Lawrence Moore: As their demand for the Sierra Forest product as well do you expect that to be bifurcated, where you see demand for both and then how quickly might you see those products come to volume.

Speaker Change: Yes, so sure forests are first the xeon six product on Intel three and Super proud of right now we have a leadership process technology back on American soil for the first time in a decade. So this is really exciting and CFR high core count 144 288.

David A. Zinsner: Maybe for Dave on the gross margin side, nice upside in the first quarter, but the drop in the second quarter is a little bit puzzling with revenues going up. So could you just talk a little bit about that second quarter drop and then the confidence in the rebound in the second half? Is that just revenue driven in the second half? Or what are the key metrics there, please? Yeah, that'll be good. Thanks, Russ. Maybe start with Q1, because it somewhat explains Q2.

Speaker Change: Core product very focused on power performance efficiency, and we do see a good pipeline of customers and a good pipeline of I'll say socket win backs because the area power performance has been an area that we've been carrying a deficit being on an older node and now that we're on leadership nodes we definitely.

David A. Zinsner: We had better sell through of product; Pat even mentioned Meteor Lake strengths, you know, that better sell through was on previously reserved material, and so we just saw some upside in gross margins because of that. We had a little bit more of a flattish plan between Q1 and Q2 in terms of how that would flow through. And so it kind of pulled some of the benefit of gross margin improvement we would have seen in Q2 and kind of pulled it into Q1, so that was part of it.

Speaker Change: These share gains for that of course granite Rapids, which will come in Q3. These xeon six P. Core part is much more of the bread and butter of the Xeon family. So we do see that being a stronger element to the portfolio. This year as you know we haven't been participating in the power performance sockets as.

Speaker Change: <unk> lately and Sierra Forest gives us that tool. So it really is a one two punch as we've described and with granite coming in Q3, and a volume ramp on Intel three with that we feel we have a very good product line next year is Clearwater forest. The second generation of the core part the leadership position on <unk>.

David A. Zinsner: The second part is, as we talked about, this year was going to be a heavy year for startup costs for us, and it really shows up more meaningfully in the second quarter versus the first quarter, and so that puts a little added pressure on gross margins.

Speaker Change: <unk>.

Speaker Change: The server market are very strong.

Speaker Change: Product for Us your unquestioned leadership in power performance. So that I believe that's a great opportunity for us to gain share again in the datacenter. So the roadmap is healthy the execution.

David A. Zinsner: As you point out, you know, the upside in revenue, we will have a good fall through in Q3 and Q4 that will help lift the gross margins from where they are today. And then on top of that, you know, we'll see some areas which have high gross margins helping us, like, for example, Mobileye. We get a good gross margin from Mobileye, and the strength that we'll see through the year there and products like that, you know, will also help drive better gross margins in the back half of the year.

Speaker Change: Is strong and we're rebuilding customer trust, they're looking at US now and saying Oh Intel is back and we're quite excited by that and then beyond that building volume building the confidence and the momentum for traditional use cases as well as the AI use cases as I just referred on Ben's question as well Jody.

Speaker Change: You have a quick follow up.

Jody: Yes, I do think on the foundry webinar, you had sort of talked about Intel three volume being kind of more of an inflection next year.

David A. Zinsner: As we look into 25, I think we'll have better gross margins in 25 than we had in 24, so this should be an ongoing story for us on the gross margin fund. And, as you know, we're driving to get, you know, kind of mid-50s gross margins by the midpoint between now and 2030 and ultimately get to 60%. You know, of course, revenue will be part of that, but a lot of that is within our control.

Speaker Change: Does that mean it within server that these until three products are sort of.

Jody: Get to volume crossover at some point next year or could we see.

Speaker Change: Obviously, it's in the leadership you just talked about is important.

Speaker Change: What's kind of keeping you from getting those products ramping in the second half.

Speaker Change: Yeah. Thank you and you know servers always just take a while to ramp customers bring them in they qualify them they test it.

Speaker Change: Because they are generally putting these things at scale. So their system adoption cycle for our server products and you know the numbers that I'm holding my team accountable for our some of the most aggressive volume ramps that we've ever achieved on a server products. So we're driving them very hard you know that said in terms of the total wafer <unk>.

David A. Zinsner: It's, you know, things like 18A wafer pricing, growing at 3x the cost of 18A, that will help drive margins. The pull-in of tiles, as Pat mentioned, internally, is going to drive better gross margins for us over time. All of what we're doing in terms of re-segmenting the business is to drive better decision-making.

Speaker Change: <unk> this year right, it's dominated by Intel seven and the Intel for and three Ray for volumes become much more prominent next year and that's what I was communicating on the webinar, but as we go through the year Youre going to start to see the wafer ASP pickup as a result of Intel for three ramping it much better.

David A. Zinsner: That better decision-making will translate into significant cost improvements for us, which should also be a meaningful driver for gross margins over time as well. And, of course, you know, as Pat mentioned, we're happy to get the CHIPS announcement out, and, of course, that, coupled with what we expect from the EU and the investment tax credit, will also be major tailwinds on gross margins over a long-term basis. Thank you, Ross.

Speaker Change: P points better margins associated with those and they will become much more prominent in the foundry P&L next year, but those are these are production ramps that are already underway on Intel three the Intel for ramp already underway, we began that a second half of last year. So these wafer ramps are underway with.

Operator: Jonathan, can we have the next question, please? Certainly. And our next question comes from the line of Ben Reitzes from Melius. Your question, please. Hey guys, thanks a lot. I appreciate the chance to ask a question here. Hey, Pat, can you talk a little bit more about servers in the data center? You know, there was there was talk of a bottom there in the previous discussion. How do you see that kind of going throughout the year in light of your 2Q guidance? And what's the catalyst for the pickup there?

Speaker Change: Volume production volume products that we're bringing to the marketplace very confident in our ability and then of course 18, a as we deliver the PDK for that in Q2, the 1.0 PDK and we'll begin the volume ramps on Clearwater far some Panther Lake in the first half of next year for those products are coming out.

Speaker Change: So we feel very comfortable with that overall picture that we've laid out so thank you Joe Jonathan.

Speaker Change: Jonathan can we have the next question please.

Speaker Change: Certainly.

Speaker Change: And our next question comes from the line of Vijay Rakesh from Mizuho Securities. Your question. Please.

Benjamin Alexander Reitzes: Thanks a lot. You know, gives us power performance capabilities. So overall, we're seeing a very healthy growth rate, mid 20s as we go through the year. We're also seeing increasing interest in the AI capabilities of Xeon, and we win head node positions.

Vijay Raghavan Rakesh: Hey, Matt just a quick question on Grand Rapids.

Vijay Raghavan Rakesh: Any.

Vijay Raghavan Rakesh: Thoughts on the timing and do you expect to regain some computing Shan associated with those ramps.

Matt: Yeah, Thanks, Vijay and building a little bit on the last question Grant Rapids will come in Q3 of this year one.

Patrick P. Gelsinger: And we're seeing pretty extraordinary performance. At Vision, we talked about the ability to now run 70 billion parameter models directly on Xeon. So overall, we feel like we're on a solid trajectory into a market that even though it's been dominated by the Gen AI theme, as enterprises, our OEMs, and ODMs are communicating, you know, there's growth here in the servers. And we now have a much better product position, improving ASPs, and a better overall positioning and AI for a lot of these use cases where it's Xeon CPU Ben, do you have a quick follow-up? Yeah, thanks. Can we just double click also on Gaudi?

Matt: One will have the production release of that product a famous.

Speaker Change: Just take some time for customers to get comfortable qualify.

Vijay: Those are products to marketplace, but you'll see are forest Grand Rapids. These are much more competitive power performance products on Intel free so we see them stabilizing in them, giving us opportunity to regain share and as we go into next year, we expect that we're regaining share as.

Vijay: As we end this year and go into next year. These are great products, and we're gonna be a ramping them very aggressively with our customers.

Vijay: Jay do you have a follow up.

Jay: Yeah. Thanks, just on the GPU side.

Jay: Any thoughts on Falcon insurers.

Jay: Any any preliminary takes on that how do you see that building out into 'twenty five.

Jay: Yeah, and Goudy three announcement this quarter extremely well received and as I mentioned already 20, plus customers for goudy to free. So we're seeing that build obviously falcon shores will build on that momentum will be bringing that late next year when falcon sure. When we combine the great systolic performance.

Benjamin Alexander Reitzes: $500 million in the back half of the year. I think you previously talked about a couple billion in the pipeline. What does that say about, you know, your yield to revenue on an annualized basis with AI? And is there an update on the pipeline and your confidence there heading into 2025 on the accelerator front? Yeah, thanks, Ben. And obviously, you know, pipeline converting into revenue is much more meaningful. And, as you said, greater than $500 million for the year.

Jay: Of Goudy free with a fully programmable architecture and all of that comes together with our Falcon shores and then we have a rich you know a very aggressive cadence of Falcon shores products. Following that we also added the goudy three a pcie card too with this use case of Xeon, plus an accelerator or goudy acts.

Jay: Celebrate or is getting very good response from our customers as well so we'll be bringing that out later this year, but the real story is delivering the tcl valued delivering the enterprise use cases on Falcon shores will just build on the momentum that we're establishing with goudy two and three we also described the customers coming on the <unk>.

Patrick P. Gelsinger: And that's obviously quarter on quarter accelerating rapidly, which also gives a great indication for the business in 2025 as well. You know, at our vision event, we had over 20 customers publicly describing, you know, their embrace of Gaudi2 and Gaudi3. And I was super pleased to see the breadth of those customers. You know, it was CSPs like Naver and Ola and IBM Cloud. It was ISVs like Seeker, right, coming on board.

Jay: Intel developer cloud, where we're getting these products very early in their life available for developers and enterprise customers.

Jay: Customers like seeker now our biggest the Intel developer cloud win to date.

Jay: Seeing the benefits, but the bigger story is how do we unleash the data assets of our enterprise customers and that's things like the open platform for enterprise AI that we launched open summit. So overall a lot of good things happening.

Matt: To unleash the Gen AI cycle for Intel and of course right now as we're doing this.

Matt: It's a hot market, we're participating across all of our segments, whether that's client edge enterprise or a foundry opportunities as well delivering AI everywhere.

Patrick P. Gelsinger: But maybe most importantly, enterprise customers and, ultimately, Gen AI, training, okay, creating models, but enterprises are going to use models. And that's where our TCO benefits, the ability for us to act on customers' data in their enterprise environment is so powerful. And, you know, customers like Bosch and Roche are coming forward to be able to demonstrate the true benefits of Gaudi and Xeon plus Gaudi. The roadmap is in good shape, the Gaudi3, FalconShores in 2025.

Speaker Change: Jonathan could we have the next caller please.

Jonathan: Certainly and our next question comes from the line of Timothy Arcuri from UBS Securities. Your question. Please.

Timothy Michael Arcuri: Thanks, a lot Dave I also wanted to ask about gross margin you did seem to be better.

Timothy Michael Arcuri: Each year, but it is really we.

Timothy Michael Arcuri: Whipping around a lot and it looks like you sort of have to exit this year at 48, or you know, maybe a little higher which is already well above the 40 55.

Timothy Michael Arcuri: 45, five that you'll be at this year, because youre guiding it up to 100 basis points. So I know you don't want to guide next year, but if you could even qualitatively help us can you sustain those margins at that level and I ask because last year, you sort of exited at 49% and then things crashed here during the first half of the year. So can you help us just think about what some.

Patrick P. Gelsinger: We're also seeing that the industry wants open alternatives. And we announced our AI networking initiative, Ultra Ethernet Consortium, standardizing on scale up and scale out to Ethernet, increasing work for abstract levels of AI development with PyTorch, and the embrace of the open platform for enterprise AI, you know, that we rolled out. All of those taken together, the industry is looking for open enterprise alternatives for generative AI deployment, and Intel's quite well positioned. And we're starting to really see that uptake in our Accelerator and Xeon pipeline now. Thanks, Ben.

Timothy Michael Arcuri: Some of the puts and takes will be next year off of that high base that youre going to exit this year at.

Timothy Michael Arcuri: Yeah.

Speaker Change: Good questions.

Speaker Change: There'll be additional startup costs next year, we do think it on a on a percent of revenue basis. It will be lower so that should help lift the margins of course, the expectation would be we see growth in revenue that also should help.

Speaker Change: On top of that we.

Speaker Change: We already are seeing good decision, making.

Speaker Change: And changing decision, making around how we operate now under this new.

Speaker Change: Different business structure that we have at this point.

Speaker Change: A lot of that stuff doesn't actually show up in the P&L with all these decisions get made this year, but a lot of it decisions made.

Speaker Change: Lot of them benefits to those decisions don't show up until next year and the year. After so we should see some benefit.

Speaker Change: From that as well the other thing that kind of has with this our margins around a bit more over the last few years has been this notion where we reserve material all the way up until the <unk>, Pat just mentioned that <unk>. So ordinarily we would take a whole bunch of reserves on Sierra Forest and then we.

Operator: Jonathan, can we have the next question, please? Certainly. And our next question comes from the line of Joe Moore from Morgan Stanley. Your question, please. Oh great, thank you.

Speaker Change: Would release them as we.

Speaker Change: As we started shipping beyond the <unk> date, we won't be doing that going forward so that should help.

Joseph Lawrence Moore: I wonder if you could talk to the server roadmap. It sounds like you're confirming the time frame for both Sierra Forest and Granite Rapids. Can you talk about, you know, is there demand for the Sierra Forest product as well? Do you expect that to be bifurcated, where you see demand for both? And then, you know, how quickly we might see those products come to volume? Yeah, so Sierra Forest, our first Xeon 6 product on Intel 3, and we're super proud, right? Now we have leadership process technology back on American soil for the first time in a decade. This is really exciting.

Speaker Change: Just the volatility of the gross margin so it would be more a function of revenue.

Speaker Change: Revenue growth spending profile in the Fabs.

Speaker Change: <unk> costs that we'd have in the mix.

Speaker Change: Tim do you have a follow up question.

I do I do so I wanted to ask about server CPU share March I think the assumption for March was that service share was going to be pretty flat. So the question is what is that the case and it sounds you sound, maybe a little bit less optimistic if I'm sort of reading between the lines on share into the back half of the year just given how long. It takes these things to sort of impact your share. So so your bullish outlook and the.

Speaker Change: Second half of the year it sounds like it's more market driven versus share gain can you just clarify that thanks.

Patrick P. Gelsinger: And Sierra Forest, a high core count, 144, 288 core product, very focused on power, performance, efficiency, and we do see a good pipeline of customers and a good pipeline of, I'll say, socket windbacks because the area of power performance has been an area that we've been carrying a deficit in, being on an older node. And now that we're on leadership nodes, we definitely see share gains for that. Of course, Granite Rapids, which will come in Q3, the Xeon 6 P-core part is much more the bread and butter of the Xeon family. So we do see that being a stronger element in the portfolio this year, as we haven't been participating in the power performance sockets as aggressively lately. And Sierra Forest gives us that tool.

Speaker Change: Well overall I can say.

Speaker Change: Hard to predict exactly how these will play out in light of the overall Gen. AI surge that we've seen that said the products are good right. We came into the year, improving our market share position.

Speaker Change: The first quarter of the year. It does take time to ramp these new products, but better products rebuilding trust with our customers that we're delivering on these are now hitting the what we would call the early.

Patrick P. Gelsinger: And of the cycles on these new products is giving us a lot of interest with the market and the customer new use cases.

Speaker Change: <unk> also demonstrated you know 70 billion parameter model running natively on Grand.

Speaker Change: Granite rapid set our vision event all of these should make us more and more confident in our business execution. We're also seeing that.

Speaker Change: We don't need right Osaka count to increase the Asps are going up with the core counts on our new leadership products as.

Patrick P. Gelsinger: So it really is a one-two punch, as we've described. And with Granite coming in Q3 and a volume ramp on Intel 3 with that, we feel we have a very good product line. Next year is Clearwater Forest, the second generation of the E-core part, the leadership position on 18a in the server market, a very strong product for us, with unquestioned leadership and power performance. So I believe that's a great opportunity for us to gain share again in the data center. So the roadmap is healthy, the execution is strong, and we're rebuilding customer trust. They're looking at us now and saying, "Oh, Intel is back."

Speaker Change: As well so all of those and a fairly.

Patrick P. Gelsinger: Uh huh.

Speaker Change: The mystic view that we're getting from our Oems and our channel partners for their view of upgrade cycles are building momentum from customers across the industry. We feel very comfortable that we're stabilizing our position we have in improving our roadmap and we do expect to see share gains as we ended the year and go into 'twenty five.

Speaker Change: Jonathan can we have the next caller please.

Jonathan: Certainly our next question comes from the line of <unk> <unk> from Raymond James Your question. Please.

Raymond James: Thank you. My question is on the client side I think Pat you mentioned something about supply constraints impacting your <unk> outlook.

Jonathan: If you could provide some color as to what's causing those supply constraints and when do you expect those to ease as we go into the second half and then you know in terms of your AI P. CS I think you've been talking about $40 million or so.

Patrick P. Gelsinger: And then beyond that, building the volume, building the confidence, and the momentum for traditional use cases, as well as the AI use cases, as I just mentioned in Ben's question as well. Joe, do you have a quick follow-up? Yeah, I do.

Jonathan: So potentially shipping this year could you maybe put that into some context as to how it actually helps Intel is it just higher ASP is it higher margin I would think that you know these products also come with higher costs. So I just want to understand how we should think about the benefit to Intel as with these as they say.

Joseph Lawrence Moore: Thank you. In the Foundry webinar, you had sort of talked about Intel 3.0 volume being kind of more of an inflection next year. Does that mean that within servers, these Intel 3.0 products are sort of, you know, get to volume crossover kind of at some point next year? Or could we see, obviously, the leadership you just talked about is important, what's kind of keeping you from getting those products ramping in the second half? Yeah, Joe. Thank you.

Speaker Change: AIP shrimp, yeah. Thank you and overall, we are as we've seen.

Speaker Change: This is a hot product the AIP C category and we declared this as we finished last year and we've just been incremented up our AIP C or the core ultra product volumes throughout we're meeting our customer commitments that we've had but they've come back and ask for upside on multiple occasions.

Patrick P. Gelsinger: And, you know, servers always just take a while to ramp up. You know, they always bring them in, they qualify them, they test them, you know, because they're generally putting these things at scale. So there's just an adoption cycle for server products. And, you know, the numbers that I'm holding my team accountable for are some of the most aggressive volume ramps that we've ever achieved for server products. So we're driving them very hard.

Joseph Lawrence Moore: Different markets and we are racing to catch up to those upside our request and the constraint has been on the backend wafer level Assembly one of the new capabilities that are part of Meteor Lake and our subsequent client products. So with that we're working to catch up.

Patrick P. Gelsinger: And build more wafer level assembly capacity to meet those.

Speaker Change: How does it help us hey, it's a new category and you know that new category products will generally be at higher Asp's. As your question suggests but we also think it's new use cases, and new use cases over time create a larger tam. It creates an upgrade cycle that we're seeing or create new applications and we're seeing essentially.

Patrick P. Gelsinger: You know, that said, in terms of the total wafer volume this year, right, you know, it's dominated by Intel 7. And the Intel 4 and 3 wafer volumes will become much more prominent next year. And that's what I was communicating in the webinar.

Speaker Change: Every I S V Aif hiring their app, whether it's the communications capabilities of zoom and team for translation and contextual ovation, whether its new security capabilities with crowd strike and others, finding new ways to do security on the client or its way over it.

Patrick P. Gelsinger: But as we go through the year, you're going to start to see the wafer ASPs pick up as a result of Intel 4.3 ramping and much better ASP points, better margins associated with those, and they'll become much more prominent in the Foundry P&L next year. But these are production ramps that are already underway on Intel 3. The Intel 4 ramp is already underway; we began that second half of last year. So these wafer ramps are underway with volume production, volume products that we're bringing to the marketplace, very confident in our ability.

Speaker Change: Creators and gamers taken advantage of this so we see that every PC is going to become an AI PC overtime and when you have that kind of cycle underway shunyi everybody starts to say Oh, how do I upgrade my platforms and we even demonstrated how we're using AI P. C. In the Intel factories now.

Patrick P. Gelsinger: To improve yields and performance inside of our own factory and as I've described but it's like a century no moment right, where some treat all ushered in Wi Fi at scale, we see be a IPC ushering in these new use cases at scale and that is going to be great for the industry, but as the unquestioned market leader right the lead.

Patrick P. Gelsinger: And then, of course, 18A, as we deliver the PDK for that in Q2, the 1.0 PDK, and we'll begin the volume ramps on Clearwater Farms and Panther Lake in the first half of next year for those products coming out. So we feel very comfortable with that overall picture that we've laid out. Thank you, Joe.

Speaker Change: And the category creation, we think we're gonna deferential benefit from the emergence of the AIP see trending do you have a follow up.

Operator: Jonathan, can we have the next question, please? And our next question comes from the line of Vijay Rakesh from Mizzou Security. Is your question, please? Yeah, hey Pat, just a quick question on Grand Rapids.

Speaker Change: Yes, John Thank you and I guess my other question is on the other bucket.

Speaker Change: I think Dave you kind of talked about altera potentially exiting the year at a 2 billion run rate from from current levels. That's a pretty steep ramp and also I think you said next growth will accelerate over the next couple of quarters. So given you know the telecom weakness out there that we're seeing I'm just curious as to what's giving you that visibility or confidence I mean is this driven by some new <unk>.

Vijay Raghavan Rakesh: Any thoughts on the timing and do you expect to regain some computing and server share there with those ramps? Yeah, thanks, Vijay. And building a little bit on the last question, Granite Rapids, you know, will come in Q3 of this year when we'll have the production release of that product. Same as, it will take some time for customers to get comfortable, qualify, and bring those products to the marketplace. But, you know, Sierra Forest, Granite Rapids, these are much more competitive power performance products on Intel 3.

Speaker Change: Products or is it just the market recovering any color would be helpful. Thank you yeah I mean on.

Speaker Change: On Alterra.

Speaker Change: And this is not unprecedented when you see a massive.

Speaker Change: Work down of inventory of course that significantly impacts the revenue, but as that normalizes. Then you start shipping to end consumption. So it's actually a pretty easy lift to get to to get to the $2 billion Mark once we're through.

Patrick P. Gelsinger: So we see them stabilizing and then giving us an opportunity to regain share. And as we go into the next year, we expect that we're regaining share as we end this year and go into next year. These are great products, and we're going to be ranking them very aggressively with our customers. Vijay, do you have a follow-up? Yeah, thanks.

Vijay: The inventory.

Speaker Change: Digestion period, so I think we have high confidence on that and others have commented on their inventory cycles as well on the FPGA category. We have good products in the second half of the year with <unk> starting to ramp as well.

Vijay Raghavan Rakesh: Just on the GPU side, on the AI side, any thoughts on Falcon Shores? Any preliminary takes on that? How do you see that building out into 2025? Thanks.

Speaker Change: And then on any X.

Speaker Change: Of course that business also has gone through its own inventory adjustments that we have good.

Speaker Change: Competence around that reversing which will help drive strength and then some of the products that are more tailored to the AI space of course, we will see like FX for example will see strength through the year and so that should drive.

Patrick P. Gelsinger: Yeah, and, you know, Gaudi3 announcement this quarter was extremely well received. And, as I mentioned already, 20 plus customers for Gaudi2,3. So we're seeing that build.

Patrick P. Gelsinger: Good revenue growth through the year as well and also when any ex the AI networking products are strong or ICU products, we're seeing a strength in that area. So its inventory as well as product even though as your question suggests the communications sector and the service providers that is weaker through the year, but pretty much every aspect of.

Patrick P. Gelsinger: Obviously, Falcon Shores will build on that momentum. You know, we'll be bringing that late next year when Falcon Shores, when we combine the great systolic performance of Gaudi3 with a fully programmable architecture, and all of that comes together with Falcon Shores. And then we have a rich, you know, a very aggressive cadence of Falcon Shores products following that. We have also added the Gaudi3 PCIe card to it. This use case of Xeon plus an accelerator or Gaudi accelerators is getting a very good response from customers as well.

Patrick P. Gelsinger: Their business in the edge AI as Dave said is seeing strength as we go into the second half of the year and into 'twenty five.

Speaker Change: Thanks for any Jonathan can we have the next caller. Please.

Patrick P. Gelsinger: Certainly our next question comes from the line of Vivek Arya from Bank of America Securities.

Vivek Arya: Your question please.

Vivek Arya: Thanks for taking my question just a conceptual question in our Gen. AI server with accelerators, how important is the roll off of specific CPU or does it easily interchangeable between yours or AMD or arms.

Patrick P. Gelsinger: So we'll be bringing that out later this year. But the real story is, you know, delivering the TCO value, delivering the enterprise use cases, you know, and Falcon Shores will just build on the momentum that we're establishing with Gaudi2 and 3. We also described customers coming to the Intel Developer Cloud, you know, where we're getting these products very early in their life available for developers and enterprise customers, you know, and customers like Seeker. Now, our biggest Intel Developer Cloud win to date is seeing the benefits. But the bigger story is, how do we unleash the data assets of our enterprise customers?

Vivek Arya: I guess the question is that you know.

Patrick P. Gelsinger: If most of the workload is being done on the accelerated or does it really matter a bit CPU I use and can that move towards anyhow. So essentially shrink the Tam for <unk> six server Cpus because number of your cloud customers have announced arm based.

Speaker Change: Another alternative so I'm just curious how do you think about that conversion over to Jenny I and what that means for X 86 server CPU with them going forward.

Speaker Change: Thanks, Vivek and we spoke at our vision.

Speaker Change: Vision event about use cases, like rag retrieval augment to generation, where the L. O lemons might run on the accelerator, but all of the real time data all of the databases you know all of the embedding is running on the CPU. So you're seeing all of these data environments, which are already running on xeon.

Operator: And that's things like the open platform for enterprise AI that we launched at Open Summit. So overall, a lot of good things are happening, you know, to unleash the Gen AI cycle for Intel. And of course, right, you know, as we're doing this, AI is a hot market. We're participating across all of our segments, you know, whether that's client, edge, enterprise, or our foundry opportunities as well, delivering AI everywhere. Thanks, Vijay. Jonathan, can we have the next caller, please?

Speaker Change: And X 86, being augmented with AI capabilities to feed and L. L M and I believe this whole area of Rag becomes one of the primary use cases are for our enterprise AI and if you think about it on a L. L M might be trade.

Operator: With one two year old data right, but many of the business processes and environment are real time, right, you're not going to be retraining constantly and that's where this area of the front end database becomes very prominent all of those databases run on X 86 today all of them are being enhanced for use cases like.

Timothy Michael Arcuri: Certainly. And our next question comes from the line of Timothy Akari from UBS Securities. Your question, please. Thanks a lot, Dave. I also wanted to ask about gross margin. You did say it'd be better next year, but it is really, you know, whipping around a lot.

Speaker Change: Rag and that's why we see this unlock occurring because of the data sets on Prem the datasets in the X 86 database environments that are all being enhanced against these use cases and as we've shown we don't need accelerators in some cases, we can run a 70 billion parameter model natively on xeon with extraordinary.

David A. Zinsner: And it looks like you sort of have to exit this year at 48 or, you know, maybe a little higher, which is already well above the, you know, 45-5 that you'll be at this year because you're guiding it up to 100 basis points. So I know you don't want to guide next year, but if you can even qualitatively help us, can you sustain those margins at that level? And, you know, I ask because last year you sort of, you know, exited at 49% and then things crashed here during the first half of the year. So can you help us just think about what some of the puts and takes will be next year off of that high base that you're going to exit this year at? Yeah, a good question.

Speaker Change: C O value for customers and Furthermore, all of the I T environments that enterprises run today. They have the security they have the networking or they have the management technologies in place they don't need to upgrade or change those from any of those use cases, so we see a lot of opportunity here to build on the enterprise.

Speaker Change: Asset that we have with the Z on a franchise, but we're also going to be aggressively augmenting that were commonly the head node even when it's other accelerators are being used or other gpus being used and as we've described xeon plus goudy, we think it's going to be a very powerful opportunity for enterprise.

David A. Zinsner: So, um, you know, there'll be additional startup costs next year we do think it on a on a percent of revenue basis it will be lower so that should help lift the margins of course you know the expectation was would be we see growth in revenue that also should help on top of that we you know we already are seeing good decision making and changing decision making around how we operate now under this new different business structure that we have at this point a lot of that stuff doesn't actually show up in the P&L that all these decisions get made this year but a lot of the decisions made or sorry a lot of the benefits to those decisions don't show up until next year and the year after so we should see some benefit from that as well the other thing that kind of has whipped this our margins around a bit more you know over the last few years has been this this notion where we reserve material all the way up until the PRQ Pat just mentioned that CR4 is just PRQ so ordinarily we take a whole bunch of reserves on Sierra Forest and then we would release them as we as we started shipping beyond the PRQ date we won't be doing that going forward so that should help adjust the the volatility of the gross margin so it'll be more a function of revenue growth spending profile in the fabs startup costs that we'd have and and the myth. Tim, do you have a follow up question? I do. I do.

Speaker Change: So many of those cases, we see this as a market lift new applications, new use cases, new energy coming to the enterprise AI, you'll hear we are in a year 23 of the cloud and while 60% of the workload has moved to the cloud over 80% of the data remains on Prem under the control of the enterprise much of that under.

Speaker Change: Utilized.

Businesses today, that's what <unk> is going to unlock a lot of that is going to happen through the <unk> six CPU and we see a powerful cycle emerging and I would just point you back to what we described that vision. This was a great event and many customers are seeing that value. Today is that do you have a quick follow up yes. Thank you.

Speaker Change: Maybe one for Dave on the but then the potential operating loss kind of how do we model that for the foundry business. So let's say if I exclude the 2 billion in depreciation had been but I'm, assuming it's almost all going to your foundry business. What is the right way to think about foundry operating.

Speaker Change: Income or loss.

Speaker Change: And how much of external foundry revenue are you expecting this year. Thank you.

Tim: Yes, good question.

Speaker Change: Operating losses will pick up we roughly we're at like two four ish in the first quarter. It will pick up in the second quarter, given the startup costs are increasing.

Speaker Change: And I would say roughly in that range for the remainder of the year.

Tim: And then what would I, but I said before is we see that improving then going into 'twenty five and we know with Pat's given me the order he wants to see every quarter some improvement in.

Tim: And the operating loss ultimately to get to breakeven midway.

Timothy Michael Arcuri: Yes. So I want to ask about server CPU share. For March, I think the assumption was that server share was going to be pretty flat. So the question is, was that the case?

Speaker Change: Midway through the point between now and 2030 and I think that is a.

Speaker Change: Very achievable I'm, sorry, what was your second question.

Speaker Change: If he loses we might exactly used alone.

Tim: We've moved on.

Speaker Change: Why don't we go to the next caller Jonathan.

Jonathan: Certainly our next question one moment.

Patrick P. Gelsinger: And it sounds like you sound maybe a little bit less optimistic if I'm sort of reading between the lines on shares into the back half of the year, just given how long it takes these things to sort of impact your shares. So your bullish outlook for the second half of the year sounds like it's more market driven versus share driven. Can you just clarify that? Thanks.

Tim: Comes from the line of Matt Ramsay.

Cowen: Cowen Your question please.

Matthew D. Ramsay: Yes, thank you very much guys.

Speaker Change: Yeah.

Patrick P. Gelsinger: I have one question I've been getting from some folks and I totally understand the lead times are starting.

Matthew D. Ramsay: Some of these programs to put increased tayo volume at external foundry, but you guys have made the progress on the five nodes in four years as you highlighted multiple times is there any flex at all.

Patrick P. Gelsinger: Well, overall, I'd like to say, you know, it's hard to predict, right, exactly how these will play out in light of the overall Gen AI surge that we've seen. That said, products are good, right; we came into the year, you know, improving our market share position. In the first quarter of the year, it does take time to ramp these new products, but, you know, better products, rebuilding trust with our customers that we're delivering on these, and now hitting, you know, the early end of the cycles on these new products is giving us a lot of interest in the market and the customers. New use cases, you know, also demonstrated, you know, a 70 billion parameter model, you know, running natively on Granite Rapids at our vision event.

Patrick P. Gelsinger: To bring back some of that external volume earlier, and I think it matters to some folks because it is a demonstration of you guys being able to ramp your own product to volume and yield and economics, one on <unk>, which might give some indication to some external customers that are looking at your foundry business. So just any.

Patrick P. Gelsinger: <unk> flex at all to pull that timeline and have sort of re shoring some of the external tiles.

Speaker Change: Yeah, Thanks, Matt and largely those decisions are made when the product decisions are made so there's limited flexibility to move them around and if you pick a process node for certain tile generally that's the process node that its on so theres limited flexibility there and many of those decisions as we've highlighted before.

Patrick P. Gelsinger: We're literally made years ago, right and those choices were made.

Patrick P. Gelsinger: We see the peak of our external tiles being this year and next year and then the roadmap and the movement of those coming back you'll begins to quite accelerate even starting late next year or so the plan is clearly laid out as we said we see a couple of Fabs worth of capacity.

Patrick P. Gelsinger: All of these just make us more and more confident in our business execution. You know, we're also seeing that, you know, we don't need, right, you know, socket counts to increase the ASPs we're going up with the core counts on our new leadership products as well. So all of those in a fairly, you know, optimistic view that we're getting from our OEMs and our channel partners, for their view of upgrade cycles, and building momentum from customers across the industry, we feel very comfortable that we're stabilizing our position, we have an improving roadmap, and we do expect to see share gains as we end the year and go into 2025. Jonathan, can we have the next caller please?

Speaker Change: Paucity coming back into the Intel factory network.

Speaker Change: As we move into the 26 and beyond so this becomes a significant driver. We've also driven significant roadmap decisions against that improving our profile of our product and I'll say that begins in a very powerful way next year with Panther Lake in Clearwater farce unquestioned, the best products and clients the best products in <unk>.

Speaker Change: <unk> are now being built on Intel a H N. A that's the question suggests we see our customers are seeing that what every a foundry customer that we speak to right understanding where we are in.

Patrick P. Gelsinger: Our product and process a cycle and the ability for them to essentially benefit from Intel as customers zero and the foundry network. So overall this is feeling very good we're on track to go accomplish that and the business model that we've laid out and Dave and I are presented as we go through.

Operator: Certainly. Our next question comes from the line of Srinivasa from Raymond James. Your question, please. Thank you.

Srinivas Reddy Pajjuri: My question is on the client side. I think, Pat, you mentioned something about, you know, supply constraints impacting your 2Q outlook. If you could provide some color as to what's causing those supply constraints and when do you expect those to ease as we, I guess, go into the second half? And then, you know, in terms of your AI PCs, I think you've been talking about 40 million or so potentially shipping this year. Could you maybe put that into some context as to how it actually helps Intel? Is it just a higher ASP? Is it a higher margin?

Speaker Change: The decade shows a very healthy improvement in wafer ASP wafer volume foundry and these decisions are made right here.

Speaker Change: On track to both have the wafer foundry capabilities have the process technology and the products to fill those fat.

Srinivas Reddy Pajjuri: <unk> factories, and that's why Dave and I have such confidence in the business model that we've laid out and the improvements that will deliver as we go over the next several years together, Matt do you have a quick follow up yes.

Matt: Yes, John Thank you.

Matt: I wanted to ask a question about AI.

Matt: AI accelerated roadmap. So you guys have goudy three that you've talked about it in top insurers coming next year and the hardware.

Patrick P. Gelsinger: I would think that, you know, these products also come with higher costs. I just want to understand how we should think about the benefit to Intel from these AI PCs. Yeah, thank you.

Srinivas Reddy Pajjuri: It looks quite good I wanted to ask a question about the software that goes on top of that for both.

Speaker Change: Well really for infants, but also for training.

Speaker Change: How do you feel about the software road map that you guys have in the AI space going forward and how much compatibility.

Patrick P. Gelsinger: And overall, you know, we, as we've seen, this is a hot product category, the AIPC category, and we declared this as we finished last year. And we've just been incrementing our AIPC or core ultra product volumes throughout. We're meeting our customer commitments that we have, but they've come back and asked for upside on multiple occasions across different markets. And we are racing to catch up to those upside requests.

Patrick P. Gelsinger: Or uniqueness rather is there to the software that runs on goudy three versus what we'll call them on Falcon shores and the forward roadmap.

Speaker Change: Yeah, maybe three different points there. The first one is for inferencing, you need a whole lot less software compatibility right and as the market is more focused on influencing going forward. If you can run the models right in the context of the databases and the others so that per tens and that's why we're seeing the strength that we're seeing right.

Patrick P. Gelsinger: And the constraint has been on the back end, you know, wafer-level assembly, one of the new capabilities that are part of Meteor Lake and our subsequent client products. So with that, we're working to catch up and build more wafer-level assembly capacity to meet those. But how does it help us? Hey, it's a new category.

Matt: Now you know mats in these use cases and clearly some of the software compatibility issues of a GPU you'll have led to the training environments that have been challenging for us, but now as customers get much more focused on enterprise use cases influencing tcl, we're finding a lot of strength in the offerings that we have.

Patrick P. Gelsinger: And as we've matured a number of customers now we've worked through many of those use cases and getting quite a lot of acceptance of the software stack that we have with goudy two and three we will have a very smooth and seamless upgrade from goudy three into Falcon short, but the powerful thing that will come with Fox insurers is the full program.

Patrick P. Gelsinger: And, you know, that new category products will generally be at higher ASPs, as your question suggests. But we also think it's new use cases, and new use cases over time create a larger TAM. It creates an upgrade cycle that we're seeing. It creates new applications.

Patrick P. Gelsinger: <unk> that you'll see with the complete instruction set capabilities of Falcon shores and at that point, we will have no deficits for any of the use cases are much greater compatibility for the full range of AI capabilities.

Patrick P. Gelsinger: And we're seeing essentially every ISV AI-ifying their app, whether it's the communications capabilities of Zoom and Teams for translation and contextualization, whether it's new security capabilities with CrowdStrike and others finding new ways to do security on the client, or it's creators and gamers taking advantage of this. So we see that every PC is going to become an AI PC over time. And when you have that kind of cycle underway, Srini, everybody starts to say, oh, how do I upgrade my platforms?

Matt: Other thing that I emphasize this is a powerful capability with incredible programmable capabilities and were finding these use cases like I described with the open platform for enterprise AI Rag use cases is clearly beneficial.

Patrick P. Gelsinger: For us overall, we're feeling like the software story is coming together very nicely and the entire industry is moving to higher level software abstraction, such as a python and Triton so they're moving away from any of these dependencies to a open software platform. So the industry trends are in the right direction are mature.

Patrick P. Gelsinger: And we even demonstrated how we're using AI PCs in the Intel factories now to improve yields and performance inside of our own factories. And as I've described, it's like a Centrino moment, right, where Centrino ushered in Wi-Fi at scale.

Patrick P. Gelsinger: He is in the right direction and our software stack has gotten much more mature and will have a very smooth upgrade to Falcon Schwartz.

Speaker Change: So let me just close our time together and say you know thank you for the questions. Thanks for joining our call. We appreciate the update to give you on a very solid Q1, and we got a lot done in Q1 that gives us a great foundation for the future. We continue to drive our process and product and AI innovations and delivering on our.

Srinivas Reddy Pajjuri: You know, we see the AI PC ushering in these new use cases at scale, and that's going to be great for the industry. But as the unquestioned market leader, right, the leader in category creation, we think we're going to deferentially benefit from the emergence of the AI PC. Srini, do you have a follow-up? Yes, John, thank you. And I guess my other question is in the other bucket. You know, Dave, you kind of talked about Altera potentially exiting the year at a 2 billion run rate from current levels. That's a pretty steep ramp.

Srini: Our process technology and leadership roadmap if any of you were a coffee text in a few months I look forward to seeing you. There we have a number of our products and offerings that we'll be announcing there as we continue our AI momentum in competitiveness and as always look forward to talking to you next quarter. Thank you very much.

Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Speaker Change: Yeah.

David A. Zinsner: And also, I think you said growth will accelerate over the next couple of quarters. So given, you know, the telecom weakness out there that we're seeing, I'm just curious as to what's giving you that visibility or confidence? I mean, is this driven by some new products? Or is it just the market recovering? Any color would be helpful.

Matt: Yeah.

Matt: Okay.

Timothy Arcuri: [music].

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Yeah.

Matt: Yeah.

David A. Zinsner: Yeah, on Altera, you know, and this is not unprecedented, when you see a massive work down of inventory, of course, that, you know, significantly impacts revenue. But, you know, as that normalizes, then you start shipping to end consumption. So it's actually a pretty easy lift to get to the $2 billion mark once we're through the inventory, you know, digestion period. So I think we have high confidence in that.

David A. Zinsner: Sure.

David A. Zinsner: [music].

David A. Zinsner: Yeah.

Matt: Okay.

Matt: Yeah.

Matt: Okay.

Matt: Okay.

David A. Zinsner: Yeah.

Matt: Okay.

Matt: Okay.

David A. Zinsner: Yeah.

Matt: Yeah.

David A. Zinsner: Okay.

Matt: Okay.

Matt: Yeah.

David A. Zinsner: [music].

David A. Zinsner: Yeah.

David A. Zinsner: And others have commented on their inventory cycles as well in the FPGA category. We have good products in the second half of the year with Agilex starting to ramp up as well. And then on NEX, you know, of course, that business also has gone through its own inventory adjustment.

Matt: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

Matt: Okay.

Matt: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Yeah.

David A. Zinsner: So we have good confidence around that reversal, which will help drive strength. And then, you know, some of the products that are more tailored to the AI space, of course, we'll see strength through the year. And so that should drive, you know, good revenue growth through the year as well.

David A. Zinsner: Yeah.

David A. Zinsner: [music].

David A. Zinsner: Okay.

David A. Zinsner: Yeah.

Matt: Yes.

Patrick P. Gelsinger: And also, when NEX, you know, the AI networking products are strong, or IPU products, we're seeing strength in that area. So it's inventory as well as products, even though, as your question suggests, the communication sector and the service providers are weaker through the year, but pretty much every aspect of their business and edge AI, as Dave said, is seeing strength as we go into the second half of the year and into the fourth. Thanks, Rene.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Matt: Okay.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: [music].

Operator: Jonathan, can we have the next caller, please? Certainly, our next question comes from the line of Vivek Arya on Bank of America's history. Here is your question. Thanks for taking my question. Pat, just a conceptual question.

Matt: Okay.

Matt: Okay.

Vivek Arya: In a Gen AI server with accelerators, how important is the role of a specific CPU? Or is it easily interchangeable between yours or AMD's or ARM's? I guess the question is that, you know, if most of the workload is being done on the accelerator, does it really matter which CPU I use? And can the move towards Gen AI servers essentially shrink the time for x86 server CPUs? Because a number of your cloud customers have announced ARM-based server alternatives. So I'm just curious, how do you think about that conversion over to Gen AI and what that means for x86 server CPU time going forward? Yeah, thanks, Vivek.

Operator: Yeah.

Matt: Okay.

Vivek Arya: Yeah.

Vivek Arya: Okay.

Vivek Arya: Okay.

Vivek Arya: Okay.

Vivek Arya: Yes.

Vivek Arya: Okay.

Matt: Okay.

Vivek Arya: Okay.

Matt: Okay.

Vivek Arya: Yeah.

Vivek Arya: Okay.

Matt: Okay.

Matt: Okay.

Matt: Okay.

Vivek Arya: Okay.

Matt: Okay.

Vivek Arya: Yeah.

Matt: Okay.

Vivek Arya: Okay.

Vivek Arya: Okay.

Patrick P. Gelsinger: And we spoke at our vision event about use cases like RAG, retrieval-augmented generation, where the LLMs might run on an accelerator, but all of the real-time data, all of the databases, you know, all of the embeddings are running on the CPU. So you're seeing all of these data environments, which are already running on Xeon and x86, being augmented with AI capabilities to feed an LLM. And I believe this whole area of RAG will become one of the primary use cases for enterprise AI.

Vivek Arya: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: And if you think about it, you know, an LLM might be trained with one, two years of old data, right? But many of the business processes and environments are real time, right? You're not going to be retraining constantly.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: And that's where this area of the front end database becomes very prominent. All of those And as we've described, you know, Xeon plus Gaudi, we think it's going to be a very powerful opportunity for enterprises. So in many of those cases, we see this as a market lift, new applications, new use cases, and new energy coming to enterprise AI. And, you know, here we are in year 23 of the cloud. And while 60% of the workload has moved to the cloud, over 80% of the data remains on premises under the control of the enterprise, much of that underutilized in businesses today. That's what Gen AI is going to unlock.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Yeah.

Matt: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: And a lot of that is going to happen through the x86 CPU. And we see a powerful cycle emerging. And I would just point you back to how we described that vision. This was a great event, and many customers are seeing that value today. Vivek, do you have a quick follow-up? Yes, thank you.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Matt: Great.

Matt: Yes.

Vivek Arya: Maybe one for Dave on the potential operating loss, kind of how do we model that for the foundry business? So let's say if I exclude the $2 billion in depreciation headwind, which I'm assuming is almost all going to your foundry business, what is the right way, Dave, to think about foundry operating income or loss this year? And how much external foundry revenue are you expecting? Yeah, a good question. Um, you know, the operating losses will pick up, you know, we roughly were at like two, four ish, in the first quarter. They will pick up in the second quarter, given the startup costs are increasing. And I would say they will be roughly in that range for the remainder of the year.

Matt: Yeah.

Matt: Okay.

Matt: Okay.

Matt: Okay.

Vivek Arya: Okay.

Vivek Arya: Yeah.

Vivek Arya: Okay.

Matt: Okay.

Matt: Yes.

Vivek Arya: Okay.

Matt: Okay.

Matt: Yes.

Vivek Arya: Okay.

Vivek Arya: Okay.

Vivek Arya: Okay.

Matt: Yeah.

Vivek Arya: Sure.

Vivek Arya: Okay.

Vivek Arya: Okay.

David A. Zinsner: And then what I said before is we see that improving then going into 25. And we, you know, Pat's given me the order, he wants to see every quarter some improvement in the operating loss, ultimately, to get to break even midway through the point between now and 2030. And I think that is very achievable.

Vivek Arya: Okay.

Matt: Okay.

David A. Zinsner: Yeah.

Matt: Okay.

Matt: Okay.

David A. Zinsner: Okay.

Matt: Yeah.

Matt: Okay.

Matt: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

Matt: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

David A. Zinsner: Okay.

Operator: No, we've moved on. Okay. Why don't we go to the next call, Jonathan?

Matt: Okay.

Operator: Okay.

Operator: Certainly, our next question, for one moment, comes from Matt Ramsey, from Cowan, your question, yeah, thank you very much guys. Some questions I've been getting from some folks, and I totally understand some of these programs. TILE VOLUME AT EXTERNAL FOUNDRY, Progress on the five nodes in four years, as you highlighted multiple times. Is there any flex at all?

Operator: Okay.

Operator: Okay.

Matt: Okay.

Matt: Okay.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Matthew D. Ramsay: Bring back some of that external volume earlier, and it matters to some folks because it's a demonstration of you guys being able to ramp your own product to volume, to yield, and to economics on 18a, which might give some indication to some external customers, Flex at all, that timeline for sort of reshoring some of the external tiles. Yeah, thanks, Matt. And you know, largely those decisions are made when the product decisions are made, so there's limited flexibility to move them around.

Operator: Okay.

Matt: Okay.

Matthew D. Ramsay: Okay.

Matthew D. Ramsay: Okay.

Matthew D. Ramsay: Okay.

Matthew D. Ramsay: Okay.

Matt: Okay.

Matt: Okay.

Matt: Yeah.

Matt: Okay.

Matthew D. Ramsay: Yeah.

Matthew D. Ramsay: Okay.

Matthew D. Ramsay: Okay.

Matt: Okay.

Matt: Okay.

Matt: Yes.

Matt: Okay.

Matthew D. Ramsay: Yes.

Patrick P. Gelsinger: And, you know, if you pick a process node for a certain tile, you know, generally, that's the process node that it's on. So there's limited flexibility there. And many of those decisions, as we've highlighted before, you know, Matt, were literally made years ago, right? And, you know, those choices were made. You know, that said, we see the peak of our external tiles being this year and next year, and then the roadmap and the movement of those coming back, you know, begins to quite accelerate even starting late next year.

Pat Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Pat Gelsinger: Yes.

Matt: Okay.

Patrick P. Gelsinger: Great.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Timothy Michael Arcuri: Okay.

Pat Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Yeah.

Patrick P. Gelsinger: So, you know, the plan is clearly laid out. As we said, we see a couple of fabs worth of capacity coming back into the Intel factory network as we move into the 26 and beyond. So this becomes a significant driver. We've also driven significant roadmap decisions against this improving the profile of our product. And I'll say that it begins in a very powerful way next year, you know, with Panther Lake and Clearwater Forest.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Sure.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Unquestioned, the best products and clients, the best products and servers are now being built on Intel 18a. And as the question suggests, you know, we see customers seeing that with every Foundry customer that we speak to, understanding where we are in our product and process cycle and the ability for them to essentially benefit from Intel as customer zero in the Foundry network. So overall, this is feeling very good.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Yes.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Matt: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: We're on track to accomplish that, and the business model that we've laid out and Dave and I presented as we go through the decade shows a very healthy improvement in wafer ASP, wafer volume Foundry. And these decisions are made, right?

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: We're on track to both have the wafer Foundry capabilities and have the process technology and the products to fill those factories. And that's why Dave and I have such confidence in the business model that we've laid out and the improvements that it will deliver as we go over the next several years together. Matt, do you have a quick follow-up? Yes, John, thank you. I wanted to ask a question about AI, Xcelerator. You guys have Gaudi3 that you talked about, and South here, and the hardware looks quite good.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

David A. Zinsner: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Pat Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

David Zinsner: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: I wanted to ask a question about the software that goes on top of that. Well, really for inference, but also... How do you feel about the software roadmap that you guys have for the AI, or uniqueness, rather, to the software that runs on Gaudi. CommonFalcon.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah, maybe three different points there. The first one is, you know, for inferencing, you need a whole lot less software compatibility, right? And as the market is more focused on inferencing going forward, you know, if you can run the models right in the context of the databases and others. So that applies, and it's why we're seeing the strength that we're seeing right now with maps in these use cases. And clearly, some of the software compatibility issues of a GPU have led to training environments that have been challenging for us.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Sure.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Speaker Change: Thank you.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: But now, as customers get much more focused on enterprise use cases, inferencing, and TCO, we're finding a lot of strength in the offerings that we have. And as we've matured a number of customers now, we've worked through many of those use cases, and we're getting quite a lot of acceptance of the software stack that we have with Gaudi2 and 3. You know, we will have a very smooth and seamless upgrade from Gaudi3 to Falcon Shores. But the powerful thing that will come with Falcon Shores is the full programmability that you'll see with the, you know, complete instruction set capabilities of Falcon Shores.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: And at that point, we will have no deficits for any of the use cases and much greater compatibility for the full range of AI capabilities. You know, the other thing that I emphasized is that Xeon is, you know, a powerful platform with incredible programmable capabilities. And we're finding these use cases, like I described, with the open platform for enterprise AI, RAG use cases are clearly beneficial there for us. So overall, we're feeling like the software story is coming together very nicely. And the entire industry is moving to higher-level software abstractions, you know, such as Python and Triton.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: So they're moving away from any of these dependencies on an open software platform. So the industry trends are in the right direction. Our maturity is in the right direction. And our software stack has gotten much more mature, and we'll have a very smooth upgrade to Falcon Shores. So let me just close our time together and say, you know, thank you for the questions.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Thanks for joining our call. We appreciate the update we can give you on a very solid Q1. And we got a lot done in Q1 that gives us a great foundation for the future. We continue to drive our process and product and AI innovations and deliver on our process technology and leadership roadmap. If any of you are at Computex in a few months, I look forward to seeing you there. We have a number of products and offerings that we'll be announcing there as we continue our AI momentum and competitiveness. And, as always, we look forward to talking to you next quarter. Thank you very much.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Yeah.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Patrick P. Gelsinger: Okay.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.

Patrick P. Gelsinger: Yes.

Patrick P. Gelsinger: Okay.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: Okay.

Operator: Yeah.

Operator: Okay.

Operator: Okay.

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Operator: We're and I'm I'm and You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You I'm You At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

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John William Pitzer: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Mr. John Pitzer, Corporate Vice President of Investor Relations. Thank you, Jonathan.

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John William Pitzer: By now, you should have received a copy of the Q1 earnings release and earnings presentation, both of which are available on our investor relations website, intc.com. For those joining us online today, the earnings presentation is also available in our webcast window. I'm joined today by our CEO, Pat Gelsinger, and our CFO, David Zinsner. In a moment, we will hear brief comments from both, followed by a Q&A

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Speaker Change: Thank you for standing by and welcome to the Intel corporations first quarter 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. If your question has been answered and you'd like to remove yourself from.

Patrick P. Gelsinger: Before we begin, please note that today's discussion does contain forward-looking statements based on the environment as we currently see it, and as such, are subject to various risks and uncertainties. It also contains reference to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release, our most recent quarterly report on Form 10-Q, and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures, including reconciliations where appropriate to corresponding GAAP financial measures. With that, I will turn things over to Pat.

Patrick P. Gelsinger: The queue simply press Star one again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Mr. John Pitzer, corporate Vice President of Investor Relations.

Pat: Thank you Jonathan by now you Should've received a copy of the Q1 earnings release and earnings presentation, both of which are available on our Investor Relations website <unk> dot com for those joining us online today. The earnings presentation is also available in our webcast window.

Pat: I'm joined today by our CEO, Pat Gelsinger, and our CFO, David <unk> in a moment, we will hear brief comments from both followed by a Q&A session.

Patrick P. Gelsinger: Before we begin please note that today's discussion does contain forward looking statements based on the environment as we currently see it and as such are subject to various risks and uncertainties.

Patrick P. Gelsinger: Thanks, John, and welcome, everyone. We've reported solid Q1 results, delivering revenue in line and EPS above our guidance, as we continue to focus on operating leverage and expense management. Our results reflect our disciplined approach to reducing costs, as well as the steady progress we are making against our long-term priorities. While first-half trends are modestly weaker than we originally anticipated, they are consistent with what others have said and also reflect some of our own near-term supply constraints.

Patrick P. Gelsinger: It also contains reference to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release. Most recent quarterly report on Form 10-Q, and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations.

Patrick P. Gelsinger: They also provide additional information on our non-GAAP financial measures, including reconciliations where appropriate to corresponding GAAP financial measures.

Patrick P. Gelsinger: With that let me turn things over to Pat.

Patrick P. Gelsinger: Thanks, John and welcome everyone. We reported solid Q1 results delivering revenue in line and EPS above our guidance as we continue to focus on the operating leverage and expense management. Our results reflect our disciplined approach on reducing costs as well as the steady progress we are making against our long term priorities.

Patrick P. Gelsinger: We continue to see Q1 as the bottom, and we expect sequential revenue growth to strengthen throughout the year and into 2025, underpinned by one, the beginnings of an enterprise refresh cycle and growing momentum for AI PCs, two, a data center recovery with a return to more normal CPU buying patterns and ramping of our accelerator offerings, and three, cyclical recoveries in NEX, Mobileye, and Altera. We had an extremely productive Q1 and achieved several important milestones along our journey to reposition the company for improved execution, competitiveness, and, perhaps most importantly, financial results.

Patrick P. Gelsinger: While first half trends are modestly weaker than we originally anticipated they are consistent with what others have said and also reflects some of our own near term supply constraints.

Patrick P. Gelsinger: We continued to see Q1 as the bottom and we expect sequential revenue growth to strengthen throughout the year and into 2025 underpinned by one the beginnings of an enterprise refresh cycle and growing momentum for AIP cease to a data center recovery with a return to more normal CPU buying patterns and ramping.

Patrick P. Gelsinger: Of our accelerator offerings and three cyclical recoveries in any ex mobile ly and altera.

Patrick P. Gelsinger: We had an extremely productive Q1 and achieved several important milestones along our journey to reposition the company for improved execution competitiveness and perhaps most importantly financial results.

Patrick P. Gelsinger: We hosted our first ever Intel Foundry Direct Connect, which drew nearly 300 partners, customers, and potential customers to hear about the momentum we are building with our Foundry offerings. We were pleased to announce Microsoft as our fifth Intel 18A customer.

Patrick P. Gelsinger: We hosted our first ever Intel foundry direct connect which drew nearly 300 partners customers and potential customers to hear about the momentum. We are building with our foundry offerings. We were pleased to announce Microsoft surface until 18, a customer we also updated our lifetime deal value to greater than 15 billion.

Patrick P. Gelsinger: We also updated our lifetime deal value to greater than 15 billion and extended our roadmap with Intel 14A, the first process node in the industry to use high NA EUV technology. Shortly following Direct Connect, we were thrilled to join with President Biden and Commerce Secretary Raimondo to announce our position as the National Semiconductor Champion along with the single largest award from the Chips and Science Act of more than $45 billion in proposed grants, tax incentives, and loans.

Patrick P. Gelsinger: And extended our roadmap with Intel <unk>, the first process node in the industry to use high in a UV technology.

Patrick P. Gelsinger: Shortly following direct connect we were thrilled to join with President Biden, and Commerce Secretary Rimando to announce our position as the National semiconductor champion alone with the single largest award from the chips and Science Act of more than 45 billion of proposed grants tax incentives and loans.

Patrick P. Gelsinger: During the second week of April, we brought together more than a thousand of our top customers and partners at Intel Vision 2024, where we introduced our next-generation Gaudi3 accelerator. We were joined by Naver, Dell, Bosch, Supermicro, and Roche, among many others who shared how they are benefiting from Intel solutions. Vision went straight into the Open Source Summit, where we led the launch of the Open Platform for Enterprise AI project. This industry initiative aims to accelerate Gen AI deployments in what will be the largest market for AI applications, starting with Retrieval Augmented Generation, or REG.

Patrick P. Gelsinger: During the second week of April we brought together more than 1000 of our top customers and partners that until vision 2024, where we introduced our next generation Goudy three accelerator, we were joined by neighbor del Bosch Supermicro and Roche among many others, who shared how they are benefiting from Intel solutions.

Patrick P. Gelsinger: Vision, what straight into open source summit, where we led the launch of the open platform for Enterprise AI project. This industry initiative aims to accelerate Gen AI deployments and what will be the largest market for AI applications, starting with retrieval augment to generation or Reg, our xeon plus goudy use cases along.

Patrick P. Gelsinger: Lastly, we hosted the industry's first sustainability summit, underscoring our deep commitment to building a more geographically diverse, resilient, trusted, and, of course, sustainable supply chain for semiconductors. We are proud of our leadership position in chemical conservation, renewable energy, and water reclamation. Our accomplishments year to date build on all the work we have done to execute on the strategy I laid out when I rejoined the company three years ago.

Patrick P. Gelsinger: With our established enterprise ecosystem.

Patrick P. Gelsinger: Big role to play here.

Patrick P. Gelsinger: Lastly, we hosted the industry's first sustainability summit underscoring our deep commitment to building a more geographically diverse resilient trusted and of course sustainable supply chain for semiconductors. We are proud of our leadership position in chemical conservation renewable energy and water reclamation.

Patrick P. Gelsinger: Our accomplishments year to date billable and all the work we have done to execute on the strategy I laid out when I rejoined the company three years ago.

Patrick P. Gelsinger: Job number one was to accelerate our efforts to close the technology gap that was created by over a decade of underinvestment. The heart of phase one was five nodes in four years. The rallying cry was Torrid.

Patrick P. Gelsinger: Job number one was to accelerate our efforts to close the technology gap that was created by over a decade of Underinvestment. The harder phase one was five nodes into four years. The rallying cry was toward its combined accelerating our node transitions with improving our product execution and cadence to regain customer trust.

Patrick P. Gelsinger: It combined accelerating our node transitions with improving our product execution and cadence to regain customer trust. We have rebuilt our Grovian culture and execution engine and are on track to completing our five nodes, four year goal, which many of our stakeholders thought impossible at inception. In so doing, we are in a unique position with EUV technology at scale, Western-based capacity, and at the very least, a level playing field with the market leader.

Patrick P. Gelsinger: We have rebuilt our rovian culture and execution engine and are on track to completing our five nodes four year goal, which many of our stakeholders thought impossible at inception.

Patrick P. Gelsinger: So doing we are in a unique position with at scale EV technology Western base capacity and at the very least a level playing field with the market leader.

Patrick P. Gelsinger: Intel 20A, which helps pave the way for Intel 18A, begins production ramp-up in the second half of this year with Arrow Lake. We expect to release the 1.0 PDK for Intel 18A this quarter. Furthermore, our lead products, Clearwater Forest and Panther Lake, are already in fab, and we expect to begin production ramp-up of the Intel 18A in these products in the first half of 25 for product release in the middle of next year.

Patrick P. Gelsinger: Until 'twenty, a which helps pave the way for until 18, a begins production ramp in the second half of this year with Arrow Lake we expect to release the 1.0 PDK for until late G&A. This quarter. Furthermore, our lead products Clearwater Force and Panther Lake are already in fab and we expect to begin production ramp up the Intel <unk>.

Patrick P. Gelsinger: And these products in the first half of 'twenty five for product release in the middle of next year.

Patrick P. Gelsinger: Given this progress, now is the time to turn our focus to matching technology leadership with a competitive cost structure. Establishing a foundry relationship between our products group and our manufacturing group was a critical step to achieve better structural costs. This quarter, we officially transitioned to our new operating model and introduced Intel products and Intel Foundry. Today, for the first time, we are reporting our results to reflect the new way in which we are running the company.

Speaker Change: Given this progress now was the time to turn our focus to matching technology leadership with a competitive cost structure.

Patrick P. Gelsinger: Establishing a foundry relationship between our products group and our manufacturing group was a critical step to achieve better structural cost. This quarter, we officially transitioned to our new operating model and introduced Intel products and Intel foundry today for the first time, we are reporting our results to reflect the new way in which we are running the <unk>.

Patrick P. Gelsinger: The separation of the internal financial reporting between Intel Foundry and Intel products was a critical step needed to provide transparency, accountability, and the proper incentives to allow both groups to make better decisions to optimize their own cost structure. This change also provided the added benefit of giving more transparency to our outside owners. We knew that the day one P&L for Intel Foundry was going to spark debate, but we also knew it was important to establish a baseline and provide a target model based on reasonable to conservative revenue and cost assumptions that we have a high degree of confidence we will achieve.

Patrick P. Gelsinger: <unk>.

Patrick P. Gelsinger: Separating the internal financial reporting between Intel foundry and Intel products was a critical step needed to provide transparency accountability and the proper incentives to allow both groups to make better decisions to optimize their own cost structures.

Patrick P. Gelsinger: This change also provides the added benefit of giving more transparency to our outside owners, we knew that the day one P&L for Intel foundry was going to spark debate, but we also knew it was important to establish a baseline and provide a target model based on reasonable to conservative revenue and cost assumptions that we have a high degree of confidence.

Patrick P. Gelsinger: I'm going to reiterate that point so it is heard and understood. Our target model is reasonable and conservative and reflects a high degree of confidence in our ability to deliver, and you can rest assured that we will be working hard to beat these targets. If we can move faster and do better, we will, and our new operating model is already catalyzing.

Patrick P. Gelsinger: We'll achieve.

Patrick P. Gelsinger: I'm going to reiterate that point, so we just heard and understood. Our target model is reasonable conservative and reflects a high degree of confidence in our ability to deliver and you can rest assured that we will be working hard to beat these targets.

Patrick P. Gelsinger: We can move faster and do better we will and our new operating model. This all.