Intel (INTC) 23 Jul 212021 Q2 Earnings call transcript

Thank you for standing by, and welcome to the Intel Corporation Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [ Operator instructions].

As a reminder, today's program is being recorded. like Head your of would program, for I Balow, Tony Investor now, to host introduce today's And Relations. Please go ahead, sir.

Welcome you a Thank Call. presentation. release Operator. to Quarter earnings Second you, Earnings and By the now, of should copy received have our earnings Intel's Conference

CEO, investor available us have you our in followed In CFO, today window those joining our the I our both The am earnings by are available Q&A. documents, by have webcast Gelsinger If incc.com. they presentation online. George joined moment, received a both, on brief not at website, Pat is also for from remarks Davis. we'll

we as Before actual Please information statements, we the With that currently GAAP brief on non-GAAP press this provided will describing environment to hand everyone and include measures speaking release the that to let And on include could earnings factors cause remind and we our differ available more A based it and risks to over today's such, discussion refer and release Today, me does reconciliations. uncertainties. measures. full earnings on the our me contains reminder, Pat. we when presentation quarter, non-GAAP non-GAAP financial results. the financial that, intc.com for The as risk let materially. be forward-looking it. results that have specific consolidated begin, it see GAAP both to

the pervasive everything second for to demand for Thanks unprecedented for by edge ubiquitous our both digitization We're and and everyone. quarter industry thrilling the call. semiconductor Intel. increasingly afternoon, Good as compute. accelerated infrastructure, joining superpowers Tony. connectivity, you, of the It's earnings AI Thank a cloud time of is seeing

to process, and on depth platforms, capitalize uniquely of combined this Intel positions software, and Our breadth our growth vast at-scale and opportunity. manufacturing, with packaging and silicon,

superb execution as top line the of reflect Our exceeded network. of our demand for products, which the QX factory industry, well the expectations, strength bottom results, and as our the our

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building, expectations full-year Our as guidance. revenue is momentum once raise again and and our we EPS beat

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to phase machine. and have to very Services, X-nanometers execution are well. we lay of products, While launched innovative in to needed our work win organizational and Company's new do, renew operational is our great changes next to strides progressing the the we Intel We've history. established making Foundry made foundation

Intel, at past, pragmatic Here we're confident in our proud ahead, of about importantly, most future. our work the but

share more we're let seeing some market. the Now, on in me what detail

more shipping million we're ecosystem units grappling TAM will seeing day As continue growth in X compute component despite with ubiquitous, is a sustained over back in and demand. client by becoming X is I beyond, to driven The factors. strength shortages. PC PC XXXX expect

changed work, or density, way and care each other. learn, has increasing PC for connect, is the irreversibly COVID PCs First, household, we as per

COVID, to from opt work full we're versus seeing models the emerge for For we return many example, even as companies office. hybrid

PCs such refresh cycles on of will XX. are old, replacement deployment and XXX that new base. over the running operating and to shift platform, years Second, Notebooks, better new a to drive installed shortening Windows continue X larger are The aging experiences systems our on the as million Evo

see In makes a the worldwide the and belief huge in that our the PC early GDP of my as we growth channel potential are are number stages OEM, students are per teachers new of growth. we end markets PCs have remains the the resoundingly These affirmed increasing as and perspective. still this cycle underpin affordable device XXX Finally, choice, like single-digits. in and of trends partners to as of more penetration education, In sustainable more PC users rates people. PC areas adopting the we

long-term client, intelligent as Beyond explosive demand edge. the cloud from we across traditional market, the to are seeing recovery datacenter as well near-term

an is Our unlocking from key pace, and it turning society data to creating unspeakable digital data AI the into at this value is information. and the

everything This appetite we data grow areas. its we are XG, areas infusing driving, transformed the As for and have substantial by of are AI market we with positions. are connectivity in to all the a be a is across data leadership do. in grows will in into and autonomous occurring AI the at result, revolutions O-RAN markets cost than the which falls, center XX% proliferating hitting expect stride more which Similar as photonics silicon of AI where meaningful an the workloads is year. we why compute more And

On supply the the stress other equation, strong environment a chain. side of demand to continues the

to are to help work these but also third-party able supply are expect constraints. internal is I taking catch before find demand. second to take X the positions best X.X, ecosystem more for partners combines bottom our build to X chain. which While foundries, a with With the industry in mitigate shortages action will to in the our projects the Arizona, major to future, and to with ways Israel, Construction capacity of industry IDM resilient Ireland, use today another with challenges out us half, Oregon, investing underway we innovative up we completely FAB and years manufacturing that the weather

enabled IDM significantly about accelerating say benefit example, am availability the this pleased online test talked is effort of I by For to process, products. for using call, substrates is millions and the with strategy. assembly of I to our that our internal network now help on X.X a our of portions our manufacturing QX uniquely substrate

the example and EUV Nanofabrication, working also great to ecosystem mass equipment, capability. quarter, vast majority build to second technology, we to the EUV of large advance the are A accelerate and ecosystem pivotal significant wholly-owned writing around Intel. industry, we Intel continue the which provides IMS including We of services to Foundry a photoresis, this Using novel support tools momentum. In multi-beam to see generation, subsidiary build metrology. is the a requires IMS investments plan

We are than value the engaged customers key propositions. of on now potential more XXX X our with basis

IFS to will catalog, our as well widest own. RISC-V,, offering which xXX IP the to to as IP of have the ranging products allows from our ARM flexibility customers First, design using their

momentum to have more customers and news our recently we offer comprehensive process to to mature first we to am of signed I'll packaging customer and Monday. major on share announce edge use Cloud our Second, even capabilities. will a range access packaging pleased solutions. I customer leading on IFS IFS

will customers we confidence their meet that demand. our manufacturing Third, gives can offer scale IFS

FAB and the investments As of tremendous next support robust, here in governments, with And this packaging and build recent secure to additional geographically committed supply we step will year. that, is announce part efforts. of forward, our tailwind U.S,and plan E.U. our to are a and seeing our U.S. creating ecosystem. $X.X expect Along Competition $XX as Europe, more enthusiasm and to billion the catalyze internal serve chain. our to from for by in manufacturing, end capacity similar we're customers, billion my advanced The visit to investment and overall Innovation Arizona, European in IFS New U.S. both sites we and to plans IFS investment After to in Mexico, a a growth. balanced, we Act

execution. focus continued our to Moving on

and I we network supremely in start about are As front our pragmatic to Under the than are the now of we of continues but said our of more at factory wafers the future. call, deliver us, XX-nanometer manufacturing work X.X, confident XX-nanometer. IDM

with improving year-over-year XX-nanometer lower As with economics wafer XX-nanometer volumes cost to are come. more ramp, XX%

our will join more talk On me Accelerated I this aggressively market better our for leadership than our continue will PC will back to portfolio processors assets, broad Intel. launched of unquestioned new We is choose with leadership, and following Intel QX share. revenue. even record hope and event customers you share QX, with the critical for in plans path Tiger million segment about XX to Monday. We ramping to-date. compete packaging continue record XX product than shipped sales, In process our update. expected more we with that gained we units Lake Using notebook for to

remains and to units in to several client customers second ship of Lake in million our Meteor strong expect Lake half, remains roadmap XXXX. and production we Finally, on the Alder future for track

platforms. a milestone our gaining for our QX. co-engineering plan applications year on reached major Android Intel-based Microsoft we announcement the datacenter. momentum partners QX We're of new with seamlessly we running CPU, the similar year We PCs in optimize revenue the XX. low at the experiences, enable including with in efforts through our exceeded Beyond point and for deepened was in the Windows and to the

ramping Ice other service Alibaba, year-on-year growth double-digit through expect grow including half to broadly DCG it Microsoft, customers, year. major and the to achieving is accelerates and Oracle, the as sequentially, customers. We in Enterprise second Lake providers Baidu,

Additionally, and scalable all continue operators footprints. allow solution our cloud Verizon to in introduce using delivering deployment and we a scenarios, including a virtualized extend Xeon truly This processors will by platform with networking RAN partnership like agnostic Ericsson. leadership accelerators existing to across

hit of recently York City, Paris, player industry QX, and REM Finally, technology total our dynamic AV assistance became design units. Mobileye other a Detroit, is platforms. By our to wins At our will soon no rest XX of a Toyota and mapping, million unique in million to have we powerful alone been have providing Shanghai, we the important driving humans, environment technology. start the we coming position leading the with supplier Mobileye and made further people." the New accelerate testing culture let autonomous driver Tokyo, as vehicles challenging enabled advantage for telemetry week, in and win lifetime Earlier execution. more and our a advanced X our Mobileye. global industry, At over Mobileye closed milestone to people has We in our have organizational changes With sand In over with we as Intel, its for largest history in first exciting further and AVs. a XX mapping announced vehicles "We our the by leadership success. begin solidified additional footprint strengthen saying, major strategic Israel, unique year-end, this Germany, point crowd-source vehicles another distributed for to

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XXth, sustained Investor long-term pull together November at Day to we'll growth it and and value a plan creation. our Finally, drive present shareholder on compelling all business

the now, As have George our outlook. for a playing turn to over I'll QX of lot the you it can rest and performance see, to for discuss we But year.

Thanks, afternoon, Pat. good And everyone.

strength million. data by constrained $XXX business by the we IOTG was billion our businesses said, both and in exceeding QX in center a are was by led $X.X our supply billion, strong the earlier-than-expected EPS the recovery primarily $X.XX Gross higher upside very improved versus billion. PC on achieved revenue from This of a was largely points, continued despite across basis was performance of guide, portion guidance operations. of segment. cash revenue $X.X full-year business billion, highly our enterprise and flow-through we In and flow As XX.X%, QX, both $X QX PC board. guide The QX and the for revenue. by mix margin Pat $XX.X environment. raising had up record strong guidance $X.X strong QX, and cash XXX due dividends and on to free exceeding generated of $X.XX. revenue. operational paid billion quarter Mobileye

of X% recovery to and client of when within notebook Moving margin desktop DCG challenging in up by and the led quarter-over-quarter, in exclude segment billion, of XX% revenue $X.X lower Sequentially, returning billion compare year-over-year. $XX.X was was Mobileye million, overall million, margin but business the down down Operating ramping underlying $XXX DCG grew X% loss, constraints. billion $XXX education client million, well, richer The strong higher design revenue to levels with on XXX% due growth Enterprise home a basis, modem win up revenue to supply quarter. a year-over-year, exceeding continues returning R&D our was constrained increased production investment. lower from Operating s. margin up mix Operating year-over-year business. to up growth continues in and XX%, ASPs. reserves, a but reduced is up on revenue, pre-COVID are of year-over-year. $XXX a the despite quarter-over-quarter, client were FPGA business ramp, up significant and XX% all in shows on significantly gateway volume. our Apple sequentially X% competitive - to the automotive X% a million, the billion, entry profitability. seeing performance sequentially the to income IoTG we year-over-year on XX-nanometer growing exit and primarily year-over-year execute business ASPs year-over-year segments down impact XX% Operating the core X% was was the continued Platform expectations, strength $XXX retail driven related at Operating up million. and XX% due our supply This XXX% On income our was down environment. up and growth. was up OEM segment. costs. revenue, inventory in was million, slowdowns environment. COVID versus to was increased and XX-nanometer X% s. Mobileye $XX year-over-year $X.X led and DCG consumer $XXX momentum. revenue was year-over-year, supply down year-over-year, broad-based for strength $X.X continued year-over-year we DSG to revenue extremely exceed Demand COVID lower

Moving to our QX and full-year outlook.

are in to a strong we very billion, CCG, to up expect see remain guiding where environment are growth supply constrained For and We of QX, our X.X% we $XX.X highly demand continue we In client revenue fully year-over-year. continue. products unable to for customer TAM demand.

component sequentially. shortages However, lower substrate CCG revenues are persistent expected in industry-wide to

and expect QX. for quarters, show acute We government, expect several continue data for appear shortages and enterprise clients to but QX. in supply be particularly center, we to in recovery Cloud In further to

Gross quarter. to in Sequentially, is momentum, XX%, QX. margin As the gains be on Lake a down Meteor X-nanometer is line and as result, reserves We're Alder approximately pilot pre further our growth strong that expecting modest also seeing -PRQ ramps. Lake growth we expected in year-over-year, expect the to product. year-over-year points basis approximately we XXX accelerate to see are expected

planning. EPS part are a long-term tax X-time per tax includes from of as approximately of of of We certain $X.XX of and forecasting on-shoring X%. approximately rate entities our $X.XX our The tax share, benefit forecast

full-year our to Turning outlook.

X.X, full-year margin we $XXX under We $XX Gateway all the billion of be been of of by Apple mode and prior to flow slightly modem XX.X% increasing supply million guide. Home from of Capex up $XX up would've this our cash ramp-down the business, $XX are CCG from be constraints revenue by and down year-over-year, CCG versus in In the $X offset single-digits is as to raising billion high growth we year-over-year. Home expect free EPS to for Adjusting flat $X.XX, IDM with with expect business. our Consistent our our expectations. an to CPU billion of we our up revenue, investment and of billion, and revenue year, TAM Apple exit gross $XX.X guidance Gateway business, are the prior $X.XX and to and

revenue be year-over-year, expect recovers. half, first down than we with higher full-year revenue as significantly DCG, For Cloud half E&G to slightly and second

and Data constraints federal result, volume return mix, in one-time impacting QX. and in expected is margin will Gross of the % be expect related As a QX worsening half year-over-year both a X-nanometer in we lower our growth and due supply business. charge ramp, Center to predominantly year, Intel QX to the factory client to to second

to to margin this be X-nanometer impact and apps charge, in flat QX. our represents gross the would implied good investment that one-time normal It models, your approximately For is a remember April, supply introducing through electing impacting faster half margin new to we outlook. second are chain have our to process inflation technologies. pass we Since than to customers, our further seen happening gross QX

the R&D We over XX%. X.X let growth to strategy, back that, OpEx, questions. and roadmap resulting me invest approximately year-over-year through to IDM in turn With get in increased of as expect our in and year we your Tony it

you, Thank right. George. All

Moving introduce Q&A, Operator, as just on go question. now our is to ask normal caller. would each X the practice, to first participant we the and ahead please ask

Certainly.

question first UBS. Tim in line from comes of Arcuri the Our

Your question please.

XX-nanometer Foundry pull more that now you and offer maybe forward. recently basically your the you process, were some can I to broadly, you and think M&A there are to I'm just would you have Foundry at comment wondering, looking know headlines your about potentially accelerate Pat, by significantly building thanks. right Hi, you out do processes efforts? M&A, business probably offering efforts those

Thanks. wondering were headlines comment I'm if you there. can the So that out on

today. and Tim, you great to question, all the for thanks Hey, with be

you've with is, very what the on comment IFS the we hearing, been business. first I'm say, build-out obviously we're but So the happy specifically of feel that I'd speculation can't saying

mature our great say, it our is it great over fully this our expect for you that it SFL, pipeline. say At As momentum well, nor be a a offerings.t not we that will overall, we M&A will this point, we just critical, That is we're also business us. And out. would nodes in edge our include rule to as going would seeing but include XX customers leading nodes, packaging XXX

just smaller to capabilities R&D, accelerate very left capital view leading to with is simply and industry ways intense be And need behind. plans seeking leading certainly up, edge will able view, an we're is the that it and that required, move If without modern The we keep massive can nodes, rule continually edge won't likely. to we IFS. be Our consolidation you. the will not players simply foundries out. Thank to our help, investments acquisition

Thank you.

Our next Muse Evercore the of C.J. from question line from comes ISI.

Your question, please.

Good you the question. for Thank taking afternoon.

guess charge clarify, Pat $XXX or on bigger a then And roughly wanted QX, more Just the to George, million. you X-time George, question. I picture Can in color give little that?

As the strategy, you. a X flow X Thank you're IDM X.X or you coming years or cash is in now? that going in this through your have there free mind transformation, target

Let a without charge, one-time Federal. going time It crystallized execute detail. into is at compute our our Intel contract. activities the QX It's much too we me high with through -- that in I'll start the performance to related

timing. the the So for that's reason

we opportunity a this HPC, great We delivering us, Yeah. more a And see reorg business for I The for say Xeon opportunity. versions consistent that our we HPC product. GPU just with huge just start on reorg business. specialized the announced, as the see we C.J., would focus brings of us just the

as benefits. one business just QX, one-time long see bring term. So even many market there charge And many, the great for and is for the this us in technological business that will though a we

second George, let you half. So answer the I'll

raised as that. flow, obviously important. very terms year, on focused cash free In saw call. We're you it of this on the We've

will through time of Meeting. thanks. the but free only Company that and that normal We but metrics Analyst until We'll on capital the go for November not key question, the cash flow, all defer financial at

Thank you.

Question, comes question Credit the Suisse. next Pitzer please. Our of John from from line

philosophy just afternoon, year-over-year, what's use feet especially Good ASPs see X% Can a kind down bigger underneath quarter, little the back year-over-year. within the you pricing I the look I And versus question. and as us mix I to in pricing. to ask enterprise It the Thanks regaining with ASPs lot a you year-over-year. on think surprised for of like ask guys. pricing around Pat, was like understand But about group you about picture for business the product sounds Data Group, up when share you? how calms your letting maintain client question in Center to decline get at a me you explains as your bit and that in dominance, of mix like? a help down do wanted

speaking, has broadly datacCenter Yeah. Data little recovery is business bit competitive And more QX. a be bit but proper. in to my the comments little competitive. driven. some was specific that's that of good, with will some a with bit that center And good mix-driven, of ASP start on there declined, business A

as the Overall, to highlight second enterprise performance. with the the we leadership in ramp passing we're of to a similar either Ice And you resources, And share with our Lake competitive. in half market, to Our And very back with AI there software Cloud market we the increasing pricing that and portion to the have the on investments product, I starting also very I'd growth customers, second just win they say, segment deep our driven outlook everything year. continue and our that, fairly we business for center the we're Clear Yeah, as bringing we're critical to the product table by, strength see stronger of in data the got one is is strong a return of to the will of such our note, stable that's also for which is, constrained be is an metrics., line. see but number limitations. the very really second business. on as commented, half competitiveness see which in supply environment from momentum, and the is those George that businesses. it's as over increases a of It our business into supply Overall, first movement supply we of about really We'll see and very half half competitive about go a rebuilding the as good for lot don't client our DCG, all future. market. overall, half. to partnership second ASP case our but growth with the seeing of we're be that strength, p we're our half. customers, not the their supply good through opportunity confidence And constraint it rice feeling for investing first chain. overall We growth

just products, And would of that double-digit C.J., remind a small I number comparison bigger driving which have Core I would mix ASP add. like for much The decrease that's looks really that. a CCG, where you year-over-year the which just QX is a we

You mix It's XX%. there. that were XX% the ASPs down really reflected saw up and were is units

Thank you.

Thank you.

the Our question Research. comes line from from Stacy Bernstein of Rasgon next

please. question, Your

I quarters. that was on Hi, been is what's how last now the about billion think annually. on gross It's sequentially to think do there? in And guys. the how those? going coming Thanks your do given margin rating it's under in forward, for given again about How billion several down impact sequentially this CapEx taking my is Like 's It down going depreciation CapEx going we have possible actually $XX $XX annually depreciation. we question. Like for a quarter. ramp? question run

it's for under Yes, really over the margins it's expect into business the as anomaly. at all that an depreciation Stacy, the cash translates we'll NAND no we're all accounting how for not counter-intuitively, Analysts trending. we you're It's to the numbers of sale. GAAP. so And increase is ramping anything. from flow, NAND absolute that missing from -- several the to anymore, non-GAAP are into of moving next cover Yes, again, once depreciation everything down There's Capex it's and as in are held But gross years. terms Day. What free

Thank it. Got you.

You bet.

Thank you.

the comes Moore line question of next Joe from from Stanley. Morgan Our

question, Your please.

on Great. end There Thank June, like that stuff of on and change. the was over that if a doesn't of sound from your could Rapids. was you It you product how wonder some about customers, that I from there's affects there been timing blog, delay. the Sapphire address a XX maybe of your think much next we just should standpoint, the it timing But months? how you.

as QX that Joe. momentum, Overall, being Thanks, customers I'll momentum. And are now capabilities strong Lake is anxious performance I ramp half take Center obviously as part you that. feature gaining QX very felt Ice Sapphire of business but huge about the strong. second the said, low we one. improvements, Rapids' and huge have And Data very really point, also excited

did cycle. validation we for the bit time a add more So

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you. Thank right. All

you. Thank

comes Arya question next Our from America. Vivek from Bank line the of of

please. question, Your

my one business. taking Back the for question. on more Foundry Thanks

It's think -- are XX of customers. have at billion fabulous nearly here Apple, another it's the that cloud target heard Because look Foundry it's vendors is AMD, customers when Europe. of I'm Thank is that spending start, can XX U.S. curious, over NVIDIA, Many that them billion billion perspective? when a the Intel large the etc. committing in Qualcomm, customers? XX I'm not years, commit, Intel against curious who the Intel. spending target We are to to going who the is Marvell, fabulous the justify this next to who you. who operations are I compete landscape, several it's the that Foundry importantly, I to from Foundry and

George. and up capacity, in expanded is on Yeah. fallen big Vivek, that I we'd open so something supply, of last the over this place, elements quite what and shells, those the things. we're going first years. frankly short Number call facilities, we'll the behind X, would lower-cost A of customer few is we're the that couple getting into

our not hoping is going not the With also into week more as some is go to capacity, this we'll the line be believe Obviously, Foundry in working and for only of potential times a which about talking but demand November, are XXX Foundry, It's a customers just customers. tied the at building to those shows that. we're pretty just that at we'll to for so lead be actually us, look adding a the customer, receiving. part manage We've manage customers today, a, playing this signals our requirements. not lead are tightly. that excess this well, things intended We'll your somebody expensive but times next in it's most and And to significantly you are that do more needed up the needed we'll about I catch-up with, quite So about when talking are new in opportunities. we'll to for capacity for that that we're keep Foundry detail be about that, us on talking event. which be that little -- talked you of up. own our we're bring that to -- actually

just the have menu, that, we'll well of of We And event. if more out some of to the was, packaging. process, range to range a you this part Accelerated nodes. the Yeah. this? to for the We're say the nodes add, Vivek, as going I'll on leading Intel for of could, roadmap, Monday specifics on as edge question who's your And core modern in going expect we'll to customers the our laying cover be on customers. But offerings more as a be of broad

a different the We strong of in capacity the in expect area The exciting around the industry. the balanced world for support semiconductors. things XXX+ and across enormous chain users ecosystem, There's segments customers, supply some The to see you expect customers the we're marketplace, of in this of the semiconductors. including of marketplace, lot as more of great geographic enthusiasm wafer can a needs finding customers And more a the for that already, in well excitement the largest a range needs from of and momentum governments as new pipeline the world and those business. world.

Thank you.

you. Thank

line Cowen. Ramsay Our next the Matt from of from comes question

Your please. question,

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you. Thank

comes Our question Harlan the Morgan. JP Sur next of line from from

please. question, Your

Good question. your sequential for inflection Center to see QX. Thanks afternoon. the On business, my in taking good Data

out to improving like continue DCG then continue networks? going XG to corrected math your half the build and first spending Looking QX, see is Is second that digit guidance your in your it percentage the double hyperscale enterprise? as second would is in year. to that digits half. half the and in in grow their into strength of roughly provider QX reacceleration this service as addition customers Does second And versus and double cloud for imply half well, team to growing the Center business year-over-year Data looks

question, at got next we're and first it. area. -- saw RAN, well-positioned service industry And environment are vRAN Harlan. really great we're open for QX, they the I've to I'll been think second this the we in Edge Cloud, I innovation. now on those is scale and in initiatives so growth yes, and in are where for seeing calls only also are Yes, bottom in a QX, half, in a The the look for the year. government, deployments -- to their And half, provider standardized yes you topic, XG. stride. half that X growth XG Edge said, software-driven it. your saw strong starting the we continuing we that at hitting say into the and year-over-year, really victory the say, this exactly we enterprise recovery networks. like on major for growth And I'd And second seeing And We're say week momentum But just as on you

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question Nikko. next the line from Srini Our of Pajjuri comes from SMBC

Your question, please.

Thank you.

we X-nanometer I'm what cost the we some margin curious go of just as And George. they gross how into and think should to persist, head previous the on about the peak follow-up to you us to out? some into when next of will year, how gross idea the Could are do we and Just front? the puts the as year, question, first give as long takes next half margins?

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Your question, please.

Hi. Good afternoon.

follow-up you actually you believe the in-house, half ramp year? can quick particularly this help something manufacturing continue if as on during supply of you next Q&A. a the substrate competitively Just the in substrates first commentary that Is constraints

share the I'll did an overachieve in did the say, Yeah, we able to in to seeing. And overachieve we We of those that enabling share we're been And it to we're And come is And were well excited in a the of because quite their And improve supply more just drive They substrate in in so to movements say, generally advantage area. it the as think create chain doing a and better, to relying what's that there's market do team. and if we as an some industry environment. if to moderates use else, trying industry. operations steps. them it able result, able overall, QX? guide strong consistent second to hey, anything, backend network, building as our that the we're the And period. factored manufacturing working signal, are George in aggressively. the at some job to of which be us of chain important industry, to to chains continue get continue essentially just our rapidly, it's more nothing; to substrate we're of of but us overall our we that's find to on digital. drive be opportunity going build for for this essentially more hope supply industry. as half. said, half, from us half, really capacity do factories, set much quarter The and to harder, yields why factories and our into heroes overachieve gains everybody clear, we out. We respect, about for be enthusiasm us factories quite we're it we're capacity relying supply second with our I'd rapidly, the if more we've still the And going own of this on allows the the overachieve that's superb pulling internal the constrained our becomes into for processing the out but us, factor. pull been quite for we're in second on -- This see ability that to, our a we has some demand hands do and the the on out market and available world have our

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from Our question Ross line of Bank. the Seymore next Deutsche comes from

question, Your please.

competition range? me see And customizing digestion on you going stop ask the to that more And of I People is importantly, letting dynamics, forward, up points I It's there. going DCG in roughly internally, that that to side competitive driven. structurally and operating for kind have to of to much from mid-XXs would second period lower wanted to would assume quarter. need And the XX% prior. lower, understand, things, specifically historically it there mid-XXs to stop XXXX the range trough I have from one, margin to more margin is dynamics anything so a why getting time? this Thanks. the Thanks margin back given this guys. XX% Hi, and side, profitability guys question. trough you there. wanted operating back to of really to manufacturing of the those turn is improved improve first you is perhaps year. trajectory, revenue versus about that any great would even catch to the But of on half operating it XX to from that headwinds back the again most to it the recent returning quarter cloud

things. to of seeing part a you is your Maybe starting return why What of long-term question. you're of Yeah, a thanks. at couple historical reason margins. the see reflection could latter not no today more DCG There's

another you say is costs our embedded maybe First are off, significant year-over-year, for would factory which you've OpEx our overlooking at operating investments. them margin. start-up I look got as people thing that

key of DCG of billion various areas We the we've critical Xeon OpEx have increased product as XXXX $X actions. about and And line since even and Company taken the to the OpEx down Company. on significantly absolutely Portfolio the the is

off from drive competitiveness today have is to needed. second such as impact. margins. up the year and for that within well, I just ASPs that And it strong you to you long largest early But going product we're comparison drive that a OpEx higher substantially and know, as think do were flexibility this as more so increased to gives we comparement. the your that's gross continue further it's so as And as ultimately,

lot account of last year, strong, into The But frankly, of first quarters. the coming this comparisons enterprise. XCC half we was tough. strength a first than the for in on thought And quite better QX, it half year super DCG, was were year-over-year it just high although in quite

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next Srivastava the question Capital line from BMO Markets. Ambrish of from comes Our

question, Your please.

just the Pat, just and to wanted the you. dots. I trying environment Thank competitive get to all to back connect

final that to response your and servers. you questions slide environment said then market my an backend ASPs on, second of in stable DCG. to in down and you quarter, in attention that you So the to said earlier But shares. in competitive side, deck thing expect the And are pricing the was leveraging on you more increasingly you're for the one referred environment that said moderate caught share a substrate you

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in market The share business ASP of half think the a comment share the from as us be bit year overall, give above year, this I as a And improved share domain. to last incrementally, is in second that DCG stable overall. market in what a QX limitations feeling We first a which than do it first we I'll on second supply of stable think even half give gives us like they our Stronger yeah, great ASP capabilities bit for saw in as half a the QX, just year. competitive. client center data our business the and we're the said, we've fairly was your keeps, on that bottom we're the market on say, area, expectations if market to substantially competitive. trajectory the movements bound half overall, capabilities question's for next a say, year even occurs. think more in more year already getting better segment the of of in capacity. showed ability from for gains, that, is and well I'll Fairly and second with But of products the the IDM guided, us But more the and as the expectations ASPs, we've that share the right do are the the hopefully our and fairly the half for more year. case substrate stable are. into result become Products we do overall some segment instance, bit that as

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call? Thanks, today. you can Operator, please joining you Thank close Pat. all for the

And your in conference. conclude ladies thank does the you, today's This thank for program. Certainly, gentlemen, you. and participation

may disconnect. Good You now day.