Intel (INTC) 27 Jul 232023 Q2 Earnings call transcript

Thank you for standing by, and welcome to Intel Corporation's Second Quarter 2023 Earnings Conference Call. [Operator Instructions] 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. have earnings copy are presentation, our website should earnings the available you investor and release both intc.com. now, received of a QX on By of which

available the today comments joined our from hear a In CEO, our by presentation online, a I and by us Q&A Gelsinger; both David joining webcast window. followed those is For session. brief also CFO, in Pat moment, our am will earnings Zinsner. we

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

Our provide references useful to contains discussion our to financial investors. also measures believe information that we non-GAAP

SEC could release, risk Pat. let annual appropriate, Our most on things provide to our also actual XX-K cause including that, report information GAAP recent financial turn and measures information additional where on They to our our to factors expectations. Form non-GAAP over with from me specific measures, financial differ with provide materially that earnings on more results the other corresponding filings reconciliations,

John, you, good Thank afternoon, and everyone.

confirmation and the value. the efforts our our our Our our efficiencies marketplace. maps expectations in quarter results and remain the cost maximizing goals organization and to in confidence on in both to and strategy is We our contributed savings to delivering line, process map, in drive strategic and to across the and center shareholder achieving and second upside customer demonstrating product committed a profitability. financial long-term data Effective all road quarter return and across rebuilding improvement on execution bottom the continued Strength client strong top exceeded of road Intel.

to opportunity. on to at the from see node drive every customers a QX, We best the position unique real AI AI benefits In we TCO possible our are we for in believe accelerating our began continuum.

of workloads ubiquitous making and is continuum the scaling usage it across democratize full AI, Our and models. to it strategy

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day have we ubiquitous to or further and edge by $X Services, with trillion reinforces opportunity capitalize cloud to superpowers to is significant supply along sensing, previously X the well As global a outlined, XXXX. as for connectivity, the Intel growing of compute, secure, underpinning is X X.X us chain. AI as the infrastructure pervasive IFS, our of our need accelerant a diversified our a correctness tension AI and on semi-industry of positions IFS geopolitical and every strategy. IDM market strategy, resilient Foundry

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We XXA offering key against are executing well our as foundry progress a make to and strategy. on substantial our Intel continue

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progress this good We XXA X significant also quarter. made on opportunities

as ambitions in the In our facility strategy. The sites, Poland semiconductor test is and well for X Silicon are Poland. with and in to we in announced the our investing IDM an And smart of out new facilities go-forward build investment in while to assembling of We Ireland scale leading-edge important capacity strategy in strategy. our building and to Magdeburg already part capital Junction a investment at an foundry strategically region. manufacturing X.X we Germany advance our in operate QX, further expanded as overarching plans adhering

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QX, Intel in milestones PDK and highlight performance density on remaining and the for would yield X and For defect is nodes, X met released overall track targets. X.X I performance

power 'XX Intel node will Rapids first Sierra our lead thereafter, running currently stepping both RibbonFET cases Lake, the increased the efficiency delivery and use using vehicles area and ahead a enabling will XXA, CPUs announced graphics. our we to Forest for in gains be demands following first silicon first in industry, implement for like shortly Granite of compute We volume is that in AI, its savings, power X-plus with launch product PowerVia, half and client the ideal years Arrow QX, Intel X. On In backside performance fab. first we for

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to we in on manufacturing remain the and to run half XXA, chips continue track and external being ready XXXX. Intel internal test On of second

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products. Moving to

in business segments in QX have strength performance. client yet recovery well, seeing leadership Our and the executed group as modest we share as segments education consumer a where and exceeded as expectations the in again gained well premium

with We down inventory our levels. customers have closely manage client to CPU to healthy worked

to strategic recovery As as execute the half we normalized. in the against a inventory second has our see year sustained initiatives, of continue we

positioned as believe WiFi the the that a inflection see over the AI capitalize the we importance emerging is And XXXXs. years we the that Importantly, growth for very rival point opportunity. PC will and early on coming critical PC of market Centrino Intel well to the in

gains on on is will our Processor XXth a PRQ road on In security map node regions in increasing enabling feature as AI Lake Intel family, over built usage the levels. is demand efficiency first by Boost, Gen advanced enabled across experience addition, positive to technology, EUV our to neural ramping low-power and compute and also of previewed performance want most anticipation which above for VPU, and AI and dedicated cases pre-pandemic delivering AI capabilities, AI improved use at strong the need Conference. platform Meteor and Lake key the design for QX and dedicated long-term key Intel last we Microsoft's for Meteor be for leadership remain Lake client density through household quarters. Building X PC PCs the stable inflection as will chiplet were outlook point productivity, client will of engine, Boost. power AI people creator a in life hybrid a well performance. Meteor first extend share Intel first XXXX will our as a in With Build processor maintain our our X, will we sensing, many Foveros graphics integrated packaging bring workloads, work, remains XD

I despite Scalable showing Xeon while to Xth to our of or we customer In am announced poised demand the our strong overall is mixed scale in effectively with the pleased our say brand end Finally, are recently in Gen ship ASUS millionth Next the NUC partnership. our that Gen continue to Computing this Xeon data coming days. direct environment. business, well-regarded to will making the Processor unit decision X center, investment Xth Unit market

of Cloud Xth by Gen announced This quarter, Google Instances Cloud. we general also the availability

of We show a when alternatives Also in AI-infused validation published strong GaudiX Gen our third-party great the performance GPU saw for and they neural data as market Xeon acceleration AI we such targeted areas the compete both open progress on are training graft more published capabilities, are estimate performance AI also data like MLCommons shipments than applications MLPerf and in results. networks and End-to-end we X best that Gen showing QX, Gen workloads. benchmark Habana alternatives, outperforming including Xth AI AlphaFold competition. Xeon saw and with Xeon from that XX% versus Xth the algorithm DeepMind's other now price center Xth

responsible enterprise-grade, Xeon to recent our by Group Our within collaboration generative strengthening our data was Boston deliver and our high and reinforced security offerings Gaudi business the and with maintaining AI, to Gen Xth Consulting privacy. market AI levels while leveraging of value of positioning announcement unlock secure

CPU center launch road vehicle Sierra to on half launch to 'XX. of will Scalable in lead stronger 'XX. Intel and get Xeon for incrementally of will Emerald With follow in the of map X shortly Xth Rapids, our continues schedule. first or data remains ahead Forest, Rapids set Our Gen Granite QX thereafter. our

is powered Clearwater progressing Forest will hitting and Sierra Forest, and manufactured on power Forest, the Intel follow-on be Sierra Sierra on schedule. come both is performance have of targets. with customers customers Rapids, boards ahead validation and volume Multiple For XXXX silicon market and Granite all Forest in their XXA. to to

particularly CPU enterprise on world expected persisting and performed consumption recovery persistent is server QX soft servers the we industry. inventory ahead entire remained rest the of the the TAM than the but longer taking all While digestion in of the weakness half. in see We across across expectations, second where segments for

near-term purpose the impacted focus the wallet than on rather by AI cloud. accelerators compute Additionally, general share in

our XXXX in share decline We AI recovering more importantly, gain to server expect well see CPUs and and as is TAM portfolio see beyond. term, to modestly sequentially positioned before we CPUs server accelerated expansive product in to Longer QX we QX.

AI product which accelerator includes expanding lines. pipeline services surging and for The products our for engagements is and business the MAX demand Flex our Gaudi of products,

share. product of Indian leading Technology, line our of AI by of billion pipeline opportunities Hugging through products Gaudi Genesis new is is in as $X AI Madras, leaders, our instances and is of demonstrated lion's at Face with Cloud. expand such now from Our commitments the and the value public The companies Gaudi over increasing Stability [indiscernible] driving AI addition Gaudi the emerging AWS and to and to AI XXXX to continuing Institute and including rapidly

decades leverages building make shipped and we QX, XX-qubit, next-generation our expertise. transistor of accelerators, to present to addition a and near-term momentum of key which chip, Intel. our test silicon-based we which continue technologies, advancements Falls, In for in significant quantum chip In investments with uniquely design manufacturing family opportunities Tunnel

chips. fabrication silicon-based providing only of times single similar Tunnel qubit than quantum voltage cost-effective usual alternative more achieved with CMOS under quantum XXX-millimeter strongly is our smaller the with is manufactured XX% XX,XXX a yield approach dot wafer approaches. test Falls computing, We rate uniformity the to X a true chips believe approach silicon to path commercialization million process,

Turning stronger infrastructure. and to broad-based across are PSG, auto our relatively trends markets NEX Mobileye, and demand like industrial,

in did we businesses year correction, mid-single a trajectory, of much see NEX solid expectations anticipated, we Mobileye in excluding these year-on-year continue and decline PSG, which IFS contrast, memory. as a better In 'XX, to than Although into market, for total expect collection on digit semiconductor third-party inventory calendar continue QX a growing and the the QX. in see growth

record volume our customers accelerate the for the we interfaces. Looking workloads production Solutions chiplet to with bandwidth at announced In Intel a and third is delivered consecutive QX, with integration in Group, R-Tile processor seamless shipping quarter. X results Agilex help qualified devices we specifically Programmable highest the

We year the XX bring products calendar to have to we market new XX now expected in PRQed of 'XX.

Intel, during Intel with first solution demonstrated and on Intel industry's the the Ericsson successfully Scalable running For Xeon Gen vRAN Xth HPE QX, Processor NEX, vRAN Boost.

foundation of World open at standard as In RAN, telcos Xeon-based addition, to industry-scale the Mobile we announced programmable, to utilizing software-defined collaboration Intel accelerate infrastructure. Congress enhance a transform will we platforms

Volkswagen generate to with demonstrated with announcing traction profitability continued their product eyes-on soon supervision that advanced QX design win by Mobileye with will collaboration Austin, a begin and impressive Texas. hands-off Porsche testing strong the in and in Group portfolio mobility-as-a-service

ADAS technology co-developing LiDAR that photonics technical drive the leading with Intel's based continue Mobileye's Cockpit Intel software-defined technology engagement products them, and to automobile silicon drive to We on FMCW, and with partnering vision integrates commercial offerings.

quarter, the offering meaningful we efforts. the secondary continue executed our we Additionally, in value optimize that proceeds second generated as creation to

achieve our in $X the during our remain XXXX. XXXX to road billion track exiting on maps $XX In reducing of billion addition to by goal on and executing $X quarter, product billion process and to we costs

for foundry efforts a efficiencies. for to and internal fundamentally our our accelerate changes separate group, facilitate drive during which establishes external to best-in-class foundry our to TD, operating incentives new derisk and structure, model cost mentioned inclusive and us P&L IFS manufacturing our of webinar, enables As our incremental technology drive customers

have already is tight expedites litho numerous time TD, field We in units test loading, underscore business and in manufacturing including many and to important cost efficiency, sort more. reductions reduction, improvements, to IFS. inherent value sustained packaging staffing, identified gains due our factory It and utilization improvements, the the creation connection between and

IMS critical EUV X in companies Further, technology for position is providing semiconductor to mask creation. critical our tools nodes, drive efforts. a created Capital in more market decade. our high that agreed writing of who multi-beam to half already enabling even as becomes optimize has Bain are of history second IMS partnering on to X with this ecosystem minority years capability to long the with NA we the Finally, EUV we the sell with and continue and adoption benefit a significant the portfolio, growth Nanofabrication to brings value stake business a our of

alive we exposed will this As Moore's and and Intel, well, be continue and transaction. through gem Law keep within accelerated is business's the IMS a growth hidden to very

our still years continue nodes to we X to While X.X work do, well X we strategy. on track. have advance remains in IDM

is execution product progressing Our map road well. and

early success of enterprise, we to seeing and as foundry business, network, we democratize truly cloud continue client. are to and AI our and to work signs from out build We edge

for momentum saw our on capital strong effectively over and it to cost executing turn to also us discipline efficiently I return and as internal model by We that, With our leveraging and are we future. our financial XXXX position to savings foundry strategy Dave. are profitability, the will smart

beating you, the Thank the in second afternoon, good both comfortably Pat, business results We line. bottom quarter, and top everyone. and drove stronger-than-expected on guidance

we While pace conditions, remains the expect macroeconomic moderate. improvement continued global to recovery of

to and structure cost continue expenses improvements and longer on our X.X can to prudently near IDM focus investments our aggressively driving we will term. We fundamental managing critical what to control, prioritizing transformation, term

gross points results. impacted softness $XXX offset $X.XX Second quarter markets, revenue. Mobileye, better $X.XX, Gross Revenue management margin strength, as our midpoint and CCG, EPS revenue disciplined resulted inventory by continued the was on above OpEx was than XXX $XX.X the quarter billion, than network guidance return for elevated guidance. of stronger profitability. in basis NEX DCAI, more our XX.X%, levels and was in better exceeded to partially million the by expectations which beating our and margin edge IFS guidance demand revenue in and a

or adjusted accounts was cash $X.X resulting operating $X.X negative quarter. continue $X the million billion and dividends days X in paid billion, cash inventory was was we $XXX of we management. by billion, XX or billion QX billion flow $X.X free CapEx cash $X.X in an quarter, sequentially. billion, as days up in focus and to disciplined the Net declined Net $X.X reduced by on of flow receivable

offering actions unlock investment completed billion billion Nanofabrication more shareholder weeks, Our in by Bain few of to and the business help the value. of Mobileye in and our upcoming last $X.X roughly the IMS Capital shares cash of will than $XX generate secondary

strong in our more cash profile to sheet to of QX. X.X than balance portfolio shareholder IDM our with bolster These continue avenues further exiting short-term broad focus value We'll investments support and on our of actions strategy. of from and billion assets generate investment-grade $XX

of quarter and the up as unit expectations sequentially XX% inventory business pace customer ahead CCG quarter slowed. burn delivered the our second billion, to for of $X.X of revenue results. Moving

of more toward the quarter higher anticipated, the showed in pre-PRQ As of improvement launch and half higher inventory. sequentially the of equilibrium billion, ASPs moving the improved of second and sell-through offsetting of to expect $X for declined preparation half. shipments see we costs Lake. market in to in profit QX, inventory align due execution expenses, Meteor in generating reserves shipments unit and the CCG reduced operating than education second closely operating $XXX consumption million an older outstanding revenue, more on impact to modestly

was billion, and of half digits sequentially. CPU of 'XX Sapphire up Data a and double ASP delayed ahead improvement TAM of sequentially of $X CPU X% to half, first the Xeon sequentially, enterprise the expect second year-over-year slower-than-anticipated across declines recovery the TAM ramp to TAM expectations continued CPU share up year-over-year. business with of DCAI X% in revenue China growth. market return contracted CPU we of QX, the in and Rapids and stable while center has in XX% magnitude remained the meaningfully a in contributed relatively and markets diminish

DCAI delivered XX% ASPs expenses. revenue and operating margin. our quarter had Within sequentially an a operating with of record quarterly along improving up of million, consecutive $XXX year-over-year, and on reduced higher DCAI, operating revenue, loss another record products FPGA third

in more business demand year we to this backlog levels. the half second normalized to customer of as expect return to down profile We natural the work

quarter. reserves sequentially on demand to telcos QX was levels, revenue in the operating uncertainty. markets due 'XX. see of slowly We working expectations Network infrastructure elevated NEX by below down billion, record through expenses. least are QX through and delayed macro operating reduced elongated million $X.X sluggish to at remaining significantly lower quarter in $XXX and and NEX recovery, China a investments the our inventory and loss have weak inventory third comparison edge improved

for revenue outlook of and with higher IMS Mobileye million, revenue start-up X% $XXX and stronger million. continued the on with loss was year increased Operating flat at doubling morning, QX. nearly $XXX XXXX by $XXX to costs year-over-year to year-over-year roughly was Foundry was Nanofabrication operating sequentially adjusted improving This and higher sequentially factory Services operating Xx Intel sales million, tools. profit sequentially income increased Revenue revenue. offsetting perform well $XXX fiscal up packaging midpoint. in Mobileye million

QX was on discipline with spending to billion expenses in another of quarter reductions 'XX. of achieve $X year-over-year. down We're track strong cross-company operating XX% spending

company couple OpEx to Through goal. $X.X austerity committed stop rejoined now 'XX direct which lines better investment first in since combined have client annual With in nature, measures more decision business month, of of our year, of billion are a the we than our of NUC exited and the a the X than focused the Pat business in billion. this savings investment earlier hundred temporary prioritization $XX.X tracking million half is some dollars of with

Now turning to QX guidance.

inventory a well expect revenue IFS quarter midpoint we to billion the at billion. and positioned more At expect center, quarter, client in and quickly of face and forecasting Mobileye margin of strong We the $XX.X to XX%, $XX.X and midpoint tax to levels edge generate We're revenue to growth. $X.XX are macro continue of CPU and third $XX.X of mixed of EPS Data third XX% sequential shipments match elevated year-over-year rate gross sell-through. of the billion, markets while signals guidance. network

higher margin We and on pre-PRQ inventory reserves. sales expect lower improvement sequential

capital In we're CHIPS in governments out last in to we're the well to to some and run which and see incentives, have the positioned Investment charges, time laid positively U.S. of include smart cost and through meet the and our inventory starting of investment While agreements of demand. under by sales. in equipment take requirements guided improvement closed we customer flexibility to to most manufacturing capital by the some capacity in impact creating framework, continues Act. weeks, factory funding Poland be will proactive benefit aligning through few load with purchases significant Shells Germany,

the of in capital capital requirements strategy, as 'XX made at in offsets expect across possible by Looking a capital mid-XXs percentage smart aggregate. revenue and intensity and net 'XX we our

XX%. or our that, assets While Having track for the not in 'XX factors. assets to of expect uncertain we over and offsets end have XX% land receive will 'XX, CapEx the capital a some on changed, said gross the the range of expectations of capital our months timing to number could high is next level in confident depending XX of to previous of either we're and

on results maintain AI conditions. recovery forecast well enterprise, the improving process Our cash business to to We and financial me to opportunity and China of we our a John. throughout Intel drive Accelerating in execution and units. execution back commitments continuum, reflect near- stakeholders. create in With in compute markets free slower-than-expected is capital our turn capitalize our increased owner's generate AI like cases use and and of flow the value on for our QX the year. the of the growth remain positioned financial across our demand the improved let key prioritization and of will that, product, macro over sequential revenue Despite for consumption each call focused long-term the and

Thank you, Dave.

transition our please? We to we of With Instructions] have Q&A Jonathan, [Operator will that, can caller portion presentation. the the earnings now first

Certainly. comes question Deutsche from our from Ross first Seymore And Bank. the line of

wanted but Congrats upside focus, DCAI there's Pat, mix quarter going strong some the I forward. data still in the the on center, like to things. side sounds of on it results. trends the Strong

a you you out how about potential guess what is forward? part end? the CPUs, of playing where versus to I concern, And talk going and discussed Can upside is it just you expect accelerators the when that out So that with, concern that that crowding drove question. X-part and do

the bottom great well, both Ross, for team quarter to business, good financially execution, executed the regaining designs, obviously, just we good the hard the in map and our execution thanks for fighting I'll the quarter, execution. With as execution. raised, as center, my market, winning road aspect execution regard as on momentum, data just well say across the well. line, super the of I'm beats Yes. great proud top, of every Thanks, congrats this

days, said, Xeon the the millionth Sapphire couple X. our we'll Gen unit of Rapids next the you X at see As in

as good well. good. good so we're feeling feeling in about very Road maps very the of future it's the overall, So business shape outlook

every aspect of X whether heard edge, future cloud. our and growing the in today my product gaining by it's as and X or lines. or participating Gaudi the enterprise also the say think so we're client, There's we quarter, do and with cases. And We That that As softness. some we is said, at I'll Xth prepared just performing AI Particularly, we big to look Rapids, AI of MAX those, that that customers, quarter. next we'll you we through. business, we're will and significant have that momentum. some show $X lot cloud burn in XX% of Gaudi, lot last Sapphire still whether particular, do Granite that of a we're put inventory EcoRP least, well. working all Gen with pipeline, see map, energy putting over this remarks, their whether said capabilities. has or build-out. That on-premise expect accelerator a their driven Xx Flex is remarks, is market to high-end surge being training AI enhancing AI have as prioritized be expect that into We're use in the And it's budgets workload, going seeing as we affect now center market, our of which Xeon, it's balance the will the the more said, a building right, over out that think data about is near term, road a We environments. of do focused right, In the their standard of see into time. Gen And obviously, will billion of formal Gen portion in to not AI more in we portion be a of we

and the AI opportunity balances workload to going to of position the CPU in democratize portion products. our we it. And that have CPU entire for participate real accelerated So strong We're accelerator. a portfolio between of we're across time over as seeing obviously,

follow-up? Ross, have do quick a you

Dave do. sequential I well. side. want beat to question and the quarter margin Nice quarter on -- on as to a gross pivot I increase for the third just the in the

the revenue know back some the into idiosyncratic of you I kind the Any that sequentially be even underutilization? margin as reversals year? about of side, important, pluses third should of and can blocks half, the is pre-PRQ us just the the the of of increase we half the into through Beyond of which in and quarter we those gross minuses aware walk think some second

Ross. question, Good Yes.

repeat second We cost a quarter, revenue that largely just in the fall-through, revenue. of had to of obviously in prepared beat function our a fixed the good So we was got significantly, I what given nature remarks, said and business. the

was helped quarter, margin us what the we that see obviously, so third really sequentially. the quarter. In significantly on in revenue the outperform side gross second the growth really do, at And midpoint,

so in terms will of be that improvement. And margin helpful gross

actually good modestly down, I We to down revenue. is of some X going fall-through our of we come inventory. would underloadings We're that our get of expect, but incremental again, cost pretty see also for period One, come say, that as get charge a underloading for just underloading, reasons. function some we the of the

some through. time takes to so that flow And

a some modest from reserves And to the point they're down on be other as quarter. will decline but But out, will we gross helpful will Rapids, the margin not SKUs certainly quarter. quarter we -- the more that some front. Lake Emerald meaningfully but this in in Meteor reserve it also nevertheless third then be impact we it. will and the it the pre-PRQ you because second So have of will quarter have third that impact expect a launch be will pre-PRQ then have

not down So zero. coming to but

perform to improve the better as and likely come so pre-PRQ in again actually the on reserves opportunity to forth, fourth We fourth well. an the have loading quarter. quarter, should are the off in front on fourth we the revenue quarter dependent So given in that obviously

an talk So longer there's term. front. I'll some, I think, just some opportunity take good the tailwinds to margin gross on

of having the and on will come because quarters for sales. be of continue We through underload it cost to then of inventory out cycle weighed some down through just nature

will and gross margins for we have we'll And a about some will will of product, to joined gross costs of hit the these out Pat up of internal through laundry we'll process the are then X of a and prepared margins Ultimately, of will years. But to So terms where that performance you the going since terms into then terms be really costs have process as launched of in leadership we give charges that couple enable us. for high us in parity talked us affect long about startup and going kind mentioned, products areas multiple our and quarters, to not nodes X a went margins. that underloading that -- course, get back of Pat as we remarks shows term. benefit over in model bring And have we're he see. the foundry amount list at in of we're that in start-up will headwind. of significant really, as a for And that a optimistic years,

We think pretty over amount we time course the margin. by come in XXXX. But opportunities won't done multiple gross out -- that be I expect there. years hit mean, of improve to to there be the I we the of meaningful a multiple will

that has talked up a And in over what seeing about Pat of we're improvement show today I the in is beginnings So the improvement pretty think seeing P&L. time. significant gross margins

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

Sapphire with you bigger. was was in that your think a kind what XX% up center cost you about you is see talk And I talk factor and year-on-year, to Can that just obviously, Sapphire to in get going pricing platform prepared DCAI? expect there. that? of said data Rapids you remarks Dave, to Can Rapids

have AST that terms obviously is competitive more we more offerings, product enables Well, core as market improving in to as count we confidence in the costs, get our of first all, the of on increase Platform and okay. pricing. us

core as helpful. count, affects certainly with cost Obviously, So that's that the in increase well. the

in of from underloading the goes structure get data in around we the obviously as model of with. what past X scale charges, terms we drivers internal getting and terms away cost do up -- cost is foundry in larger of these start-up on our will get X But the and nodes be hit years, longer up. which costs as the So we certainly get center

products us in margin overall and that Granite of later are the of start stronger half margin things, term of And gross and of be the even and those Forest year to the to as really so data improve first drivers P&L we produce data competitive, enables help will terms And outlook side think, thereafter on should get Sierra be longer our center center. biggest improvement. in launch I that next the

follow-up Joe, question? do have a you

Sure.

North Just the also talked center you on some Can there. seeing between seeing anything you versus to Is X? data you in to the different talk it you're QX, different China as you look of about are enterprise think in I servers, for also, see cloud? -- America? do what And trends versus cautious you

said we the -- and as And thanks for Yes. question. Joe

first question was more of one of pressure the is of reported, as center people expect we market, accelerator bit a in bit And remarks, to for I all have the overall. And Ross guys, cloud little as said has data prepared it. It's by stronger. down then of seeing be do factor spend As a QX, China back come we some that the the inventory. and enterprise a the from in from last weakness the hasn't driven being well the much strongly think, TAM around digestion been would of expected

gaining the starting as increasingly processing, improving. in momentum showing preparation, results of in position products see and and So for X AI CPUs Gen I different as That at are of right? the beyond to seeing to think a We're overall capabilities our of Google's of said, best improve, those industry our AI. X networks, data graft the weakness innovations use through different QX. we're cases like right, data seeing people well, and is our AlphaFold aspects products together, also leading least benefits look is somewhat some on strengthening neural We're the which bit

together, wafers of in Shores, for long-term about have taken the that Falcon center Also, our we all X, in executed. hand that course, GaudiX, of now opportunities strengthening optimistic feel are data well accelerator we being road map of So and GaudiX. the first

environments a term, of not would So some we the being challenging market long-term we're hoped. optimism lot working as have we see as of the even as strong of near through

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

across training prepared Would you question, the grow first will gains talked given units. acceleration. your love elaborate think commentary for I you your TAM through hear productivity could that about was guess inference. on both you I in AI And could guess and expander particularly, bifurcate that, I you And a to remarks, servers. why being hoping if

the from Cases certain it going nodes, workloads, right? platform, And virtualization about of are new right? Yes. here generally, includes TAM dominate think Why? workload. to. point you And thanks, that CPUs, analogies data was like prep, a data C.J. and processing, AI If the CPU there up leading-edge great portions history the DGX we Head to destroy driving platform, then end

as PC be tens where broadly aid model where We including then then a watts the you we generation, spend microwatts XX megawatts workload ushering said, a see in to in very going of or have training also every AI AI future, Meteor do second inferencing. We hearing AI going see, for months XX X. in Lake being responding to the a in might it's and you And with mine, and it where instantaneous. is you're use as but

drives do applications. we see So of across as AI spectrum full workloads the

idea for always emerging. to and We've part that And well was farm, build, creating broad center AI opportunity semiconductor positioned cloud well the TAM, AI retail to of participating use whether every stack, ecosystem we cases, software platform private in. is enterprise the source believe with their going manufacturing well. We it's training We've for as XX-megawatt one it. and only they're our it's and participate broadly one big of open a whether up as those portfolio. TAM. into going available one it, they're in described the as stand But and we're not in in this a I an call and dedicated right, opportunity of that to trillion-dollar firmly use environments and we're AI semiconductor is it's move whether that one models industry across seen participate industrial that's off-premises, going this data not going client, not that the product and build are driving an a opening the where edge It that to to right, of AI, Intel in this being democratizing as data superpowers, it's but great that, foundational

you question? C.J., have follow-up a do

please. Yes,

and little you're of benefits what are to both XXA a scaling and customers backside hear about terms talked particular. power. how love looking and bit in in foundry power You potential at your seeing Would today that technology

nodes to and you. is on on culminates -- X announcement, we I And We're by in make over proceeding the good reinforcing very And XXA. But belief continue Ericsson XXA. got thank with well XXA which progress we the that, that strong have years. that affirmed and that, X XXA significant in that an X of foundry opportunities we PowerVia, this response quarter potential pipeline chips test And overall a couple the customers very customers, against foundry well. made as major the the in prepared Yes, remarks it of the a the and alternative the power in as to is this mentioned they above process a big particularly as believe and good other we industry. our progress good backside is in quarter measured industry ahead years any growing

business particularly area across and never also is foundry the part And of is the many a marketplace, the an had. second that that of interest your for our in part stumbled, of business a that and leadership there And X unit our So together business set culmination interest for first that maybe are from opportunities us machines as great the in the of question track. area to the an for that on packaging limited. the of finding foundry in lot Intel overall is advanced years foundry We strength because area as we big of is and of our packaging, well up feel sustained and today, packaging finding business. and that, of the an interesting within tying XXA lot immediate as we're This board. I'd right? pursue industry technologies part are X the we've AI well. of strength this a is good say nodes specific packaging the

And UBS. line Timothy question comes Arcuri from our from next the of

a is last half sort on CapEx at which track. had would contributions, you the First, weighted. for the of was one fab would a gross Is that you. Arizona If the I weighted that? of back-half little bit, look they Dave, bit were case? you a surprise. talk And be offsets Can I be said the that little quarter, you and know down first say about still I did But third-party

Yes.

think first to more it a thought loaded. more be looking did a half. flow CapEx I the distributed hoping. CapEx, be lot than get free -- we it's We It's manage really quarter managed bit cash of half you well, you So we this which less offsets. better would was going a CapEx when versus on second obviously manage side. It's And look the in helped particular evenly I the front-end kind

anticipated. still have offsets capital But amount And And the offsets that so most so the we kind track the for come for of year, we're quarter. the the far. get SCIP on drove had capital of of that to through lower same offsets that's capital really where

not-too-distant we get. chips the will incentives that here go be offsets Now that year, into should getting start credit get that coming capital We future, investment offsets. to add into the tax we next obviously, the we on as help the in will that

So SCIP in lands there'll that largely future. But and things it's be spending that's and function come the of more SCIPX, right quarter-to-quarter. the a now, it's where

CHIPS We're going CHIPS just for -- first that Poland On-Track Yes. to will but to are excited this Act facility, we're DG proposals that quarter. also obviously, projects, happy. maybe for our proposal, which bit, And on the the We in approval. EU comp Arizona pile very Germany X Act getting U.S. about go we'll approved, for a have submitted formal more and

And so we're those. at now pace for

both Europe as would we in super happy as the said of there as the U.S. with working So on we're is processes. and well application as it feeling engagement, those Commerce exactly everything great with Department

have you do a Tim, follow-up question?

billion more than Yes. next do. Gaudi could And about billion. accelerated recently you you $X so that an I year. has pipeline Pat, do been in I talked implying think Sandra over of $X

you Day, GPU Data road And Center out also come had about not is the commitment? Falcon the So that to merging maps talked question but at Gaudi and then that's the into XXXX. the Shores until the going is,

map, is really customers So their given of those there commitment in changes. your that where question to wondering terms the road leaves

lion's Yes. billion over And That's now is Falcon be the Gaudi. Shores Falcon But on well share of and the 'XX. accelerator well. $X also me Xx growing GaudiX volume about volume 'XX, that working as Dave that MAX the exclusively, and already Overall, rapidly, will lines we this quarter. includes that shipping as we're and for not year and X but today. product let Shores take past and Gaudi, in can the product by is is pipeline product add. next then said, Flex led GaudiX for

broadening the and GaudiX customers And software FPA. approach of that Falcon give will forward it compatibility have a X So single map GaudiX, more a bring we're added just stack. that PyTorch accelerators Shores. GaudiX, the just making confidence and we we're into road offering. But into simplified our have software progress with generalized We're that stack, taking the becomes with they our adding we as together support. be our We GPU oneAPI we'll that flexibility

deliver it better programmability we right, better. wafers. on the GPU and cover every is Falcon as it broader step way models I of said, the the have are better along And being accelerator hardware in gets use of to Every software software and way, building gets we're timeline. along the Every cases. release of GaudiX along as that overall being supported. the better. More stack. And acceleration best just gets way, more now solution Shores the in step we marketplace. language every the matrix But release supported More gets set So best full, the

are First enhanced. ones

that this program expect expanded that as business is positive opportunities. customers we rapidly we'll opportunity, as with of very future well with accelerating giving updates And looking there good. very the be So you in pipeline both

comes line next the question from Melius from our of Ben And Research. Reitzes

Yes. with about moment. year Centrino Pat, a is aha very client about what wires unplugged -- Intel? place, going grasped talking mind just we the my was the AI and accelerate Do And having business took What from really that. to your moment comment caught you next and it the you with PCs clear attention investors or that? that's AI when benefit with Centrino

that are question going and people research cloud way. Yes. their with on applications that the But It starting become And for to right? super client to And done kids going are, that occur, the going client AI-enabled. of assignments real paper to the simplifying that's are do to and the be to see And to AI-enabled? homework not I you're course, a that cool, right? You every you're goofing what ChatGPT, must is think for can't writing like cloud. becoming today, around go

the cloud. trip round can't You to

the of do of will to doing that and and part able use calls, AI generations brief relevance edge. local one will Those be a right, client, going see client-centered. enablement at efficiency aspect portraying, there's of and through and across on effects, cases. We every raft inferencing, All consumer, developer Adobes of those tools environments enterprise legal those others Zoom done the other, generated the that being new of be being to also the clients, be real-time real-time new in as productivity translation your environments, creator transcription, are language automation, content gaming real-time after

round the can't cloud. You trip to

and edge client. local happen You will don't inferencing have all the cost the in convenience the latency, let's It round a the store say, structure to or the to bandwidth trip, the cloud. at at

we've And I wire, at truly "Oh, bring of directly with delivery those Now Intel the that believe expect about. we just into will more talked a people into first me driver become capabilities, that They mind, cases. one native the because this we because me the right, more at make like more didn't I AI plug this for will and market that TAM want made new that efficient see will use this right? a to capable, I say, the So use the to volume we second on Centrino a the client idea efficient have go And moment AI PC is to to engine will the in We the that's cloud see have fall is to I'm of that AI be my AI get this have the client we includes effective." client to cases. begins footprint as volume with time these locally them don't bringing that going year. edge. And to Lake the the as product PC cost have. going of we the true client leader democratize this which of real the Meteor in and in neural and in half the major do year, in that immediately the do

Ben, question, follow-up do you have a please?

wanted to to there some that growth demand There's on your there's investors client click given sequential talk and if wanted in business there been the pull-in, with guidance I out on -- John. was your that for what double Yes, some business. some in concerns second the there there. you're quarter, And from about was sequential based confidence just comments seeing more any some others. in color

Yes.

that jump at the inventory healthy biggest QX. see on channel in. quarter-on-quarter in worked start The levels. through me inventory the some QX, is levels. can And inventory OEMs healthy that we Let and we're and at we and that Dave see QX now We change now

strength even And to for of of combine demand again quarter gaining that solid some obviously, and and from good in early in QX. end-of-quarter business. the we OEMs with continue indicators are share We our through client see sale the that business signals clear

good the a product into momentum very come second half we and So year with the of strong line.

outlook. feel client quite good the about So we business

be the quarters, strategic the When made let's we did accelerated have seen which few of is how kind terms purchases. where that normally attractive look in quarter, our deals negotiated of in indication add, you'll over just call will don't early tonight you've tomorrow, filed demand, either XX-Q, it. we we've that or identify an strategic XX-Q see little which we've of have a at this I'd sales us in last which number there for late you

pull give pretty demand, I question assessment you of did that. So we a to in think your of that'll probably good

James. comes And of line Raymond Srinivas our next the Pajjuri from question from

It's relates silicon. announced it you huge great to demand, I a But there's Pat, for custom it custom question see customer that as XXA custom silicon. seems on a for like, on AI silicon AI a on to the have front.

some for customers custom successfully -- already accelerator. think of using as are your I silicon an AI hyperscale

focus that If right now? you? market any I'm is. just with for so, that engagements your Is have strategy area do So for curious customers you what a

Yes. Thank And is yes. you, Srini. And market. multiple in ways this answer one is Obviously, of play to the those have customers. I foundry simple

they the reinforces that strength, us be versions opportunities. of for participating We opportunities exactly course, customers some have pipeline number own be those some that good of going their designs. other we're seeing opportunities already augment will you And XXA, one and foundry, looking to able investigating And of foundry to and engage we're foundry opportunities with right, several silicon a of those near-term do just those described, their areas. be AI with what components, unique of accelerator we're that silicon, those of are where be packaging some to people to we're but of is play And to X.X are where the standard the able of engaging going where comes opportunities. those. But combining advanced to pipeline have be designed it their way they strength IDM our with some And of a really our opportunities with gives given this another with being variations capacity products. of their could packaging, using immediately Intel of to packaging in of

agree to this clearly going we So a that overall, market. be is

us, across devices, sensing part that's and see communications a provider the spectrum, unique IDM that going positioning chips automotive foundry seen that see be that high-end for particularly environments. in also chips we the us as in being some and the for and you've devices, a as training We both of see everything. for X.X infused infrastructure, AI But AI the we and as for AI most ones AI provider of we the future. press gives opportunities edge, for there's to about chips the product technology for And are said, that

a Srini, follow-up you question? have do

the capital front. Yes, it's see on working the good for Dave. Dave, progress to

I you sometime cash positive your said is would free think half. second turn in that previously, expectation flow

aware And PRQ on gross into is guess, still that there Just curious charges as front, we that's fourth we expectation. also, be of the the quarter? if should any, margin I go

Okay.

by we on So a team the in on -- of terms just working take just the me quarter moment because inventory $X second capital give down brought billion. credit let to

the down to which Our days sales outstanding days, XX is on AR front exceptional. is

to of improving QX lot what flow terms cash of a So capital. in from QX the you was free saw working

drive an So team job outstanding that I on the focusing done free flow. think really the just all cash elements has

expectation is by year. the flow. of Our this cash the the little to year year. end end a But free focus outlook CapEx as the think on Obviously, talked coming cash to of achieve breakeven improved the to that. reason the we flow, still different of by we the might about, in There's get We can into free year a it's the we shouldn't be get business. just than why thought breakeven we no net terms

quarter-over-quarter quarter-over-quarter some, from obviously fourth good a quarter. have relates good improvement quarter, likely but a to reserves pre-PRQ third in from the it As which should to the be was improvement the second quarter, we're it pretty

we have caller, please. last Jonathan, I think time for one

line question Rakers our comes of today for And from the Fargo. final then from Wells Aaron

a Yes. well. And do follow-up I have as quick

the of to back bit. gross little Just kind margin going a

looking about you just when was quarter, Dave, PRQ about impact going talked the think, you I basis be backwards, guided to XXX this points.

underload to points. you basis I think there was think an also guided impact XXX around I that

forward? and I'm So was as going try to were frame recent curious what what most quarter of numbers relative in the what is we just those kind -- this expectation

given it although as an a revenue like those number, the of a largely less bit lower off And in Yes, revenue was numbers, absolute little so were they the the I quarter. of higher. impact, They as said, were be dollars will expected, third had was of expected. both of lower

a have follow-up? Aaron, quick do you

against as look kind real of build-out. lot do, pipeline front in on pipeline, large I'm talked the about narrative. the cloud? guys a to I the the on We see you Pat, competitors cloud hyperscale just of AI with do just as you expect Gaudi some GPU the quickly curious forward, directly Gaudi of deployment in competing part of in and that some

looking recently is right? show significant for looking for benefits alternatives. answer. They're we numbers, And more for everyone for Simple the MLPerf numbers customers. with that capacity. They're very Clearly, competitive Yes, also GaudiX looking posted TCO alternatives.

today instances as already. definitely We have already And engaged. so available on AWS we're Gaudi

AI, described our earnings Cloud. we names the in Genesis of some that calls, And Stability

I'll of some the providers engaging. So Tier but are next-generation some proven, say, these scale the cloud also at of ones X are

So testing our making that, on be more Gaudi overall, own we we for we're that also We're to have it the expect customers test case. to absolutely, with quickly. now DevCloud, easier And We're a X,XXX Cloud. so X,XXX-node Gaudi they be very a can cluster that with now are customers who environment. of at large training building Intel the advantage taking their Development scale

opportunities. the simple overall, answer is, we're much pipeline and So very those yes, so, seeing a of good

on made, forward and you about opportunity look time. bottom at raised of half quarter very big operational Q&A all, tell saw, We say on it saving you. accelerating top having the to process we our we to you September. Innovation we've simply Thank you for to have a you. comes that, improvements look to more the more, exceeded that improvement me good that guidance business. could our in. that just execution, many, joined opportunities to to talking the expectations just our We're all discipline, that that we continued hope together We'll we discipline forward will I best Thank us to on and me the with progress a that that that year. But we're see quarter. and It we not of today, in we're execution, line. transformational you investor and grateful very a was of great a line, good particularly there. today. We right, track and in have product an our the you on if We you the the good be we be hosting business a want my seeing cost today. second margin the thankful even important have our up And was time put, let So And journey update team to our execution, thank fiscal of wrap

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

now Good You day. disconnect. may