INTEL CORP Q3 FY2024 earnings call

• Cost Reduction Plan: Completed most headcount actions, on track for >15% workforce reduction by year-end; reduced capital expenditures by over 20%; simplifying and streamlining portfolio. - Intel Products: Focus on x86 franchise, launched Intel Core Ultra 200V series, Arrow Lake, progress on Panther Lake; strong share position in CCG, Xeon 6 and Gaudi 3 launches in DCAI. - Intel Foundry: Intel 18A progressing well, lead vehicles met milestones, AWS partnership expanded, new design wins, awarded government funding; moving to independent subsidiary model. - Other Categories: Altera revenue up, Mobileye leading in ADAS, focus on unlocking shareholder value.

Intel Products revenue was $12.2 billion, up 3% sequentially. CCG revenue was down 1% quarter-over-quarter, DCAI revenue was up 10% sequentially, NEX revenue was up double-digit sequentially. Intel Products operating profit was $3.3 billion, 27% of revenue. Intel Foundry delivered revenue of $4.4 billion, up slightly sequentially, with an operating loss of $5.8 billion. Mobileye reported revenue of $485 million and maintained full year guidance. Altera delivered revenue of $412 million, up 14% sequentially, with operating profit positive.

• Q4 2024: Expect revenue $13.3 million to $14.3 billion, midpoint $13.8 billion. Non-GAAP gross margin approximately 39.5%, tax rate 13%, EPS $0.12. - 2025: Plan to reduce non-product cost of sales by $1 billion, lower OpEx to $17.5 billion, gross and net CapEx $20 billion to $23 billion and $12 billion to $14 billion respectively; expect adjusted free cash flow positive. Muted gross margin expansion in 2025, improvement in 2026.

• Impairment Charges: Significant non-cash charges related to Intel 7 equipment and space impacted gross margin. - Market Adoption: Slower uptake of Gaudi 3 due to product transition and software ease of use. - Geopolitical and Market Uncertainties: Impact on revenue and profitability from external factors.

Q: Talk about metrics for Intel 18A transition and external customer revenue growth.

A: Patrick Gelsinger mentioned solid progress with new customers, qualitative metrics to be updated, larger impact in 2026.

Q: Gross margin discussion, cause of upside in Q3 and outlook for Q4 and 2025.

A: David Zinsner said Q3 upside from better sell-through, Q4 impacted by no repeat and 18A start-up costs, muted 2025 gross margin expansion with improvement in 2026.

Q: Defect density on 18A and yield translation.

A: Patrick Gelsinger said defect density sub 0.4 at process development phase, needs to be lower for high-volume production, Arizona ramp on track.

Q: Panther Lake and Nova Lake outsourcing status.

A: Patrick Gelsinger said majority of Panther Lake silicon area back in-house, Nova Lake has some SKUs externally but majority internal.

Q: 2025 revenue growth outlook and gross margin color.

A: David Zinsner said managing business for 3%-5% growth, muted 2025 gross margin with improvement in 2026.

Q: Intel's data center AI strategy and x86 ecosystem.

A: Patrick Gelsinger said CPU plays role in data center AI, Gaudi 3 interest, x86 Ecosystem Advisory Group for x86 architecture momentum.

Q: Foundry external revenue pace and server CPU share recapture.

A: Patrick Gelsinger said external Foundry a modest portion, goal to stabilize and grow server CPU share, Xeon strength in AI head nodes.

Q: Packaging business interest and memory packaging impact on margins.

A: Patrick Gelsinger said strong packaging pipeline, memory packaging impact on Lunar Lake margins, one-off with Lunar Lake, traditional for future products.

Q: CapEx and OpEx flex, Better Together rationale.

A: David Zinsner and Patrick Gelsinger discussed CapEx flexibility with EUV fleet, Better Together for operational integrity, funding, and balance sheet management.

Q: Narrowing product focus and x86 prioritization.

A: Patrick Gelsinger discussed simplifying product lines, reducing complexity, focusing on x86 franchise to improve efficiency and profitability.