Great. Thank you. I'm wondering if you could talk about the gross margins next year. You talked about investment in 10-nanometer, but you took those ramps this year, is it the simultaneous ramp of 10, and then startup cost of 7 that pulls that down? And why wouldn't you recover from that in subsequent years as you mature deals thereafter? And I also wanted to ask just as a follow-up, does the accounting change with the numbers have been lower, if not for the change to take stock compensation out of the numbers? Pat Gelsinger (CEO): Let me start with the margin question and then I'll ask George to step in and help. First, I'd just say, this is a pivot point for the company. We are repositioning Intel for growth to be a long-term growth company. We see the massive opportunity that we have. Near-term, we could have chosen a more conservative route with modestly better financials, but instead, the Board, the management team, and this is why I came back to the company are choosing to invest, to maximize the long-range business that we have. Overall, these are great markets that we're going to be leaning into with very unique positions that we have with our technologies and products. As you look specifically to next year's margins, here, we see that the decline is driven really by two factors. One is the new manufacturing nodes. As you've heard us say, we're going to rapidly move through our 5 nodes in 4 years, and this will have pressure on the margins near term as we ramp those up. But we'll quickly, on an accelerated pace, give us leadership capabilities that will improve margins over the horizon. We're also investing in our future. These investments that we're making now in our roadmap will pay off, as those products return to leadership products, beget leadership pricing, which begets leadership margins. So as we said in our prepared remarks, comfortably above 50%, and we're confident in the multi-year recovery of the margins that result from, again, competitive process and competitive products will produce great results for us long-term. So overall, a couple of years of pressure returning over that horizon as we see these growth areas in our datacenter, our client business in these four new growth markets, the networking, graphics, mobility, and autonomy foundry. We've made a strong choice. We're going to be decisive and we're very transparent, right? We're laying out an understanding of where we're going, and we elected to give that guidance earlier than we might have otherwise, not just for next year, but over the horizon as well. So now is the time, and we're making that decision boldly and aggressively. George, you want help in the last part of the question? George Davis (CFO): Sure, happy to. We're announcing the accounting change in 2022 to give people a heads up. We think it's a modest impact on gross margin, which fits within the range we've provided for the next couple of years. We guided for the next 2 to 3 years, not specifically 2022. Pat has done a good job outlining the key drivers. The accounting changes are because we're out of alignment with the industry regarding stock-based compensation. Like you, we also expect not to see large adjustments in a quarter related to ICAP activities, and we're removing that from non-GAAP as well. Frankly, these two changes have been net accretive over the last couple of years, but we believe it's time for these adjustments, and they are in line with industry practices. Pat Gelsinger (CEO): And the other factor that we did talk about is also starting to give accountable units against our new business unit structures as well, which will give increased transparency to the marketplace and will also give increased accountability internally to drive the execution that we're laying out. So with that, Tony, next question. null (Operator): Our next question comes from the line of Ross Seymore of Deutsche Bank. Your line is open.

Hi guys. Thanks for letting me ask a question and George, congratulations on your retirement. A similar question on the longer-term side of things, Pat. If I look back over the last decade, Intel's grown double-digits, I think once in a single year. So talk a little bit about what gives you the confidence in the company being able to be a double-digit grower a couple of years out from now? Pat Gelsinger (CEO): Well, thank you. As we look at these markets, we see clearly the client business with CCG. We don't expect that to be a double-digit grower, we do expect growth coming from the client business. Even IDC now agrees with us on growth next year. We do see the opportunity for us to be a share gainer, as well as gaining more of the bill of materials of the clients as well. But our expectations there are modest in the growth of the client business. Clearly, the datacenter business, we do expect to see stronger growth. As our products get stronger and as we've noted with Sapphire Rapids next year and the roadmap over '23, '24 and '25, we do see ourselves in a position where we’ll be gaining leadership, which allows us to have pricing margin improvements in that product line, and the datacenter is growing. But it isn't just the datacenter; it's also these four new business areas that we've laid out. Next to datacenter, the networking business, we have a very strong position already, but also the ability to reach into the network and the large growth that we see in the edge where Intel is very uniquely positioned. The edge market as the 5G becomes an open RAN platform, also, the edge deployments, smart factory, smart cities, we're very well-positioned and we expect to see substantial growth there. In the graphics area, we have a good business today in integrated graphics, but the opportunity for us to reach into this large and rapidly growing GPU business, discrete graphics business, high performance computing, we’re extraordinarily well positioned to be able to satisfy what we see as almost insatiable demand in that area. Then of course the mobility business, we're already well underway with our Mobileye business, which has unique technology position. Another great quarter from that team. Finally, the great synergies we get from leveraging our core manufacturing assets as well as our process technology innovations. As we noted, over half of the technology industry is going to be leading edge right in the second half of this decade. Very few companies can do that, and we're finding great interest for our foundry business to be able to satisfy those. So if you think about the growth in the core business plus these major new business areas, and we've done a lot of modeling against this and really built a very robust plan to execute, we feel very confident in the double-digit CAGR that we described. We're excited about it. The teams are leaning into it. Even better than that, our customers are excited about it. With that customer enthusiasm, I'm very confident in what we've described here. We are leaning in. Now's the time to make it happen, and we're making the investments to realize that today.

Thanks, Pat. null (Operator): Thank you. Our next question comes from John Pitzer of Credit Suisse. Your line is open.

Congratulations, guys. Thanks for letting me ask the question. I'll echo Ross' comments. But George, congratulations on the retirement. Pat, I wanted to dig a little bit deeper into the long-term growth rate question that Ross just asked, but specifically towards the foundry business. I'm curious when you think about the gross margin guidance next year and the long-term CAGR of 10% to 12%. What’s the impact of foundry? I'm assuming foundry's still going to be relatively small next year in the business, but I'm just trying to get a sense as foundry grows, how big of a contributor it is to that 10% to 12% long-term CAGR? And how do we think about the margin profile there as it unfolds? Pat Gelsinger (CEO): Yeah. Thank you. Great question, John. The revenue impacts and the investment impacts of foundry are fairly modest in the next couple of years. They don't add that much to the top line. They don't detract that much from the bottom line as we're really building that business now. It's really in the later years where you will start to see the revenue impact really start to matter. This is very typical of the foundry business. It takes a couple of years for a customer to pick a foundry, move a design, and start to ramp it into the industry. So it really has minimal impact for the next couple of years and then it will start to really deliver in years four and five, and then the second half of the decade more significantly. With respect to margin, we expect that we are in our foundry business having very similar margin structures to the leader in this business today. We see that as a good business. Maybe a little bit lower margin than our best product margins today, but still would allow us to comfortably be above 50%, as I said in the long-term guidance that we laid out. This is a great market for us to be reaching into. It allows us to leverage the R&D investments that we have and process technology to more markets. Many of our AFP blocks, as we open up the x86 architecture for increasing innovation, we get to leverage enormous amounts of R&D for new monetization opportunities. Also, we're leveraging our smart capital strategy, where we build shelves and we start that process early. That allows us to make those investments in the ground to start building some of that IFS capacity. But it also allows us to have capacity for increased market share gains and leverage the balance between our internal and our foundry customers as well. To leverage government investments, we expect will be driven substantially to benefit the IFS business. So when we take all of that together, unique technology position, more flexible and leverage capital positions, unique IP benefits that we bring to it, we're seeing great interest from our foundry customers already. We're seeing that on mature nodes like our Intel 16, but very much from some of the largest customers in the industry with our leading-edge technologies where we're getting a lot of excitement to be on the best transistors that are available on the planet with the manufacturing capacity that we can bring. We see this as a great complement to our business, and so far, things are going even better than I would've thought when I announced this business early in the year.

Helpful. Thanks, guys. null (Operator): Next question comes from Stacy Rasgon of Bernstein Research. Please go ahead.

Hey guys, thanks for taking my questions. I want to ask a question on the current quarter results. Specifically, data center ASP. Cloud was down 20% year-over-year. Enterprise was up 70% year-over-year. Yet your ASP was down pretty materially sequentially. How do I reconcile that, given the mix there such with the Ice Lake ramping, everything should have gotten much better. What happened with data center ASP in the quarter? Pat Gelsinger (CEO): A couple of things, Stacy. First, the mix of products in the quarter were more weighted towards what I would call our ACC products down from a fee standpoint from our XCC. Part of that is coming out of the lower cloud than we expected. George Davis (CFO): I would say the other piece is, we saw a bounce up in our network SOCs. And as you know, those have much lower ASPs and tend to be dilutive to ASP. That was relative to Q2.

Enterprise is up 70%. Shouldn't the mix have gotten much better? What impact was competition or anything else here? It seems like there has to be something else going on; it can't just be mix. George Davis (CFO): One is the SOC; the enterprise piece is as I said, is a mix of products that we saw. It was skewed down from our FCC in the quarter with the enterprise as well. Pat Gelsinger (CEO): But the ASPs of any individual product line, were still very much in line with our normal ASPs for those individual products, Stacy. So overall, we just say it was a mix discussion this quarter. It wasn't an ASP discussion at that level, even though, you average those together, and you get different effects. Also, as we said for the data-center business, we did have some unique issues in China this quarter, which led to some different behavior in that business. Some of the regulatory issues there, so overall, not where we would have expected the data-center to be for the quarter, but still a very strong performance. We're happy with the growth that we're seeing in that business. As we've indicated, the momentum of Ice Lake is growing. Sapphire Rapids, great interest in that product, so we're seeing that the overall competitiveness and the growth of that business area is looking very good for us for the future, we're excited about it, and everything is going as we would have hoped for that business.

Are those trying regulatory issues permanent? Pat Gelsinger (CEO): There have been some regulatory questions surrounding gaming in China. All Cloud vendors are adjusting their offerings to comply with the new regulatory environment, so we expect it will take a quarter or two for them to adapt. We do anticipate a market recovery going forward. As you may know, we have a significantly high market share in the Chinese Cloud market. Therefore, as it recovers, we foresee a favorable rebound in that area of our business, and we expect a return to normalcy next year. George Davis (CFO): We expect it to continue in Q4. Pat Gelsinger (CEO): Yeah. Tony Balow (Head of Investor Relations): Next question. null (Operator): Our next question comes from Timothy Arcuri of UBS. Your line is open.

Thanks a lot. George, I wanted to ask about gross margin puts and takes more over the longer term. So you're saying 51 to 53 over the next couple of years, and then moving higher after the next few years. But at the same time, CapEx is also going to 25 to 28 next year, and it sounds like it might be higher than that. And depreciation is still only $11 billion right now. So that's going to obviously go up a lot too. So I think that the obvious question is going to be how believable it is that gross margin can ultimately come back, given that, I would think that the depreciation is going to be ramping in those out-years. So can you just sort of hold our hand there in terms of how believable it is that gross margin can come back when there's just such a gap between depreciation and CapEx? Thanks. George Davis (CFO): Certainly. Part of the reason for our significant capital expenditure is to address the capacity shortages we've experienced and to create more flexibility. These efforts are aimed at increasing revenue over time, which will help offset some of the depreciation. However, it is important to note that our depreciation will be on the rise in the coming years. The costs associated with our investments, particularly concerning the node acceleration that Pat has mentioned, will also have a substantial impact in the next few years due to the simultaneous work on multiple nodes. We anticipate improvement as we move past this phase. Our gross margin estimates account for expected increases in unit costs and how much we can recapture in average selling price. There are no significant unknowns here. We are confident that we will grow into our investments and that the effects of node compression will diminish as we exit this period. Pat Gelsinger (CEO): Ultimately we're making those investments in node compression to get more competitive products and more capabilities. As the products get more competitive, better pricing, better margins, which enable us to have not only better gross margins but obviously we'll have the flow-through benefits into cash flows as we are impacting our CapEx investments. All of these things start to generate positively as we get back on top of our competitive position. As we said, we've had an extraordinary quarter since we last met every one of our process nodes that we described. Some said when we described 5 nodes in 4 years, that's never been done in history. And we said, that's right, and we're going to do it. As I updated in the formal comments, all of those nodes, Intel 7, Intel 4, Intel 3, Intel 20A, and Intel 18A, on or ahead of schedule. Relatively speaking, we're closing the gap on the industry, probably even more rapidly than I would have expected just a quarter ago. As a result, these investments will be producing superior products with superior pricing and margins more rapidly than we would have forecast even a quarter ago. Overall, we think all of these things are now starting to play together. Obviously, we have a couple of years to work through, but this is going to be a great outcome. We think all of our aggressive leanings right now are going to be handsomely rewarded in the marketplace to our customers and to our shareholders over time.

Thank you, Pat. null (Operator): Thank you. Our next question comes from C.J. Muse of Evercore ISI. Your line is open.

Yeah. Good afternoon. Thanks for taking the question. I guess a question on CapEx. So you've outlined a higher number for calendar '22, but as I think about and contemplate higher intensity at the bleeding edge nodes, it would appear that that would really be for Intel only. Should we be thinking about a step-up above and beyond that level, as you build out capacity for IFS over time? And then, second quick question around that. Are you making any changes to how you're accounting for depreciation of lifetime on equipment or buildings, or anything like that, as part of the accounting changes that you've outlined tonight? Pat Gelsinger (CEO): So the initial CapEx that we use is, obviously, as you said, building out shelf capacity, building flexibility into it. As George indicated, subsequent years might be going up a bit more. But as we've also said, we do expect to see the opportunity for government investments to enable us to go bigger and faster on our CapEx investments. The numbers that we've given reflect the initial build-out of our foundry business. We feel comfortable in that. We've also described our smart capital strategy that gives us more flexibility for what we do internally, what we do in our foundries. The ability to benefit from government investments, the flexible build-out of shelves. Overall, we see these investments allowing us to grow and gain foundry customers, where as those get committed will build out the specific capacity. Balancing foundry will enable us to leverage industry capacity as well as our own, and everything we bring internally will be at better margins. Overall, we think it's a very uniquely, powerful, resilient, and favorable strategy for us to execute over time. George Davis (CFO): Yeah. And C.J., the accounting changes that we're talking about. Number one, are to increase transparency into the business by breaking out the segments the way Pat has been describing the segments of the markets that we're going to be addressing. The other changes are really just to align with the industry. So when people look at our non-GAAP numbers, they are going to see the same basis for that as most of our peers. So no accounting changes that we're talking about that relate to how we treat depreciation of assets. Tony Balow (Head of Investor Relations): Next question. null (Operator): Thank you. Our next question comes from Blayne Curtis of Barclays. Please go ahead.

Good afternoon. Thank you for taking my questions. I have two regarding gross margin. First, can you remind us about the federal impact in Q4, which continues into the first half? You're starting at a 55 margin while guiding for the long-term range of 51 to 53. It seems clear that as you ramp up more Intel 7 products, the margin is decreasing significantly. I'm trying to understand, even though you might not want to provide guidance for next year, will you be closer to the lower end of that range as you increase client volume in Q4? I also want to understand the near-term impact on gross margin and your long-term perspective. Listening to your comments, it seems that achieving a double-digit top-line growth is necessary. I think many may perceive that the compound annual growth rate could be around half of that during this call. I'm looking to understand how flexible you can be concerning gross margin in relation to your spending under the smart capital plan. Thank you. Pat Gelsinger (CEO): In the fourth quarter, gross margin remains consistent with our previous discussions. The impact from Intel Federal is limited to this quarter and doesn't carry over. If you want to consider the gross margin for 2022, I think it's again relevant. George Davis (CFO): 51% to 53% for the next 2-3 years. The biggest hitters are the impact of higher capital, which we see accelerating in Q4 this year, going into next year, and then the effect of the multiple node compression. Those are the key dynamics that we see. So that's all we can guide at this point. Pat Gelsinger (CEO): Overall, as we've said, we feel confident in these numbers. We're giving a lot more transparency. We're taking the opportunity to give you more understanding of our business. We're electing to do that earlier in the process than we might otherwise because we're making these decisions; we're choosing to give you a lot more understanding of the business. We're confident in these growth outlooks as well. These are exciting new market categories that we are leaning into. They are large market categories. It’s not just that they are large categories, right? They reinforce each other. The stronger am in networking, the stronger I am in data center. The stronger I am in client, the stronger I am in graphics. The stronger I am on my process technology, the stronger I am in my foundry business. Every one of these is building on each other and creating synergy value. Overall, right; as we move to leadership in these areas that we are well on track on doing that. We feel quite confident that growth rate, the margin profiles, it will, of course, take the opportunity. At our Analyst Day to dig into the business areas quite a bit more. We're going to help you understand those. We're going to give you segment reporting that helps you see those and provide transparency and accountability through it. But overall, we believe we are laying out a pretty exciting path that the management team, Board of Directors, and our customers are really leaning back into us to say, yes, this is Intel. We're excited for the future. Now is the time.

Thanks. Pat Gelsinger (CEO): Next question. null (Operator): Next question comes from Pierre Ferragu of New Street Research. Please go ahead.

Thanks for taking my question. George, next step. I wonder what your life is going to look like not answering every day questions about Intel gross margin. And so maybe I'm daring to ask you another question on gross margin, but I won’t just to make sure I give you a bit of fresh air. I will you said earlier in a previous question just for you, George. You haven't talked about market shares of those transition barriers. The next 2-3 years looking at gross margins, just to take maybe stepped down; you're going to invest alerts. How do you see your market share evolving and why? And then relating that gross margin, in your gross margin guide, is there an element of taking prices down to protect gross margin during the transition, or is that purely driven by investments? Pat Gelsinger (CEO): Overall, we expect that we'll be in a position to gain market share in our existing markets as we're making these capital investments. We've been woefully short of capacity for a number of years. This is a great opportunity in the industry. Everybody everywhere in the world realizes semiconductors are hot. We need more of these, so we're building the capacity to satisfy that. In the near term capacity is destiny. Building more capacity enables us to gain more market share. We think we can do that as our products get stronger with very favorable pricing conditions as well. In the client business, Alder Lake goes in production; they will be talking more about that next week. A tremendous product that will be a great market share gainer as well as a pricing leader, right? Structured across the segments that allows us to gain share across multiple segments of the client marketplace. Also, I'd point out that these four areas, these four new growth businesses; we're very small in those businesses today. These have massive growth potential for us large, favorable markets that are looking for leadership, logic, capabilities, that Intel is uniquely positioned to supply into the industry. Overall, clearly, the near-term, as we've laid out with great transparency, some of the margin impacts in the near-term, but these are great investments. Great investments in large, growing, favorable markets that very few companies have even the opportunity to participate in. We bring such massive assets to them that we believe that we're going to be well-positioned to gain leadership positions across networking, accelerated computing, graphics, autonomous vehicle category, and the foundry business. When you combine that with share gaining positions in client and data-center, this is a tremendous period of time. We're seizing the opportunity. Carpe Diem.

Thanks Pat. Pat Gelsinger (CEO): Very good. Last question. null (Operator): Last question comes from Matt Ramsay of Cowen. Your line is open.

Thank you very much, guys. Good afternoon. I wanted to ask a couple of questions on the data-center business. One on product and one on the results. On the product, I think you guys reiterated that Sapphire would be shipping in Q1. Pat, I wondered if you might give some commentary on when you expect to see some legit volume ramps of Sapphire and has that timing moved? The second part of the question is on the results. It looks like the Cloud segment was down 20% year-over-year off of a plus 15 last year. So I don't know by my math, we're down say mid to high singles from Q3 Cloud levels 2 years ago pre-COVID, and CapEx has been pretty strong since. You guys called out China, but there's some other things going on with market share. Maybe you could address those and talk about how we reverse some of that share loss? Thanks. Pat Gelsinger (CEO): Yes. On Sapphire Rapids, it will be in production in the first quarter, with a ramp-up in the second quarter. There has been no change in the timing. We are in the final stages of the production process, finalizing all the components as we prepare for the volume ramp in the second quarter of next year, and we are on track for a first-quarter launch. Regarding the datacenter cloud business in the third quarter, and this will carry into the fourth quarter as well, it aligns with what we previously mentioned. We have a unique exposure to China where we hold a significant market share. There is nothing else notable affecting that business; that is the core issue. Overall, the server business is facing supply constraints, particularly related to components like controllers and power supply devices, which are hindering our ability to ship more units. Our cloud customers and OEMs have strong backlogs and are pushing us to meet their demands, but we are limited by these matching sets, as we refer to them in the industry. Other than those two factors, China and matching sets, everything else in the data center business is progressing as expected. To wrap up our call, I want to express my pride in our talented and dedicated team at Intel. Despite the challenges posed by supply constraints, our teams, including our factories, product designers, and software developers, are performing exceptionally well. Our execution capability is rapidly improving, and there is a strong desire among us to succeed. I also want to personally thank George for his leadership and everything he has done for our company during this transition. We have taken the first steps on our journey, and I look forward to sharing more successes in the future. Thank you for joining us today. Tony Balow (Head of Investor Relations): Alright, thank you. Thank you all for joining us today. Operator, could you please close the call? null (Operator): Yes, sir. This concludes today's conference call. Thank you for participating. You may now disconnect.