Hi guys. Thanks for let me ask a question. I guess, Dave, to hit on some of the revenue questions or items you just said, do you expect the first quarter to be the bottom in absolute dollars through the year? And any color between the segments? It seems like it's exceedingly a CCG problem right now in the quarter, or is it broader than that? David Zinsner (CFO): Yeah. So you want to go first? Pat Gelsinger (CEO): No. David Zinsner (CFO): So let me start, and Pat will provide some additional details. Regarding the $11 billion, we anticipate that most business units will experience a sequential decline in double digits. We will not issue guidance for the remainder of the year. However, I mentioned that the first half is likely to see inventory corrections. Additionally, I want to highlight that we expect Q1 to have the most significant inventory decline at our customers that we've observed in recent history. Compared to the past four or five quarters of reductions, this decline will be considerably larger. This situation is certainly affecting our outlook for Q1. Pat Gelsinger (CEO): Yeah. And clearly, as we look at Q1, affected by macro significant inventory adjustments, and that's affecting clearly clients but also data center as well. And we do see that year-on-year, quarter-on-quarter data center to be down as well. And we think that's a macro statement across all segments across cloud, enterprise, government, and uniquely China. Part of our more positive expectation for the second half of the year is clearly from our customers and what we've heard from them but also with expected some level of recovery from China as well. So overall, clearly, a major inventory correction cycle is coming after back-to-school, as they refresh our customers clearly wanting to take more aggressive steps as they adjust. But that inventory adjustment is well below their sell-out rates. So for that, we do believe that we will see recovery as they have made those inventory adjustments, and we'll see the business be stronger as we go through the year. David Zinsner (CFO): Ross, do you have a follow-up?

I do. Quickly, Dave, I want to pivot to the gross margin side of things, excluding the change in the depreciable life side of the equation. I know revenue is the biggest headwind right now. But you had talked at the Investor Day last year about a 51% to 53% gross margin range and you want to operate within those bands. What does it take to get back to that? Is there a revenue level? Do you have to be above $17 billion, $18 billion? Are there offsets, any framework you can give to give investors confidence that we never thought we'd see a three handle on your gross margin? And so we really want to know what it's going to take to get back to a five handle. And if that's significantly changed from the last framework that you provided us? David Zinsner (CFO): Yeah, good question. So, obviously, revenue is the most significant impact to gross margins. We obviously did not expect to be down at these levels. That said, it's a function of some significant inventory burn. So it's not necessarily a reflection of the demand in the market. So obviously, we would expect that to ever at some point, which will be a significant lift to the gross margins. The other thing is, in the first quarter, we're going to have about a 400 basis point impact on our gross margins just from under loading, because of the demand softness. And we would expect loadings to improve once we get past the inventory correction we're currently experiencing. In addition to that, we have a number of initiatives underway to improve gross margins, and we're well underway. When you look at the $3 billion reduction that we talked about for 2023, $1 billion of that is in cost of sales, and we're well underway to getting that $1 billion. And then when you start to click it further into the $8 billion to $10 billion that we want to hit by the end of 2025, about 66% of that, two-thirds of that is cost of sales improvement. And we're getting a lot of that from our internal foundry model that Pat mentioned. We're already seeing significant opportunities to be efficient – more efficient between our business units and our factories. And I think we'll have a lot of things to say over the course of this year about areas that we see meaningful improvement. Also, we have smart capital that was modest in 2022, it's going to be more significant in 2023, and much of that smart capital does translate to a better cost structure for us that will help gross margin. So net of that, I feel very confident we will get back to 51% to 53% in the medium term. And in the long term, I feel very confident we will get back to 54% to 58%. And I think Pat said it in the past, we aim to beat that range. John Pitzer (Head of Investor Relations): Thank you, Ross. Jonathan, can we have the next question, please? null (Operator): Certainly. And our next question comes from the line of Vivek Arya from Bank of America. Your question, please.

Thanks for taking my question. I'm curious, how many weeks of PC microprocessor inventory is still in the channel? I'm trying to understand, whether the demand assumptions are not what they should be, right, or is it the supply assumptions? So when you say that, the consumption this year will be $270 million, right, which is the low end. How do we know that for sure? What if the consumption rate is much lower than that? So just how many weeks of PC microprocessor inventory is there? And do you think Q1 is that clearing quarter, or you think even in Q2, you could be shipping below consumption levels? Pat Gelsinger (CEO): So overall, as we said, we saw the range $270 million, $295 million. We believe the sell-through rate will be to the lower end of that. The consumption that we saw in Q4 was well below that, and the consumption rate or the sell-in rate in Q1 is even more significantly almost 2x more significant below the consumption rate. Obviously, these are the macro effects that we can't predict, and that's what's taken us a bit more to the low end of the range. But clearly, as we've been working with our customers and channel partners, we've been monitoring very carefully the sellout that they've seen. So we're pretty comfortable with that range. Also, we would point to China and a very unique circumstance there as is well known. And we do expect that there will be some level of economic recovery there, particularly we forecasted in the second half of the year. This is a topic that we continue to work closely with our customers. That said, overall, and as we updated on our PC webinar, we do expect that the long-term market is in the 300 million unit range. So as we overcome this inventory adjustment cycle, and some of this near-term economic. And I think as you heard from Microsoft, PC usage is up, the number of hours per PC continues to be up. The installed base has gone up. So all of those factors give us reasonable confidence that post this period of inventory correction we will have a very healthy $300 million unit plus or minus market that we're selling into. John Pitzer (Head of Investor Relations): Vivek, do you have a follow-up question?

Yes. Thank you, John. And thank you, Pat. Second question is on the data center. Historically, the semiconductor market likes incumbency, and there is only a share shift if and when the incumbent messes up. And right now, your competitor seems to be becoming a larger incumbent in a lot of cloud deployments, and it doesn't seem to be messing up. Doesn't it make it harder to displace them? I'm just curious what edge you think Intel has to change the status quo of share shift in cloud server? Do you think your design will get noticeably better? Is it architecture? Is it manufacturing? What helps you specifically to change this current momentum of share shift in cloud servers? Pat Gelsinger (CEO): Yes. Thank you. And I think the most important thing is what we just did with Sapphire Rapids, right? Our customers were anxious for a great product from Intel. Obviously, we would have liked it to be earlier, as we had initially estimated, but we are now shipping a very high-quality product with significant areas of leadership in areas like AI performance, power performance, security feature function, high-performance computing workflows that are five times the competition. And features in areas like confidential computing and security that are quite differentiated from anything in the marketplace. Obviously, share shift, particularly in the data center space, these designs were one a year ago or two years ago. And so, it takes some amount of time. And against that, we're seeing a very strong outlook for Sapphire Rapids ramp through the year, as I said, 1 million units in the middle of the year, so very strong demand from our customers. And the other thing, as we've indicated, is have we rewon our customers' confidence that they could bet on our roadmap. Emerald Rapids looking very healthy for later this year, Granite Rapids and Sierra Forest looking very healthy for next year. And all of those, I believe, are rebuilding our customers' confidence. And I believe with that, given the massive incumbency that Intel has, and I would just emphasize that even though we have seen the share shift in recent sell-in, the installed base is Intel. There's an enormous, on many of the cloud customers, 95-plus percent of their installed base is Intel that gives us a very strong incumbency that we get to renew as we rebuild our customers' confidence. So as you put all of those things together, yes, we realize that we stumble, right? We lost share. We lost momentum. We think that stabilizes this year, and we're going to be building a roadmap that allows us to regain leadership for the long term in this critical market. John Pitzer (Head of Investor Relations): Thanks, Vivek. Jonathan, can we have the next question, please? null (Operator): Certainly. Our next question comes from the line of Timothy Arcuri from UBS. Your question, please.

Thanks a lot. Dave, I had a question on CapEx. I know you don't want to guide for the full year, but you did say that 20% to 30% of the gross CapEx, whatever the number is this year, is going to be sets. I know you don't have a lot of visibility on the chips money you're going to get. But it seems like, best case, revenue is going to be in the mid-50s roughly. And if I take a little less than 35% of that, because you said that it's still going to be 35% or less, that will be the net CapEx intensity. And I sort of divide the numbers, it implies a gross CapEx number, something in the range of $20 billion, give or take. Can you sort of help us just handicap that number? David Zinsner (CFO): Yes. We are currently not looking to provide guidance beyond the first quarter due to uncertainty. However, we are committed to making the right investments for our long-term IDM 2.0 strategy while carefully managing our capital expenditures to ensure good free cash flow. I anticipate that our Smart Capital offsets will be significantly better this year, partially because we will be fully engaged with SCIPs 1 through our partnership with Brookfield. We also expect grant incentives to contribute to this year's Smart Capital offsets. Additionally, the investment tax credit is already in place and may benefit us this year. While Smart Capital will be robust, we are being cautious with our total capital spending throughout the year. As the year progresses, we will monitor developments closely and adjust accordingly. Importantly, we did not foresee reaching this revenue level for 2023 when we previously mentioned a net CapEx intensity of 35%. Nevertheless, we are maintaining our discipline to keep spending at or below that 35% threshold for the year, which is a key takeaway for investors. Pat Gelsinger (CEO): Yes. Also, I'd just add that we do, and Dave sort of implied it, but we do expect to do SCIP 2 this year as well, which is another source. Also, the credit center clearly has motivation on the part of commerce to get that underway, and the rules are making in place in the near future and start to dispense funds this year. Also, I'd point to Europe as well, so it's EU chips as well as US chips. So all of those efforts are part of Smart Capital for us. We do believe that we'll have the capital necessary to meet both our near-term but more importantly the strategic long-term investments. And that's what we say we're on track with IDM 2.0. We're on track with the capital, the builds that allow us to restore leadership in our process technology as well as have the factory capacity to both deliver that for our products as well as for our foundry customers. John Pitzer (Head of Investor Relations): Tim, do you have a follow-up?

I do, John. Dave, could you walk us through some of the factors affecting gross margin? I understand you don't want to provide guidance for the full year, but could you help us think about the factors that might influence it? Obviously, as volumes increase, that will positively impact gross margin. Are there any other factors you would highlight for us? Thanks. David Zinsner (CFO): Yes, revenue will be the primary factor influencing gross margins. We operate with a high fixed cost structure, which negatively impacts us when revenue declines, but we also gain advantages when revenue increases. What is currently a challenge will become favorable as the business improves. The second major factor affecting us is the underload charges, which amount to about 400 basis points this quarter. We will evaluate the appropriate loading for the second quarter as we approach that time. This approach is aimed at effectively managing our cash flow. However, as business conditions change, we will increase the loading at the fab, which will enhance gross margins. Additionally, we have various cost initiatives underway, targeting $3 billion in savings for 2023 and an improvement of $8 billion to $10 billion over the coming years, which will further contribute to managing costs and improving gross margins beyond just revenue and loading factors. John Pitzer (Head of Investor Relations): Thanks, Tim. Jonathan, can we have the next question please? null (Operator): Certainly. And our next question comes from the line of C.J. Muse from Evercore ISI. Your question please.

Thank you for taking the question. Another question on CapEx. I guess, bigger picture, can you speak to your CapEx philosophy in a slower demand environment? Is it finding the right number to fit a free cash flow model, or are you looking at your overall demand picture and saying, we need X minus Y wafer starts, and that's why we can spend less? Would love to get a sense of how the slowdown here is potentially changing or potentially not your strategy of spending? And if it's not, is it just simply delaying investments into 2024 and 2025? Thanks. Pat Gelsinger (CEO): Yeah. Thanks, C.J. I'll start and ask Dave to jump in. We think about the capital budget with two lenses in mind, right? One is the strategic lens. Am I going to get back to leadership at 20A and 18A? Yes, am I going to make the capital investments required to do that? Absolutely. To some degree, do we scrub those? Could we look hard at those? Where can we save tens or hundreds of millions of dollars on those? Yes, we will. But we're not going to diminish from the capital required for strategic leadership for the long-term. So strategic capital largely unchanged. The second bucket, of course, I'll just call it capacity capital, right, and adjusting to the near-term ebb and flows of the business requirement. And obviously, in this macro environment, that's been adjusted meaningfully downward, and we're finding everywhere we can to squeeze our existing capacity more effectively to be more aggressive in terms of how we work with our equipment suppliers in those areas and doing everything we can to minimize the capital that's required for capacity-driven requirements as well. And that's where the larger trade-offs have been. And, of course, in a business as large as ours, we have labs and buildings and everything else. We are scrubbing those like crazy as you would want us to. Dave, what else would you add? David Zinsner (CFO): You took one of mine. Obviously, the OpEx area, yeah, is an area that we've really focused on and Pat mentioned the lab piece, which is one of the areas that we have found efficiency. And I guess the last thing is that we have seen our capital offsets be higher than our original expectation. We were planning for probably one-third of what we think we'll get in 2023 when we announced our smart capital initiative at the Analyst Day. So that's obviously coming in stronger. Of course, Pat already alluded to the fact that a lot of that is SCIP has turned out to be a pretty powerful tool, and this will enable us to do a SCIP 2 this year as well, which obviously helps. John Pitzer (Head of Investor Relations): C.J., do you have a follow-up?

I do a quick one. And again, I know you don't want to guide the full year, but as you look at different scenario analysis for 2023, how do you see return to positive free cash flow playing out? Is that something that could come in the second half, or that's really a 2024 event? David Zinsner (CFO): In 2023, we initially thought we would break even on free cash flow, but in the first half of the year, we are falling short of that expectation. However, we anticipate getting closer to our expectations in the latter half of the year. As for 2024, it's still a bit far off, but we are dedicating a lot of time to planning for it. Looking back at our free cash flow for 2022, we saw a result of about minus $4 billion, which was within our forecast range of minus $2 billion to minus $4 billion. We had anticipated a higher level of capital offsets that are now being pushed into 2023, yet we still reached the high end of our forecast. We achieved this through initiatives focused on working capital, which is a significant part of our free cash flow strategy. In the past, this was not a major focus for us, but it is now. We are managing our shipments, payment schedules, and inventory more effectively. While our underload affects gross margins, it also enhances our cash flow by reducing variable costs. We believe these strategies will be advantageous and support our free cash flow as we move forward through the year. John Pitzer (Head of Investor Relations): Thanks, C.J. Jonathan, can we have the next question, please? null (Operator): Certainly. And our next question comes from the line of Matt Ramsay from Cowen. Your question, please.

Good afternoon, guys. Thank you. Dave, the first question, I get it a lot is, just with the challenges that you just mentioned at C.J.'s question on free cash flow. And I guess, well done to you and your team for extracting as much cash as you did out of working capital in the quarter. But I get questions about the security of the dividend all the time. And maybe that's a Board-level decision, but maybe you and Pat could address it a bit. Is that the current levels of dividend? Is that sort of a sacrosanct thing at Intel in your current operating plan? Are there discussions around it either way? Don’t shoot the messenger, it’s a question I get a ton. David Zinsner (CFO): Yes. Well, obviously, we announced a $0.365 dividend for the first quarter. That was consistent with the last quarter's dividend. I'd just say the Board, management, we take a very disciplined approach to the capital allocation strategy, and we're going to remain committed to being very prudent around how we allocate capital for the owners. And we are committed to maintaining a competitive dividend. John Pitzer (Head of Investor Relations): Matt, do you have a follow-up question?

Thanks, everyone. As a follow-up, I wanted to explore the DCAI business further. You mentioned that PSG or Altera has grown around 40% year-over-year. If my calculations are correct, this suggests that the core cloud and enterprise server business is down by about 40%. Pat, could you clarify if that math is accurate? Furthermore, could you explain your perspective on share loss, average selling prices, and market weakness in China and the enterprise sector? How would you break down what’s happening in the server share market? Pat Gelsinger (CEO): PSG had a strong quarter with a solid backlog and continued growth. However, I believe your calculations regarding the size of those businesses are inaccurate. We're open to discussing this further offline. Last year, we experienced slower growth than the market and some share loss, but we anticipate stabilization this year. The key to improvement lies in better products, which we've just launched with Sapphire Rapids. The feedback has been positive, particularly during our customer-focused event on January 10, which saw strong participation from all customer segments. This year, our focus will be on ramping those products, which we expect will lead to improvements in market share and average selling prices as we rollout the product. Customer confidence in our long-term roadmap is crucial; we've established a credible plan moving forward. Expect to see numerous updates from us this year as we begin delivering samples of our next-generation products, alongside the continued ramp of Sapphire Rapids featuring unique capabilities. We believe we have moved past the most challenging times and are now advancing in this area with a strong focus on customer needs and use cases. John Pitzer (Head of Investor Relations): Thanks, Matt. Jonathan, can we have the next question, please? null (Operator): Certainly. One moment for our next question. And our next question comes from the line of Toshiya Hari from Goldman Sachs. Your question, please.

Hi, good afternoon. Thank you for your question. Pat, could you discuss the demand environment in DCAI across cloud, enterprise, and possibly your communications customers? In your prepared remarks, you mentioned that the inventory correction in enterprise is ahead of cloud. Does that suggest that cloud demand might moderate or decline as we move further into the year? Any elaboration on that would be appreciated. Pat Gelsinger (CEO): Thank you, Toshi. We observed a softening in demand throughout the year in the data center market overall. Our increased exposure to the enterprise sector in China has slightly weakened our position, and we're seeing similar trends with cloud providers as well. All of them showed weakness in the first half of the year. However, we are somewhat optimistic that the enterprise sector in China will recover more quickly than the cloud sector. Given our stronger presence in those areas, we think this could be beneficial for us relative to competition. In the networking space, we maintain strong leadership, especially in vRAN and O-RAN, where our platform significantly outperforms competitors. While we anticipate some softening in networking during the year, it may not be as pronounced as in other segments. We expect a year-over-year decline in the first half, but we anticipate a return to growth in the second half. Overall, we believe our position is stabilizing, and we are optimistic about stronger recovery in the markets where we have an advantage as the year progresses. John Pitzer (Head of Investor Relations): Toshiya, do you have a follow-up?

I do. Thanks, John. Pat, you also talked about your focus and commitment toward value creation. You mentioned how you guys are pulling future investments from the switching business. As you look across your portfolio as of today, I think to your point, you've done quite a lot since coming back. Like where is the incremental opportunity as you think about improving the portfolio going forward and creating value? Pat Gelsinger (CEO): Yeah. And I would just say here without being too specific and some of these things are under evaluation, discussion with customers and the best way to handle it. We're doing a thorough analysis across the portfolio. And I would say we are looking at every aspect of the portfolio, where we're getting good returns, where we're not. And we're making decision after decision to optimize the portfolio. And as you say, we haven't been hesitant to make those decisions inside the back. And we have a few more that we're looking carefully at. But we're also looking at every area of the business. Dave suggested in his comments, hey, can we do a better job with our line? Could we do a better job with our building assets? We've also discussed as part of the internal foundry model that we're making major steps to improve our automation and ERP efficiency to run the company more. Some of our people actions. We've been very scrutinizing and benchmarking ourselves against best-in-class in every aspect of how we run the business. So one-by-one, we're saying we're going to be world-class as measured by benchmarks in these areas, and all the business areas that we're in, we believe they're strategically important and yielding good results with our shareholders' investments. John Pitzer (Head of Investor Relations): Thanks Toshiya. Jonathan, we have time for one last question please. null (Operator): Certainly. Then our final question for today comes from the line of Joseph Moore from Morgan Stanley.

Great. Thank you. We’re going to talk about the reception you're seeing with Sapphire Rapids. And in particular, it seems like it's a really good chip. But I think the price at the platform level is getting more expensive, DDR5 is more expensive. What's it like right now migrating to a more expensive platform and environment or budgets are under pressure, does that change the ramp relative to other CPUs that you have? Pat Gelsinger (CEO): Yeah. Thanks, Joe. And you are touching on a very important issue, the memory. And obviously, the memory pricing for DDR4 has collapsed, right, and making that pricing gap versus DDR5 very visible currently. That said, customers don't buy these platforms on memory prices. They buy them on total cost of operations that they get for the performance as they put them into operations. So memory price is one piece of that. But I'd also say DDR prices are expected to decline as we go through, and the gap to DDR4 is widely forecast to decline, and that gap will diminish as we go through the year. However, right, you contrast that to the significant performance capability. And in some areas like AI, we're seeing five to six times performance benefits. And when you put that into a TCO calculation, it's overwhelmingly positive. Security is not measured on TCO. It's measured on absolute statements of security and confidential computing. So overall, we are driving this ramp very aggressively through the year. We have strong demand from customers. We're ramping our factories quickly. And we do believe that we will have a strong ramp of the Sapphire Rapids platform as we go through the year. John Pitzer (Head of Investor Relations): Joe, do you have a quick follow-up?

I also wanted to inquire about the migration of the AXG business into DCAI and CCG. Is there any change in priorities, or is it simply a restructuring of where those businesses are located? Pat Gelsinger (CEO): Yeah. It's a restructuring of where the businesses reside. And as we move past this, I'll say, launch phase of those products. And we're now into the scale phase of those product lines. And for instance, discrete graphics, driving the attach rate and channel motions with our enormous client business. In the data center, bringing a broader portfolio across HPC, our Flex product line, the AI capabilities that we have that we're uniquely delivering through data center. So all of this is about is the efficiency and scale of those business areas. And we've been having numerous discussions with our customers about these changes, and they have been very well received. And I'd say all the products that we launched out of AXG, the Flex product line, the discrete graphics product line, the MAX product lines. All of those products are continuing forward, and we believe all of those will have strong ramps in their volumes, revenues, and market impact as we go through the year. So with that, let me just wrap up our time together. First, thank you. We're grateful for you joining us today, the opportunity that you've given us to update you on our business. And clearly, the financials aren't what we would hope for. But we're also pleased with the execution progress we made. And as a result, we're confident in the strategic outlook that we have for our business. Though the macro is difficult. It was difficult in Q4. We expect it to remain difficult as we go through the first half of the year, but we're laser-focused on controlling the things that we can and every aspect of our execution, cost management, and transformation is in our hands and we are well underway in executing against those paths. John Pitzer (Head of Investor Relations): So with that, we look forward to seeing many of you throughout the quarter, updating you on our progress next quarter. Thank you very much. null (Operator): Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.