I guess for my first question, I wanted to dive into the demand side of the equation. What was weaker in the near term than you had expected? And, much more importantly, it seems like the back half you're going to have double-digit sequential growth in largely both quarters, so that's significantly above seasonal. I know you went through some of the reasons at a high level, but can you dive a little bit deeper into what gives you that level of confidence in the second half ramp? Patrick Gelsinger (CEO): Yes, thanks for the question, Ross. The market has been weaker overall, and this has been echoed by others in the industry. Demand has softened across various segments including cloud and enterprise customers in different regions. We are experiencing weaker demand at the lower end of the seasonal trend from Q1 to Q2. However, as we approach the second half of the year, we are engaging closely with our customers and OEM partners and are seeing strength across the board. This is partially due to our unique product offerings and market trends, particularly with AI PCs and an anticipated Windows upgrade cycle in the second half. Core Ultra is performing well, and while we are meeting our commitments, we have not been able to fulfill all the increased requests from customers. We see a strong outlook for AI PCs in the data center, and with our new products, we are seeing healthy increases in average selling prices. Our products like CR4, which just went into production this week, are enhancing our competitiveness. Additionally, we have a significant amount of Gaudi revenue expected in the second half, and our other business segments are also improving. The Intel Foundry is showing progress as well, with gradual improvements in both revenue and margins. Overall, we are confident that the second half of the year will be strong for the business, with the first half being weaker but understandable. We expect all of Intel’s business units to grow and gain momentum as we move into 2025. John Pitzer (Head of Investor Relations): Ross, do you have a quick follow-up?

I do. Maybe for Dave, on the gross margin side, nice upside in the first quarter, but the drop in the second quarter is a little bit puzzling with revenues going up. So could you just talk a little bit about that second quarter drop and then the confidence in the rebound in the second half? Is that just revenue driven in the second half? Or what's the key metrics there, please? David Zinsner (CFO): Yes. Good. Thanks, Ross. Maybe start with Q1 because it somewhat explains Q2. We had better sell-through of product. I hadn't even mentioned Meteor Lake strength. That better sell-through was on previously reserved material. And so we just saw some upside in gross margins because of that. We had a little bit more of a flattish plan between Q1 and Q2 in terms of how that would flow through. And so it kind of pulled some of the benefit of gross margin improvement we would have seen in Q2 and kind of pulled it into Q1. So that was part of it. The second part is, as we talked about, this year was going to be a heavy year for start-up costs for us. And it really shows up more meaningfully in the second quarter versus the first quarter. And so that puts a little added pressure on gross margins. As you point out, the upside in the revenue, we will have good fall-through in Q3 and Q4, that will help lift the gross margins from where they are today. And then on top of that, we'll see some areas which have high gross margins, helping us like, for example, Mobileye, we get good gross margin for Mobileye and the strength that we'll see through the year there and products like that will also help drive better gross margins in the back half of the year. As we look into '25, I think we'll have better gross margins than '25 than we had in '24. So this should be an ongoing story for us on the gross margin front. And as you know, we're driving to get to kind of mid-50s gross margins by the midpoint between now and 2030 and ultimately getting to 60%. Of course, revenue will be part of that. But a lot of that is within our control. It's things like 18A wafer pricing growing at 3x the cost of 18A that will help drive margins. The pull-in of tiles, as Pat mentioned, internally is going to drive better gross margins for us over time. All of what we're doing in terms of resegmenting new businesses to drive better decision-making, that better decision-making will translate into significant cost improvements for us, which should also be a meaningful driver for gross margins over time as well. And, of course, as Pat mentioned, we're happy to get the CHIPS announcement out. And of course, that, coupled with what we expect from the EU and the investment tax credit will also be major tailwinds on gross margins over a long-term basis.

Appreciate the chance to ask a question here. Pat, can you talk a little bit more about servers in the data center? There was talk of a bottom there in previous discussions. How do you see that kind of going throughout the year in light of your 2Q guidance? And what's the catalyst for the pickup there? Patrick Gelsinger (CEO): Yes. Thank you, Ben. And obviously, as we look at our position in the data center, I'll just say we're stabilizing. And with that, we're improving our competitiveness. We also see, as I mentioned in the comments, that the ASPs are going up comfortably as well. So socket fairly stable through the year, but the ASP per socket with increased core count improves our position. And then new products like Sierra Forest or Xeon Gen 6 product definitely gives us power performance capabilities. So overall, we're seeing a very healthy growth rate, mid-20s as we go through the year. We're also seeing increasing interest in the AI capabilities of Xeon. And we're winning head node positions, and we're seeing pretty extraordinary performance at Vision. We talked about the ability to now run 70 billion parameter models directly on Xeon. And these types of capabilities, say, for a lot of enterprise use cases, Xeon is a very strong product. And as we laid out at Vision, the ability for Xeon plus Gaudi to start positioning this open platform for enterprise AI is a very strong position for us. So overall, we feel like we're on a solid trajectory into a market that even though it's been dominated by the Gen AI theme as enterprises, our OEMs and ODMs are communicating, there's growth here in servers. And we now have a much better product position, improving ASPs, and a better overall positioning in AI for a lot of these use cases where it's Xeon CPU plus GPU and accelerator. John Pitzer (Head of Investor Relations): Ben, do you have a quick follow-up?

Yes. Thanks. Can we just double-click also on Gaudi, $500 million in the back half of the year? I think you previously talked about a couple of billion in the pipeline. What does that say about your yield to revenue on an annualized basis with AI? And is there an update on the pipeline and your confidence there heading into 2025 on the accelerator front? Patrick Gelsinger (CEO): Yes. Thanks, Ben. And obviously, pipeline converting into revenue, revenue is much more meaningful, and as we said, greater than $500 million for the year, and that's obviously quarter-on-quarter accelerating rapidly, which also gives a great indication for the business in '25 as well. At our Vision event, we had over 20 customers publicly describing their embrace of Gaudi 2 and Gaudi 3. And I was super pleased to see the breadth of those customers. It was CSPs like Naver and Ola and IBM Cloud. It was ISVs like Zeekr, right, coming on board, but maybe most importantly, enterprise customers. And ultimately, Gen AI training, okay, creating models, but enterprises are going to use models, and that's where our TCO benefits. The ability for us to action customers' data in their enterprise environment is so powerful and customers like Bosch were coming forward and Roche to be able to demonstrate the true benefits of Gaudi and Xeon plus Gaudi. The roadmap is in good shape. The Gaudi 3 Falcon Shores in '25. We're also seeing that the industry wants to open alternatives. And we announced our AI networking initiative, Ultra Ethernet Consortium, standardizing on scale-up and scale-out to Ethernet, increasing work for abstract levels of AI development with PyTorch and the embrace of the open platform for enterprise AI that we rolled out. All of those taken together, the industry is looking for open enterprise alternatives for regenerative AI deployment and Intel are quite well positioned, and we're starting to really see that uptake in our Accelerator and Xeon pipeline now.

Could you discuss the server roadmap? It seems you are confirming the timeline for both Sierra Forest and Granite Rapids. Is there demand for the Sierra Forest product as well? Do you anticipate that demand will be split between both? Also, how quickly do you expect these products to reach volume production? Patrick Gelsinger (CEO): Yes. So Sierra Forest, our first Xeon 6 product on Intel 3, and I'm super proud, right? Now we have a leadership process technology back on American soil for the first time in a decade. This is really exciting. And Sierra Forest, high core count, 144, 288 core product, very focused on power, performance, efficiency, and we do see a good pipeline of customers and a good pipeline of, I'll say, socket win backs because the area of power performance has been an area that we've been carrying a deficit, being on an older node. And now that we're on leadership nodes, we definitely see share gains for that. Of course, Granite Rapids, which will come in Q3, the Xeon 6 P-Core part is much more the bread and butter of the Xeon family. So we do see that being a stronger element to the portfolio this year as we haven't been participating in the power performance sockets as aggressively lately, and Sierra Forest gives us that tool. So it really is a one-two punch, as we've described. With Granite coming in Q3 and a volume ramp on Intel 3 with that, we feel we have a very good product line. Next year is Clearwater Forest, the second generation of the E-core part, the leadership position on 18A in the server market, a very strong product for us, unquestioned leadership and power performance, so I believe that's a great opportunity for us to gain share again in the data center. So the roadmap is healthy. The execution is strong, and we're rebuilding customer trust. They're looking at us now and saying, 'Oh, Intel is back.' And we're quite excited by that. And then beyond that, building the volume, building the confidence and the momentum for traditional use cases as well as the AI use cases, as I just referred on Ben's question as well. John Pitzer (Head of Investor Relations): Joe, do you have a quick follow-up?

Yes, I do. Thank you. During the foundry webinar, you mentioned that Intel 3 volume would experience an inflection next year. Does this imply that the Intel 3 products will reach a volume crossover primarily in the server sector next year? Additionally, considering the leadership you just highlighted, what challenges are preventing these products from ramping up in the second half? Patrick Gelsinger (CEO): Yes, Joe, thank you. And servers always just take a while to ramp. Customers bring them in, they qualify them, they test them because they're generally putting these things at scale. So there's just an adoption cycle for server products. And the numbers that I'm holding my team accountable for are some of the most aggressive volume ramps that we've ever achieved on server products. So we're driving them very hard. That said, in terms of the total wafer volume this year, right, it's dominated by Intel 7. And the Intel 4 and 3 wafer volumes become much more prominent next year, and that's what I was communicating on the webinar. But as we go through the year, you're going to start to see the wafer ASPs pick up as a result of Intel 4, 3 ramping at much better ASP points, better margins associated with those, and they will become much more prominent in the foundry P&L next year. But these are production ramps that are already underway on Intel 3. The Intel 4 ramp is already underway. We began that in the second half of last year. So these wafer ramps are underway with volume productions, volume products that we're bringing to the marketplace, very confident in our ability. And then, of course, 18A as we deliver the PDK for that in Q2, the 1.0 PDK and we'll begin the volume ramps on Clearwater Forest and Panther Lake in the first half of next year for those products coming out. So we feel very comfortable with that overall picture that we've laid out. So thank you, Joe.

Just a quick question on the Grand Rapids, any thoughts on the timing? And do you expect to regain some computing share, server share there with those ramps? Patrick Gelsinger (CEO): Thank you, Vijay. Following up on the last question, Granite Rapids is set to launch in the third quarter of this year, and we are looking forward to the product's release. It typically takes some time for customers to become familiar with, qualify, and introduce these products into the market. However, Sierra Forest and Granite Rapids offer significantly improved power performance on Intel 3, and we expect them to stabilize and allow us to regain market share. As we approach next year, we anticipate regaining share as we close out this year and move into the next. These are strong products, and we plan to ramp them up aggressively with our customers. John Pitzer (Head of Investor Relations): Vijay, do you have a follow-up?

Yes. Thanks. Just on the GPU side, on the AI side, any parts on Falcon Shores? Any preliminary takes on that? How do you see that building out into '25? Patrick Gelsinger (CEO): Yes, the announcement of Gaudi 3 this quarter has been extremely well received. We now have over 20 customers for Gaudi 2 and 3, and we expect this momentum to continue. Falcon Shores will enhance this progress, set to launch late next year, combining the impressive performance of Gaudi 3 with a fully programmable architecture. Following that, we have an aggressive schedule for Falcon Shores products. We also introduced the Gaudi 3 PCIe card, and the combination of Xeon with an accelerator or Gaudi accelerator has garnered positive feedback from customers as well, with plans to release it later this year. The key focus is on delivering value and practical applications for enterprises, with Falcon Shores building on the success of Gaudi 2 and 3. We've seen customers joining the Intel Developer Cloud, making these products available early for developers and enterprises. Zeekr is now our largest win in the Intel Developer Cloud, benefiting significantly from this initiative. The larger goal is to unlock our enterprise customers' data resources, which includes the open platform for enterprise AI that we introduced at Open Summit. Overall, we are seeing positive developments to drive the AI cycle for Intel, and AI continues to be a high-demand market. We're involved across all sectors, including client, edge, enterprise, and foundry opportunities, delivering AI solutions everywhere.

Dave, I also wanted to ask about gross margin. You did say it's going to be better next year, but it is really whipping around a lot. And it looks like you sort of have to exit this year at 48 or maybe a little higher, which is already well above the 45.5 that you'll be at this year because you're guiding it up to 100 basis points. So I know you don't want to guide next year, but if you can even qualitatively help us, can you sustain those margins at that level? And I asked because last year, you sort of exited at 49% and then things crashed here during the first half of the year. So can you help us just think about what some of the puts and takes will be next year off of that high base if you're going to exit this year at? David Zinsner (CFO): Yes, that's a good question. There will be additional start-up costs next year, but we believe that on a percentage of revenue basis, these costs will be lower, which should help improve margins. We also anticipate revenue growth, which will contribute positively. Moreover, we've observed improved decision-making regarding our operations within the new business structure, although many of these decisions won't immediately impact the profit and loss statement. The benefits from these decisions will become apparent in the coming years. Another factor affecting our margins in recent years has been our practice of reserving materials until the PRQ date, as noted by Pat regarding the Sierra Forest. Typically, we reserve a large amount for Sierra Forest and then release these reserves once we start shipping after the PRQ date. However, we will change this approach moving forward, which should reduce the volatility in our gross margin. Ultimately, our margins will be influenced by revenue growth, the spending profile in the fabs, start-up costs, and the product mix.

I have a question about server CPU share. I thought the expectation for March was that share would remain relatively stable. Can you confirm if that was accurate? It seems like you might be slightly less optimistic about share in the latter half of the year, especially considering the time it takes for these factors to affect share. Your positive outlook for the second half appears to be based more on market conditions than on share performance. Could you clarify that? Patrick Gelsinger (CEO): Well, overall, I like to say it's hard to predict, right, exactly how these will play out in light of the overall gen AI surge that we've seen. That said, products are good, right? We came into the year improving our market share position in the first quarter of the year. It does take time to ramp these new products. But better products, rebuilding trust with our customers that we're delivering on these and now hitting the early end of the cycles on these new products is giving us a lot of interest with the market and the customer. New use cases also demonstrated a 70 billion parameter model running natively on Granite Rapids at our Vision event, all of these just make us more and more confident in our business execution. We're also seeing that we don't need SoC count to increase. The ASPs are going up with the core counts on our new leadership products as well. So all of those in a fairly optimistic view that we're getting from our OEMs and our channel partners for their view of upgrade cycles, building momentum from customers across the industry. We feel very comfortable that we're stabilizing our position. We have been improving our roadmap, and we do expect to see share gains as we end the year and go into '25.

My question is on the client side. I think, Pat, you mentioned something about supply constraints impacting your 2Q outlook. If you could provide some color as to what's causing those supply constraints and when do you expect those to ease as we, I guess, go into the second half. And then in terms of your AI PCs, I think you've been talking about $40 million or so potentially shipping this year. Could you maybe put that into some context as to how it actually helps Intel? Is it just higher ASPs? Is it higher margin? I would think that these products also come with higher costs. I just want to understand how we should think about the benefit to Intel as these AI PCs ramp? Patrick Gelsinger (CEO): Yes. Thank you. And overall, as we've seen, this is a hot product. The AI PC category, and we declared this as we finished last year, and we've just been incrementing up our AI PC or Core Ultra product volumes throughout. We're meeting our customer commitments that we've had, but they've come back and asked for upside on multiple occasions across different submarkets. And we are racing to catch up to those upside requests, and the constraint has been on the back end. Wafer-level assembly, one of the new capabilities that are part of Meteor Lake and our subsequent client products. So with that, we're working to catch up and build more wafer-level assembly capacity to meet those. How does it help us? Hey, it's a new category. And that new category of products will generally be at higher ASPs as your question suggests. But we also think it's new use cases, and new use cases over time create a larger TAM. It creates an upgrade cycle that we're seeing. It creates new applications, and we're seeing essentially every ISV AI-ing their app, whether it's the communications capabilities of Zoom and team for translation and contextualization, whether it's new security capabilities with CrowdStrike and others finding new ways to do security on the client or it's way other creators and gamers taking advantage of this. So we see that every PC is going to become an AI PC over time. And when you have that kind of cycle underway, Srini, everybody starts to say, 'Oh, how do I upgrade my platform?' And we even demonstrated how we're using AI PC in the Intel factories now to improve yields and performance inside of our own factories. And as I've described it, it's like a Centrino moment, right, where Centrino ushered in WiFi at scale. We see the AI PC ushering in these new use cases at scale, and that's going to be great for the industry. But as the unquestioned market leader, right, the leader in the category creation, we think we're going to differentially benefit from the emergence of the AI PC.

Yes, John. Thank you. I have another question regarding the other area. Dave mentioned that Altera could finish the year at a $2 billion run rate from its current position, which seems like a significant increase. You also indicated that growth will pick up over the next few quarters. Given the current weakness in telecom, I'm interested in what gives you that confidence or visibility. Is this due to new products, or is it simply the market recovering? Any insights would be appreciated. David Zinsner (CFO): Yes. On Altera, and this is not unprecedented when you see a massive work down of inventory, of course, that significantly impacts the revenue. But as that normalizes, then you start shipping to end consumption. So it's actually a pretty easy lift to get to the $2 billion mark once we're through the inventory digestion period. So I think we have high confidence on that. Patrick Gelsinger (CEO): And others have commented on their inventory cycles as well in the FPGA category. We have good products in the second half of the year, with Agilex starting to ramp as well. David Zinsner (CFO): And then on NEX, of course, that business also has gone through its own inventory adjustment. So we have good confidence around that reversing, which will help drive strength. And then some of the products that are more tailored to the AI space, of course, we'll see like, at NEX, for example, we'll see strength through the year. And so that should drive good revenue growth through the year as well.

Pat, just a conceptual question. In a gen AI server with accelerators, how important is the role of a specific CPU? Or is it easily interchangeable between yours or AMD's or ARM's? I guess the question is that if most of the workload is being done on the accelerator, does it really matter which CPU I use? And can that move towards gen AI servers, essentially shrink the TAM for x86 server CPUs, because a number of your cloud customers have announced ARM-based server alternatives. So I'm just curious how you think about that conversion over to gen AI and what that means for x86 server CPU TAM going forward. Patrick Gelsinger (CEO): Yes. Thanks, Vivek. And we spoke at our Vision event about use cases like RAG, retrieval augmented generation, where the LLMs might run on an accelerator, but all of the real-time data, all of the databases, all of the embedding is running on the CPU. So you're seeing all of these data environments, which are already running on Xeon and x86 being augmented with AI capabilities to feed an LLM. I believe this whole area of RAG becomes one of the primary use cases for enterprise AI. And if you think about it, an LLM might be trained with one- to two-year-old data, right? But many of the business processes and environments are real-time, right? You're not going to be retraining constantly. And that's where this area of the front-end database becomes very prominent. All of those databases run on x86 today. All of them are being enhanced for use cases like RAG. And that's why we see this unlock occurring because the data sits on-prem, the data sits in the x86 database environments that are all being enhanced against these use cases. And as we've shown, we don't need accelerators in some cases. We can run a 70 billion parameter model natively on Xeon with extraordinary TCO value for customers. Furthermore, all of the IT environments that enterprises run today, they have the security, they have the networking, they have the management technologies in place. They don't need to upgrade or change those from any of those use cases. So we see a lot of opportunity here to build on the enterprise asset that we have with the Xeon franchise, but we're also going to be aggressively augmenting that. We're commonly the head node, even when it's other accelerators that are being used or other GPU is being used. As we've described, Xeon plus Gaudi, we think is going to be a very powerful opportunity for enterprises. So in many of those cases, we see this as a market lift, new applications, new use cases, new energy coming to the enterprise AI. Here we are in year 23 of the cloud, and while 60% of the workload has moved to the cloud, over 80% of the data remains on-prem under the control of the enterprise, much of that underutilized in businesses today. That's what gen AI is going to unlock. And a lot of that is going to happen through the x86 CPU and we see a powerful cycle emerging. And I would just point you back to what we described at Vision. This was a great event and many customers are seeing that value today.

Yes. Thank you. Maybe one for Dave on the potential operating loss, kind of how do we model that for the foundry business. So let's say, if I exclude the $2 billion in depreciation headwind, which I'm assuming is almost all going to your foundry business. What is the right way, Dave, to think about foundry operating income or loss this year? And how much of external foundry revenue are you expecting this year? David Zinsner (CFO): Yes. Good question. The operating losses will pick up. We roughly were at like 2-, 4-ish in the first quarter. It will pick up in the second quarter, given the start-up costs are increasing, and I would say, be roughly in that range for the remainder of the year. And then what I said before is we see that improving then going into '25. Pat's given me the order; he wants to see every quarter some improvement in the operating loss ultimately to get to breakeven midway through the point between now and 2030. And I think that is very achievable. John Pitzer (Head of Investor Relations): Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.