Thanks for taking my question. Pat, big picture, are the challenges the product issue, market issue, strategic issue, execution issue, I'm just wondering has the core issues been accurately diagnosed, because when we look at your CPU competitor, they appear to be doing much better in this same environment. So I'm curious what is plan B if just cost cuts don't do the job? Patrick Gelsinger (CEO): Yes. Thank you, Vivek. I'll start out by saying that this first phase of the recovery, restoration, and rebuilding plan is now well underway. With 18A, PDK 1.0, with Panther Lake, Clearwater Forest powered-on, our geo footprint now starting to take shape, we have more competitive products in every segment of the industry. That said, with that foundation in place, it's time for us to focus on Phase 2, building a more financially sustainable model for the company for the future. Many of the new products are yet to ramp into the marketplace and we're just now getting to competitiveness. But we need to build a more sustainable business model for us that allows us to have the financial wherewithal for the long-term journey. I'd say this rebuilding that we're underway, this is the most significant rebuilding of Intel since the transition from memory to microprocessors four decades ago. We firmly believe in the IDM 2.0 strategy. We're building two world-class companies. The forensics that we've done this year, this clean sheet exercise as we could describe it, is building a world-class Intel Foundry and building a world-class Intel Products Group. These efforts we believe have identified many opportunities for us to achieve financial savings. We've launched those aggressive steps today, and we believe that with the new products, a better financial position that we've done for a more efficient operation, we see the long-term opportunity for significant value creation for all of our stakeholders. John Pitzer (Head of Investor Relations): Vivek, do you have a follow-up?

Thank you, John. For my follow-up, I'm curious about the impact of the restructuring actions on your R&D roadmap, long-term external foundry opportunities, and any CHIPS Act funding. In the past, you suggested there could be about $15 billion in long-term value from external foundries. Will these restructuring actions affect those growth targets? What changes are expected due to the restructuring? Thank you. Patrick Gelsinger (CEO): Thank you, Vivek. We believe our strategy will remain effective as we implement more efficient measures. Regarding the CHIPS grants, these are milestone-based investments. We are confident in our ability to meet those milestones across the projects we've announced. Our collaboration with the CHIPS program office in the U.S. government gives us assurance about our plans. In addition, we are experiencing significant momentum in advanced packaging areas, which is leading to increased opportunities. We still stand by the projected $15 billion in long-term deal value and anticipate reaching $15 billion in revenue by the end of the decade. With the capital changes we've made, we're focused on becoming much more efficient with our capital investments and ensuring we scrutinize them carefully. After addressing our catch-up capital, which left us with no spare capacity, we can now concentrate on capital efficiency moving forward and align our spending with market signals regarding future products and our foundry commitments. Ultimately, we are adapting our investments based on market conditions, and we have established a model that allows us to scale effectively. We feel that our strategy remains on track, and we are now entering Phase 2 of executing that strategy. John Pitzer (Head of Investor Relations): Thanks, Vivek. Jonathan, can we have the next caller, please? null (Operator): Certainly. And our next question comes from the line of Ross Seymore from Deutsche Bank. Your question, please.

Hi, everyone. I appreciate the opportunity to ask my question. I wanted to follow up on the previous points and rephrase my inquiry. It seems like you are adjusting your spending to reflect the current economic reality of slower growth, but I find it hard to believe that this wouldn't affect your overall structural dynamics. So my main question is, have there been any changes to your competitiveness, the company's structure, or the long-term $100 billion goal that prompted these spending cuts? Can you describe any of these structural changes and how they might impact your financial targets? Patrick Gelsinger (CEO): Yes, let me point you back to what I said at the start. We started this forensics, this clean sheet analysis concurrent with the rolling out of our new operational model. We said we have to be a world-class foundry. We are going to benchmark ourselves against world-class foundries and that's what Intel Foundry is going to become, and that's uncovered a lot of things, a lot of inefficiencies, a lot of ways that we can drive our capital footprint more effectively, and every aspect of that business is being analyzed and how we do maintenance, how we procure chemicals, how we run and price wafers and shuttle lots and everything like that so clean sheet analysis. Similarly, on the product side, we've done exactly that same analysis. What does a world-class fabulous company look like? And we uncover quite a lot of areas where we don't leverage industry IPs. We're not using our EDA vendors as effectively. We've done too many steppings. We validate versus build-in design quality. So many of these things are steps that we're taking to be a world-class fabless company, and these are significant structural steps. We also realized that as an IDM 1.0, we were never built for efficiency. We were built for leadership. And now as we add this focus on efficiency, we see a lot of opportunities. I'm having each of the four business areas, client, networking, and data center, look at their own portfolios, even though those are the right product areas for us for the future, and similarly, the portfolio of our Intel Foundry business, and that's the work that we've now been undertaking and we're now accelerating based on the less-than-expected quarterly results, we're accelerating those impacts. We're going to drive that in the second half of this year. We want to get these restructurings done quickly so that we can move forward more aggressively with the product lines next year. In terms of the long-term forecast, we're clearly tempering our view of how fast we can grow in the near-term based on the market conditions. But our model is built that we will scale up or scale down the capital requirements appropriate to the market conditions we see. We believe the long-term guidance that we've given you, the 60:40, getting to the Foundry business model we've described, the growth areas that we've said, those are larger portions of our business. We believe those are long-term still achievable in that regard and we're on track for many of those things in the models that we're laying out, and today's actions will help accelerate us achieving those. John Pitzer (Head of Investor Relations): Ross, do you have a quick follow-up?

Yes, I do. Dave, you provided good details about the cost structure and what might change next year. I understand you won't provide guidance for 2025 revenue, but it would be helpful to know your thoughts on competitive positioning in CCG and DCAI, including any analysis of potential tailwinds or headwinds for 2025. David Zinsner (CFO): Yes, sure. On the client side, obviously, we feel very good given our AI PC position, we're leading that new product category. And I think we talked a little bit in the prepared remarks about Lunar Lake, our next product coming in after Meteor Lake and the performance of that, so that looks like a phenomenally good product and position. We're making the early inroads on the AI side of data center, and that's only going to grow as we go into next year. The big question is when does the traditional CPU market recover? It has been tempered this year, and of course, affected by other regions of the world like China spending and so forth. That's obviously been a soft space and so we'll have to see how that plays out. And then NEX, obviously also outside of the telco space is starting to recover. And then we have these other businesses, Altera is starting to recover now. So we're optimistic that next year will be a good year for them and we'll have to see how Mobileye plays out ultimately. I think on the margin front, I talked about our tempered view of gross margins next year, given the ramp of Lunar Lake, which with memory and packaging and almost all of the material getting sourced externally and we're seeing inflation in that space that is impacting it. But that part is followed by Panther Lake, that comes back into the fab. And I think one of the bigger stories we'll have once we get beyond next year is the resurgence of our internal facilities to start taking on a lot of the capacity that we had to move into the external sources should provide some meaningful improvement in terms of profitability. And then, of course, we've done a lot, as Pat talked about in terms of restructuring the business and those will start to show up next year, but will be even more impactful the following year, including the new operating model. So I think the good news for us is we actually don't need a ton of growth to see our model play out, both in the medium term and long term in terms of gross margins and operating margins. And if we do get the growth, it puts us in an even better position. John Pitzer (Head of Investor Relations): Thank you, Ross. Jonathan, can we have the next caller, please? null (Operator): Certainly. And our next question comes from the line of CJ Muse from Cantor Fitzgerald. Your question, please.

Yes. Thank you for taking the question. I guess, Dave, a follow-up to that prior question. I was hoping you could perhaps speak to how to think about gross margins beyond 2025. It's obviously very hard to offer the leverage when you're investing in both foundry capacity and at the same time outsourcing meaningful tiles to TSM. So encouraging that you're bringing Panther Lake back in-house. How should we think about incremental margins there? And any of the other kind of moving parts that you've been speaking about on this call, including the unfavorable product mix and the more competitive pricing? Is that just a near-term kind of phenomenon or something else we should be thinking about into 2025, 2026? David Zinsner (CFO): Yes. As I mentioned to Ross and CJ, the positive news for 2026 is that we will start shifting back to our internal manufacturing for many of our tiles, which means bringing more wafers into our internal network will significantly enhance our cost structure. The changes in capital expenditures, which are clearly beneficial for cash flow in the short term, will also improve our cost structure as depreciation will become less of a burden for us, which is advantageous. Additionally, we have many structural improvements on the way, driven by the actions we have taken so far, along with the new operating model and future decisions that will optimize our business model moving forward. I believe 2026 will be a strong year for us regarding gross margins, although we will reserve the actual figures for a later date when we have clearer visibility into developments. In terms of mix, we do not anticipate it to be a significant headwind or tailwind; however, as we transition to more advanced wafers, the margins on these wafers are considerably higher compared to those in pre-EUV nodes, which will certainly contribute positively. Moreover, this transition benefits us on the pricing front, as we achieve better pricing for EUV wafers than for pre-EUV wafers. Ultimately, pricing will depend significantly on when we have a competitive process with competitive products that meet customer demands, which enhances our pricing dynamics. As Pat mentioned, we are moving toward this goal, and I am optimistic about our potential to translate this into improved pricing over the next few years. Patrick Gelsinger (CEO): And just one thing to add on top of that, just to clarify, with Panther Lake already powered on, right, and showing good health, that is a product that we will start ramping in the second half of next year, right? So we'll start to see some of those benefits, but obviously, the huge volume benefits of that really are in 2026, where we'll be very aggressive at bringing both the wafers home on a more competitive process with a more competitive product with Panther Lake, offsetting the volumes of Lunar Lake, which is almost entirely outsourced. So we bring tiles home with a more competitive product and a more competitive process, and that really is, I'll say, the story that will start to unfold as we talk to you more next year.

Yes. Just a quick one on OpEx. You gave us the $17.5 billion for all of calendar 2025, but could you share with us what you think the exit rate would look like? I'm coming to around $4.25 billion, is that in the ballpark? David Zinsner (CFO): Yes. I'll say, given that some of the actions we're taking will kind of go through at least the early part of next year, we're going to enter at a higher number than we're going to exit, I'll give you that. And we should be down in 2026 relative to 2025. Give me some time as we progress through the year to start to fine-tune the budget for 2026 and I'll give you more clarity around that. John Pitzer (Head of Investor Relations): Thank you, C.J. And Jonathan, can we have the next question, please? null (Operator): Certainly. And our next question comes from the line of Joe Moore from Morgan Stanley. Your question, please.

Thank you. You mentioned the server roadmap with Sierra Forest and Granite Rapids launching this quarter. Can you explain how that impacts your competitive stance? Do you believe you've closed the gap, or do you still lead in the market? It's clear that Clearwater is your long-term focus, but what is your position in the meantime? Patrick Gelsinger (CEO): Yes, thank you. Sierra Forest is an efficient E-core product that represents a new category for us, so we need to establish its presence in the market. The initial feedback from customers has been very positive, with reported TCO benefits exceeding 25%. However, it is still early in the product's ramp-up phase. Granite Rapids, on the other hand, is our peak core and a more traditional Xeon offering, and we will begin its rollout this quarter. Gaining back market share and socket wins in the server market is a long-term effort, but we’re seeing promising signs for Granite Rapids, even though much of the current focus in data centers is on AI development. We are competing aggressively for those sockets, but Granite Rapids looks very promising. The initial performance of Clearwater Forest is impressive. This new design, utilizing 8A technology, is a remarkable technical accomplishment, especially this early in a major server product's lifecycle. The new Foveros Direct is expected to deliver significant TCO advantages for next year, and the next version of P-Core on 18A is also demonstrating solid design progress, even though it is not in production yet. We believe our product roadmap is becoming more competitive, and we see our market share position as stable. Year-over-year, we anticipate that ARM market share may be lower in the second half of this year, while x86 shares are stabilizing. We're poised to actively compete to regain our share. A positive development for our server market is the demand for AI head nodes, where we hold a competitive edge and are witnessing considerable interest in Xeon as the preferred choice for accelerators, including our own. There’s a lot to analyze here, but we feel confident that our position is stabilizing and strengthening as our product offerings and roadmap continue to advance. John Pitzer (Head of Investor Relations): Joe, do you have a follow-up?

Yes. Regarding the idea that AI has shifted some attention away from servers, it appears that in a couple of years we might reach a limit on power budgets, necessitating investments in traditional server systems and potentially requiring a significant update. Do you notice any signs of this, and considering that I think you are currently stronger in enterprise than in cloud, how are you positioned to capitalize on this when the time comes? Patrick Gelsinger (CEO): Yes. Thanks, Joe. And we do think that the enterprise market, right, is a more favorable market for us and we do have some early indications of a positive cycle there, but I'll say it's too early to give you any real firm indications, but we are starting to see, I'll say, better buying behavior, better signals from our OEMs in the enterprise market. Similarly, for the cloud market, we do believe there will be a refresh cycle, right, as people get their AI strategies in place. The TCO benefits of a server refresh now as we start talking about 3X, 4X consolidation ratios that they can have on their traditional, right, cloud environments, their container delivery environments, these are quite substantial. So we do believe that as our products get to be more competitive, right, and there is a natural refresh cycle on that, that the markets will be more favorable for the traditional CPU market. But of course, the story is CPU plus GPU, right, and that's the bigger message that we'll be delivering. And obviously, as Gaudi 3 starts shipping the CPU plus GPU use cases like we've described with OPEA, that will also help us for positioning on both sides of the cloud and the enterprise market for both CPU and GPU. That's the strategy that we're building toward. John Pitzer (Head of Investor Relations): Thank you, Joe. Jonathan, can we have the next question, please? null (Operator): Certainly. And our next question comes from the line of Timothy Arcuri from UBS. Your question, please.

Sure, thanks. Dave, can you explain why the gross margin for June was significantly worse than you anticipated just three months ago? The revenue seems to be on target. I know you mentioned the product mix, but that appears to be a minor factor, and it seems more related to the choices around Intel 4 and Intel 3. Can you clarify why this had such a substantial impact? David Zinsner (CFO): Yes, that was the biggest issue. There were also some write-offs related to legacy businesses that affected us. Our utilization was lower, which impacted us as well. However, the main factor was the shift we made. We originally planned to ramp up Meteor Lake, Intel 3, and even commence production on Intel 4, running production on Intel 3 in our Oregon fab, which is our process technology fab. We decided to accelerate the shift of all of that to Ireland. This decision was beneficial because it saves capital, avoiding the need to spend money twice. It also allows us to mature the Intel 4 and Intel 3 processes in Ireland more rapidly. The downside is that wafers are currently expensive, resulting in an early ramp of the product at a higher wafer cost, which affects our margins. This pressure on margins will extend into the next quarter. While we are expected to perform better next quarter, we will be doing more volume, and the margins will remain below the corporate average because, although we are improving wafer costs, they have not yet reached the corporate average. Thus, margins will be impacted in the third quarter as well. After that, as the situation matures, our cost structure will improve, and conditions regarding Meteor Lake will significantly enhance. John Pitzer (Head of Investor Relations): Tim, do you have a quick follow-up?

Yes. Pat, could you discuss the foundry strategy considering the CapEx reduction? I'm curious about how you'll implement the plan with this reduced CapEx. On one hand, we continue to mention bringing more wafers in-house to improve gross margin by 2026. However, I've also heard about increasing outsourcing to TSMC in real-time. Does this reduction suggest that some of your foundry customers are reconsidering their commitments? I'm trying to understand how you'll manage CapEx while still executing this strategy. Thanks. Patrick Gelsinger (CEO): Yes, thank you. At the highest level, the Foundry strategy is unchanged. And we've built capacity corridors for foundry customers. However, until we have committed orders, we're going to be modest on how much equipment we put against the shells and the sites that we have in place. And how much of that corridor we keep available, how much flexibility working with our equipment suppliers that we need for that will be a subject of careful scrutiny as we go forward. We've also made some adjustments in the capital investment that we need to support our current view of market forecast. So all of those are, say, adjustments. The big thing is now that we're finishing this phase of aggressive build-out, right, and as you think about what we had to catch up, we had no EUV capacity. We had no shell ahead, side ahead capacity. We had no capacity to pull tiles home. As those come into place, we've been making substantial capital investments over the last couple of years, and now we're focused on how do we harvest those investments in 2024, 2025, and 2026. So we're putting much more aggressive view of capital utilization, right? How much capital require ahead of working with the suppliers to be more efficient in our capital dollars, just like a foundry does? And for that, we'll point you back to again, right, we're going to be a world-class fabless company. Intel Products, we're going to be a world-class Foundry with Intel Foundry. The last point I'd make here on this is a lot of the early success that we're having with foundry customers is advanced packaging. And there, the capital requirements are not as significant as required for wafer capacity. So we believe very much that we're seeing a surge of interest there. Customers in advanced packaging are clearly interested in us for capacity, but increasingly for our most advanced packaging technology. So that's an area that we believe we have as, and we've described before, as the on-ramp for Intel Foundry and that's continuing to look very good. The final point is the Intel Foundry capacity will be aligned with, right, the first order, the Intel product requirements. And clearly, there's a lot of tiles externally in 2025. We'll bring those home in 2026, that's when we'll start to really, as Dave said, see the benefits of the model that we've put in place. Tiles coming home, leadership process technology, leadership products start in 2025 and deliver big-time in 2026 and beyond. John Pitzer (Head of Investor Relations): Thanks, Tim. Jonathan, do we have the next caller, please? null (Operator): Certainly. Our next question comes from the line of Srini Pajjuri from Raymond James. Your question, please.

Thank you. I have a couple of follow-up questions. Dave, regarding the transition from the Oregon to the Ireland fab, you mentioned that it poses a gross margin challenge. Could you provide some clarification on how significant that challenge is currently? Additionally, once it's fully operational and comparable, what do you anticipate the ongoing impact will be? David Zinsner (CFO): I'm sorry, the second question is how much will the headwind be on... John Pitzer (Head of Investor Relations): On ongoing basis. David Zinsner (CFO): Okay. So, we were approximately 400 basis points lower on gross margin, with revenue being a significant factor in that. The write-offs from legacy businesses and the mix along with underutilization also played a part, contributing notably to that 400 basis points. This will likely continue into the third quarter, especially considering we expect a 50% increase in Meteor Lake quarter-over-quarter. After that, the impact will diminish significantly, eventually not being a headwind at all. Patrick Gelsinger (CEO): Yes, it becomes a tailwind. David Zinsner (CFO): Yes, exactly. As the Ireland factory ramps, a production factory will have a lower cost per wafer start than a TD factory like Oregon. So it becomes a headwind as we go into next year. The challenge for next year will be the ramp-up of Lunar Lake. Lunar Lake has the memory integrated into the package, which means we will need to purchase that at a certain price and then include it in our pricing with no margin. This will create some downward pressure on our margins. Additionally, it relies more on externally sourced content, and we are experiencing some inflation, which adds to the pressure. While Meteor Lake will begin to help, Lunar Lake may negatively impact the margins for Intel Products. This is why we are cautious about our margin outlook for next year; we expect significant improvements on the Intel Foundry side, but the product side will be more constrained, primarily due to Lunar Lake. John Pitzer (Head of Investor Relations): Thank you, Srini. Jonathan, we've got time for one more question. null (Operator): Certainly. Then our final question for today comes from the line of Matt Ramsay from TD Cowen. Your question, please.

Yes, good afternoon. Thank you, guys. I guess my first question is on the client space. I think, Dave, you might have mentioned client flat to down in September. I think your primary x86 competitor is going to be up double-digits or I think they mentioned above seasonal, however, you quantify seasonal now. Maybe you could give us a little color there. There's lots of maybe noise in the system about ARM coming into the client market, I think that impact would be more modest relative to what you described. But if you could kind of give us puts and takes there and how the inventory with OEMs might be affecting what you're guiding for since September. Thanks. Patrick Gelsinger (CEO): Yes. I'll take that, Matt. We feel very good with our client position, the momentum we have in AI PC. Here we have a very healthy ecosystem as well. And I'll say as the large market share position that we have, we're very focused on sell-in and sell-through in the channel. So I believe our overall view of inventory levels, where our market share is, we're actually quite comfortable in the indications that we've given of some inventory sell-through in the third quarter above seasonal in Q4. Overall, the TAM expansion is low-single-digit, even though we're seeing a lot of enthusiasm around the AI PC and further TAM expansion as we go into 2025 as expected now broadly. We'd also say that our position in the commercial portion of this market is very strong with our vPro assets and we believe we're coming into a refresh cycle on the corporate. We also saw things like vPro have great success for customers as they were dealing with the CrowdStrike Blue Screen period, and customers who are vPro customers were able to recover in a day or so, where customers not on vPro took weeks to recover from that. So a lot of reinforcement of the ecosystem, the leadership that we have on AI PC. And as Dave said, Lunar Lake and Panther Lake only make our market position stronger. So I think we're very comfortable, and every indication so far this quarter is very solid for those outcomes. John Pitzer (Head of Investor Relations): Matt, do you have a quick follow-up?

I have a question. Earlier in the call, Pat mentioned the $15 billion funnel for the Foundry business. I know a significant portion of that relates to packaging, but I would like to know about the customers involved with 18A and potentially 14A. How have the plans for these programs progressed in recent quarters? Are customers still committed to ramping up their projects? Are they taking PDKs and possibly moving forward with tape-ins? Have you noticed any acceleration or hesitation from these customers? I'm trying to understand the progress on 18A. Thank you. Patrick Gelsinger (CEO): Yes. Let me just clarify, the $15 billion is lifetime deal value of committed deals, right? So this isn't a pipeline. This is committed business that we now have in place. So I just want to clarify that, Matt, because I think your question suggests that the pipeline. There's a lot more in the pipeline. This is $15 billion of committed deals. As you say, a lot of the near-term opportunity has been advanced packaging and we're seeing a significant expansion of that capability in terms of volume and technology. On 18A specifically, a lot of customers have been waiting for the PDK, right, and now that we released the PDK last month, we've seen a flurry of activity with the EDA, the IP vendors, and the end customers. So I'd be optimistic that we have good indicators coming in that area in the future, but this was really the starting point for many of them to go from test chips to start looking at production chips coming based on the PDK that we've just released. So we remain very comfortable with our earlier comments in that area. I'd say, we do believe that we'll have further updates there, but as we've also indicated, customers are reluctant to put their name out there given the supply base and the traditional operation of the Foundry industry. Overall, things are looking on track for what we've said with a meaningful acceleration in packaging over the last quarter, more updates to come. Maybe with that, John, I'll wrap us up. Thank you for joining our call. We appreciate the time as always. And I'd say on a couple of these topics, I hope to see many of you at the Deutsche Bank Technology Conference coming up where we'll have some further updates. I want to reiterate in a quarter like this that we are resolved to finish the audacious turnaround, the building of our process and product key milestones that we've achieved of this phase, but now we have to shift to putting more emphasis on the financial sustainability of our business. We're making difficult decisions as we rightsize. We rebuild a more efficient, leaner, agile Intel for the future and one that we're confident will enable our long-term success. Thanks, and good afternoon, everybody. 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.