Congratulations on the strong results. Lip-Bu, the first one for you is going to be on the foundry side. You guys announced a ton of collaborations in the quarter. You very much strengthened your balance sheet. And the tone you took in your preamble sounds much more confident on the progress you're making in foundry. Do any of these collaborative announcements or equity investments go into that increased confidence? Or are there some sort of technical merits that you're seeing that are raising your optimism in that part of your business? Lip Bu Tan (CEO): Yes, Ross, thank you so much for the questions. A couple of announcements we made are clearly more on the product side. Also, one is the SoftBank investment because they are building up all the infrastructure for AI. That definitely will need more capacity on the foundry side. So I think that would be the answer. But meanwhile, I've been saying that we made tremendous progress on 18A and 14A. Panther Lake will depend on it. Clearly, we see the yield in a more predictable way. I visited Fab 52, and it is fully operational for the 18A. With 14A, we are engaging with multiple customers in terms of milestone basis, driving some of the yield and performance, reliability that we are seeing improvement. Additionally, we also see important demands from some key customers for advanced packaging from both the cloud and enterprise sides. Overall, we are looking quite excited to build this long-term trust with some customers and scale it. We also focus on hiring some of the top talent and driving process technology improvement. John Pitzer (Head of Investor Relations): Ross, do you have a follow-up question?

Yes, I do. One for Dave on the gross margin side of things. You talked through the upside in the third quarter and the sequential downside in the fourth. But could you just walk us through some of the pluses and minuses as we think about 2026, just kind of directionally? Where I'm going is it seems like the biggest improvement has to come on the foundry gross margin side of things. Is that the biggest driver? What drives it? And as those gross margins go up, does that have any impact on the Intel products gross margin? David Zinsner (CFO): Yes, I can provide some insights, though we're not providing guidance for 2026. First, it's important to note that Altera will not contribute to the numbers in 2026, whereas they were a significant part of our 2025 figures, leading to a margin challenge for us since they positively impacted our gross margins. Despite this, we still anticipate a 40% to 60% fall-through for margins, although this is a general range influenced by product mix. Lunar Lake will play a significant role, especially in the first half of the year, but it is also a dilutive product for us. Panther Lake is expected to be beneficial in the long run, but it will come with higher initial costs. We do expect to see improvements in gross margins on the foundry side, primarily due to economies of scale, and as we shift toward a leading-edge mix, including 18A, Intel 4, and 3, these products should offer better pricing and cost structures, contributing positively to margins. However, the extent of improvement will depend on how the product mix evolves throughout the year. null (Operator): Our next question comes from the line of Joseph Moore from Morgan Stanley.

I was really interested in a lot of the prepared remarks around the sort of differences in your approach to foundry, and you talked about this last quarter and this quarter that you're sort of looking for customer commitments before you make the investment. Can you just talk about how those conversations are going? And I certainly can see the trade-off from a customer standpoint. They're making a commitment to you. Do they expect that capacity to be built ahead of time? Just is there a bit of a chicken and egg aspect to these investments? And just how are you approaching those conversations? Lip Bu Tan (CEO): Yes, Joseph, thank you so much for the question. I think on the foundry side, clearly, we are engaging with multiple customers. To build trust with the customer, we need to really show the yield improvement, reliability, and we also need to have all the specific IP that they require. It's a service industry. You need to have all the right IP. That's why I formed the Central Engineering to get all the right IP matching with customer requirement. The best way is to show the performance, the yield. Then, we can test chips so that customers can rely on us for their most important revenue wafers to drive success for them. These are very important. In terms of potential investment and collaboration, we are working with different customers with different requirements. But more importantly, it's about getting their commitment to the foundry. David Zinsner (CFO): Yes, maybe just to add on, I would say that I think customers understand that it takes time from the time you deploy capital to the time where you have output. Our expectation is we will get those commitments firmed up in time to deploy the capital to meet the demand. We're in a reasonably decent position given the CapEx investments we've already made. We have a lot of the assets on the books and what we call assets under construction. We've made a lot of investments around the shelf space. We do see a line of sight to driving a reasonable amount of supply for our external foundry customers with our existing footprint and reuse of equipment that we have on the books today. John Pitzer (Head of Investor Relations): Joe, do you have a follow-up question?

I do, yes. Regarding the supply constraints in server CPUs and other CPUs, we are noticing them in the market; however, your growth was 5% sequentially and single-digit growth year-on-year. Where is the shortage originating from? Is it due to higher demand that you are unable to fulfill? Is it linked to some transitions you have managed? I definitely see the tightness in the marketplace, so I'm curious about the source of that shortage and how it might be resolved. David Zinsner (CFO): The shortage is prevalent throughout our business. We are facing tightness in Intel 10 and 7, and we are not planning to increase capacity in those areas. With rising demand, we are constrained and relying on our existing inventory. We are also attempting to guide customers towards alternative products. There are additional shortages beyond our specific challenges at the foundry, including widely recognized substrate shortages. Overall, there is a noticeable caution regarding demand as we enter the year. However, indications suggest that demand will strengthen this year and likely continue into next year as companies navigate these challenges. null (Operator): Our next question comes from the line of C.J. Muse from Cantor Fitzgerald.

I guess a follow-up on the current outlook for demand outpacing supply into 2026. Curious if that's a comment largely focused on server or also including clients and I guess depending on your thoughts there. How should we be thinking about Q1 trends versus normal seasonality, which typically would be down high single digits, low double digits? David Zinsner (CFO): Yes. It's both. Although, as we said, we are yielding a bit of the small core market and client to fulfill customer requirements more broadly in the client space and more specifically in the server space. So that's how we're managing it. As you look into Q1, obviously, again, this is something we'll probably give you a lot more color around in January. I would just say we may actually be at our peak in terms of shortages in the first quarter because we've lived through Q3 and Q4 with a little bit of inventory. We probably won't have as much of that luxury in Q1. So I'm not sure we'll buck the trend on seasonality given we're going to be really, really tight in the first quarter. After that, I think we'll start to see some improvements, and we can get ourselves caught up as we get through the rest of the year. John Pitzer (Head of Investor Relations): C.J., do you have a follow-up question?

I do, John. I guess given the investments from the U.S. government and NVIDIA, SoftBank, et cetera, I'm curious, with that improved cash position and liquidity, how has your thinking evolved in terms of investments in either CapEx or other investments in your product businesses? David Zinsner (CFO): Yes, we are in a strong position. Our primary focus with this cash is to reduce our debt. When Lip-Bu joined, his main priority was the balance sheet. This quarter, we eliminated $4.3 billion in debt. All the maturities due next year should be settled, and we will pay those off. Regarding capital expenditures, we have flexibility, but we intend to be very disciplined with our spending. We will carefully monitor demand, and if it warrants, we will increase our capital spending accordingly. Beyond that, we will see how things progress. We aim to be disciplined about our operating expenses as a percentage of revenue while maximizing leverage. We also recognize opportunities to invest that could provide significant returns for our shareholders, and we are willing to pursue those. null (Operator): Our next question comes from the line of Blayne Curtis, Jefferies.

I had two. Just on the CapEx, I think you reiterated $18 billion, but I think you spent, I guess, less than I was modeling in Q3. So is that really still the number? And I'm just kind of curious, as you start to ramp this 18A in Arizona, is there a way to think about the timing of when you add capacity there? David Zinsner (CFO): On the $18 billion, yes, I think that's still the number. CapEx can be unpredictable and depends on when all the requirements for paying the invoice are fulfilled, which is when we would make the payments. We expect to be within that range, but there may be some variation. For 18A, we still need to ramp this up. I wouldn't anticipate significant increases in capacity in the near term, as we are not at peak supply for 18A. We won't reach that until the end of the decade, and we believe this node will be long-lasting for us. We will continue to invest in 18A over time, but I don't expect the supply to change significantly from our current expectations. John Pitzer (Head of Investor Relations): Blayne, do you have a follow-up?

Yes. Just I wanted to follow up on the gross margin trajectory as 18A layers in. I know comparing it to the prior couple nodes is not a great comparison, but maybe to a successful one. When you say yields are in a good spot and improving, is there a way to think about where those 18A yields are versus the successful products that you've seen in your history and how that layers in the first half? David Zinsner (CFO): Yes. Generally, I'm not sure yields in older nodes have been a big focus for us. We're blazing a new trail. I'd say, the yields are adequate to address the supply, but they are not where we need them to be in order to drive the appropriate level of margins. By the end of next year, we'll probably be in that space. On 14A, we're off to a great start. If you look at 14A in terms of its maturity relative to 18A at that same point of maturity, we're better in terms of performance and yield. We just need to continue that progress. null (Operator): Our next question comes from the line of Stacy Rasgon from Bernstein Research.

I wanted to revisit the issue of supply constraints. You mentioned that AI is increasing demand for servers and PCs, yet it seems customers prefer your older products, as they can't seem to get enough of them. I assume you have adequate supply for Granite, Meteor, and even Lunar Lake. So, how do you plan to encourage customers to transition away from the older products, given they haven't shown any interest in doing so despite the current constraints? Additionally, how do we view the transition for those customers, considering you have indicated that you are not increasing the capacity for the older products and have even taken some offline? David Zinsner (CFO): Yes. Good question, Stacy. I would say it's a misnomer to say AI hasn't done well. It was sequentially up double digits quarter-over-quarter, and we projected about shipments of 100 million units by the end of this year with AI PCs, and we're in that range. I think it's going pretty well. Clearly, though, the older nodes have also done well, and that was probably the part that was more unexpected. We've just got to ensure that the ecosystem drives enough applications for AI in the PC space. We're working with ISVs to drive that. They're getting there. It starts relatively immature and builds out over time. In our company, we're starting to find uses for AI PCs. In fact, our IR is developing one that we'll be using. I think it's just a matter of time. That said, the Windows refresh is happening more significantly than we expected. That's not necessarily an AI PC story. Raptor Lake is also a product that addresses that. We're seeing upside in that part of the market as well.

Dave, I want to follow up on two things that I think I heard you say on 18A. I thought I heard you say, number one, the yields would not be in a great place at least until the end of next year. And then I thought I also heard you say that you were not going to be adding a lot of 18A capacity next year. Did I hear those wrong? I mean, how can such the latter one, how can that be true if you're ramping Panther? Or is that like a... David Zinsner (CFO): We're obviously at our infancy. What I'm saying is relative to the CapEx plan, it's not like we're going to incrementally add supply for 18A next year. But we are going to be ramping the volume over the course of the next year. I wouldn't say 18A yields are in a bad place. They're where we want them to be at this point. We had a goal for the end of the year, and we're going to hit that goal. But to be fully accretive in terms of the cost structure of 18A, we need the yields to improve. That takes time. It's going to take all of next year to get to a place where that's the case. null (Operator): Our next question comes from the line of Joshua Buchalter from TD Cowen.

I wanted to ask about some comments Lip-Bu made in the prepared remarks about fixed function computing and potentially supporting more ASICs. Could you provide more context on the scope of this? Is this for potential foundry customers? Or are these products? If it's products, what types of applications do you expect to be supporting with custom silicon? Lip Bu Tan (CEO): Good question. First of all, I just mentioned about the Central Engineering. We are driving the ASIC design, and that will enhance our reach of the core x86 IP and drive purpose-built silicon for some of our systems, cloud players, and customers. This AI will drive a lot of growth, especially in doubly down on Moore's Law. This will help us a lot in our x86 uplift. Building the entire ASIC design will serve some customer requirements. John Pitzer (Head of Investor Relations): Josh, do you have a quick follow-up?

Yes. On the last quarter, obviously, the disclosure that you may decide to abandon 14A got a lot of attention. I just wanted to ask, given your balance sheet is in a lot different spot than it was three months ago, has anything changed from that regard? I don't think the Q is out, so I haven't seen if any of the language changed there. But was curious if anything had moved around since last quarter given all the changes in your balance sheet. Lip Bu Tan (CEO): Yes. Since the last quarter, our engagement with customers for 14A has increased, and we are working heavily with customers on defining the technology, process, yield, and IP requirements to serve them. They clearly see the tremendous demand they need from Intel to be strong on 14A. We are more confident and delighted about this prospect moving forward. null (Operator): Our next question comes from the line of Ben Reitzes from Melius.

Lip-Bu, can we get an update on the NVIDIA relationship, timing of products? Have you gotten any feedback from customers in terms of your ability to articulate on the materiality of the relationship and in terms of timing and materiality or any other color you want to give us on that? Lip Bu Tan (CEO): Sure. Thank you. This is a very important collaboration with NVIDIA. It's a great company, as you guys know. I've been known as a friend of Jensen for more than 30 years. We are very excited about this effort of Intel CPU x86 leadership, and their unmatched AI and accelerated computing. By connecting with their NVLink, we're really creating a new class of product in the multigenerational space. This is a very heavy engineering-to-engineering engagement. It will drive new products for custom data centers and PC products, optimizing for the AI era. This will involve years of engagement addressing the market, and we're excited to drive this requirement for AI infrastructure. David Zinsner (CFO): Just to add, what makes this really special for us is it's not attacking our existing TAM. It's an incremental opportunity for us to expand the TAM. So these are great opportunities for us. John Pitzer (Head of Investor Relations): Ben, do you have a follow-up?

Yes. Lip-Bu, you mentioned a little bit about your AI strategy now to attack the inference market and that you see room for Intel solutions. Does this strategy focus more on partnerships? Is there specific Intel IP for inference that you're particularly excited about? Or is it more of a Switzerland approach where you could partner with a lot of the existing players to address more of the TAM? Lip Bu Tan (CEO): Yes, good question. First of all, I think with AI driving a lot of growth, we want to play a significant role in this market. This is just the early innings, and it presents an opportunity for us. We focus on revitalizing our x86 architecture to really tailor to purpose-built CPU and GPU requirements for the new AI workload. This will address the efficiently managed power from agency workloads and be a new compute platform of choice, applying to system and software. We will partner with some incumbents and also emerging companies driving these changes. null (Operator): Our next question comes from the line of Timothy Arcuri from UBS.

Dave, it’s not common to see high fixed cost businesses that have gross margins under 40%. I understand a lot of this is due to the wafer costs for Intel 10 and 7, along with the low yields on 18A. However, I’m curious if you could give us an idea of what the gross margin might look like if we moved away from 10 and 7 and switched to 18A. Is there a way you could help us visualize that? David Zinsner (CFO): Yes. You've definitely been listening in on some of my conversations with the team here because that's definitely something I've been making the point of. I would say there's two dynamics: one of which you're hitting on, the high cost of older processes versus the better cost structure for the newer processes, which is meaningful. We're in negative gross margin territory for foundry, and that would make a meaningful improvement if you move into the positive territory. The other aspect of our gross margin is a function of just the product quality. We're in reasonably decent shape on client in terms of product performance and competitiveness, with a few exceptions not where we need to be on a cost basis. We have that on the roadmap. The team recognizes it, but that's a multi-year process to get there. It's more pronounced on the data center side. We don’t have the right cost structure nor the competitiveness to really get the right margins from our customers. Lip-Bu and the team have pulled in a hyper-focused effort to get great products at the right cost structure for better gross margins. Improvements on the foundry side will come, mixing higher and higher to Intel 3, 4, and ultimately 18A, and the cost structures of those will be similar. It will simply be the value provided by those leading-edge nodes that will significantly drive gross margins up.

I do. Yes. Lip-Bu, you didn't give an update last call on Diamond Rapids' launch date. I know the whole roadmap is under review, but you did sound fairly optimistic about Coral Rapids. Can you give us an update on the data center roadmap here? Lip Bu Tan (CEO): Yes. Thank you for the good question. The feedback for Diamond Rapids is getting better from hyperscale, and we are focusing on the new product, Coral Rapids, which will include SMT and multithreading to drive higher performance. We're in the definition stage and will work out the road map as we execute. null (Operator): Our final question for today comes from the line of Aaron Rakers from Wells Fargo.

I have a couple of quick questions. Regarding the NVIDIA relationship, I understand the announcement was related to the NVLink Fusion strategy and its integration with the x86 ecosystem. However, I noticed some recent reports about possibly using Gaudi for dedicated inference workloads within an NVIDIA stack. Is this relationship just a starting point? Should we anticipate more integration opportunities beyond NVLink in the future? Lip Bu Tan (CEO): Yes, let me answer that. I think NVLink is more like the hub connecting the x86 and GPU. Regarding our AI strategy, we are defining what we call Crescent Island. We also have a new product line that focuses on agentic, physical AI, and additional developments in inference. Stay tuned for updates. John Pitzer (Head of Investor Relations): Aaron, do you have a quick follow-up? David Zinsner (CFO): Yes. For '26, we're looking at somewhere in the $1.2 billion to $1.4 billion range as a good estimate for non-controlling interest. We are focused on that and will work to minimize it as much as possible. Lip Bu Tan (CEO): With that, I want to thank everyone for joining us today. We are on the journey of rebuilding Intel, and we have a lot of work ahead of us, but we are making solid progress in Q3. I look forward to seeing many of you throughout the quarter and providing you another update in January. 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.