Thank you for standing by, and welcome to Intel Corporation's Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. John Pitzer, Corporate Vice President, Investor Relations. Please go ahead.

Thank you, Jonathan, and good afternoon to everyone joining us today. By now, you should have received a copy of the Q4 earnings release and earnings presentation, both of which are available on our Investor Relations website, intc.com. For those joining us online today, the earnings presentation is also available in our webcast window. I'm joined today by our Interim co-CEOs, Michelle Johnston Holthaus; and Dave Zinsner. As you know, Michelle is also CEO of Intel Products; and Dave continues to serve as Intel CFO. In a few moments, Michelle will open up with some summary comments before providing more detail on Intel Products. Dave will then discuss Intel Foundry and the overall financials, including our Q1 guidance. Before we begin, please note that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, are subject to various risks and uncertainties. It also contains references to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release, most recent Annual Report on Form 10-K and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures, including reconciliations where appropriate to our corresponding GAAP financial measures. With that, let me turn things over to Michelle.

Thank you, John, and let me add my welcome. It's been roughly two months since Dave and I stepped into our roles as interim co-CEOs. From day one, we have been working closely together alongside the Board to drive better execution of our strategy. There are no quick fixes, and we are committed to improving our performance and rebuilding our credibility through persistent hard work that delivers tangible results. As part of this, we are driving more focused investments across the business. We cannot be all things to all people, and we are prioritizing areas where we can drive differentiated value. We are also continuing to simplify our business and become a leaner, more efficient company. And most of all, we’re doing a better job of listening to our customers to ensure we meet their needs. Q4 was a step in the right direction. We delivered revenue, gross margin, and EPS above our guidance. Intel Products executed to drive revenue in the quarter, even as PC inventory continued to normalize. And Intel Foundry drove incremental operating efficiencies while achieving key grant-related milestones, which supported solid upside to gross margins. As co-CEOs, you can expect us to be very straightforward and direct. We only make commitments we are confident we can deliver. We firmly believe that what we say is not nearly as important as what we do, and everything we do must be in service of our customers. Innovating to solve their most pressing challenges is the surest path to creating shareholder value. This is the mindset I have brought to my position as the CEO of Intel Products. This is a great business with great people, partners and IP to design world-class products from edge to cloud. I take nothing for granted, but I firmly believe that the core x86 architecture and the ecosystem we have built and invested in over the decades creates a solid foundation for success. Our customers share this view, but they need us to improve our execution and hit our commitments. I am setting clear priorities and directions in each business to drive better outcomes. I think about Intel products in three buckets. First, client edge; second, traditional data center; and third, the AI data center. Let me spend a few moments on each. In client, Intel CPUs power roughly seven out of every 10 PCs. This is a strong position that gives us advantages in the market. That said, the market is becoming more competitive, especially as we see new entrants trying to participate in the AI PC category. Personally, I thrive on competition. It drives a healthy paranoia across everything we do, and we are using it as motivation to up our game even more. The success of Core Ultra across Meteor Lake, Arrow Lake and Lunar Lake has established Intel as the market leader in AI PC CPUs, and we remain on track to ship more than 100 million cumulative systems by the end of 2025. We are innovating at scale unlike any of our competitors. This was on display earlier this month at CES, where we launched the enterprise versions of our AI CPUs with compelling new features to Intel vPro. This is a testament to the strong ecosystem we have built with IT departments around manageability, security, trust, and brand. And we expect these investments to position us well as corporations begin their migration to Windows 11. Alongside our investments in enterprise, our ecosystem reach also positions us well in AI PC consumer markets. We are working with more than 200 ISVs across more than 400 features to optimize their software on our silicon. I'm excited about the new applications I'm seeing in the pipeline that will begin to proliferate over the coming months. Our goal is to innovate, partner, and fortify our position as the preferred CPU of choice. Looking ahead to the rest of the year, we will strengthen our client roadmap with the launch of Panther Lake, our lead product on Intel 18A in the second half of 2025. As the first volume customer of Intel 18A, I see the progress that Intel Foundry is making on performance and yields, and I look forward to being in production in the second half as we demonstrate the benefits of our world-class design and process technology capabilities. 2026 is even more exciting from a client perspective as Panther Lake achieves meaningful volumes, and we introduce our next-generation client family code-named Nova Lake. Both will provide strong performance across the entire PC stack, with significantly better costs and margins for us, enhancing our competitive position and reinforcing our value proposition to our partners and customers. Let me now turn to our traditional data center business. The team has made good progress towards strengthening our offerings and driving better, more predictable execution. This year is all about improving Xeon's competitive position, as we fight harder to close the gap to competition. The ramp of Granite Rapids has been a good first step. We are also making good progress on Clearwater Forest, our first Intel 18A server product that we plan to launch in the first half of next year. All of this provides a strong foundation on which to build as we execute. The world's data center workloads still primarily run on Intel Silicon, and we have a strong ecosystem, especially within Enterprise. We are going to leverage these strengths as we work to stabilize our market share in 2025. One of the ways we'll do this is by reengaging the x86 ecosystem. We have seen a positive response from the x86 ecosystem advisory group we formed last fall, and we are encouraged by the enthusiasm for building both semi-custom and custom products. This is a big area of opportunity for the business, and we look forward to talking more about this as we have news to share. Turning to the AI data center, I will start by saying that this is an attractive market for us over time, but I am not happy with where we are today. On the one hand, we have a leading position as the host CPU for AI servers. And we continue to see a significant opportunity for CPU-based inference on-prem and at the edge, as AI-infused applications proliferate. On the other hand, we are not yet participating in the cloud-based AI data center market in a meaningful way. We have learned a lot as we have ramped Gaudi, and we’re applying those learnings going forward. One of the immediate actions I have taken is to simplify our roadmap and concentrate our resources. Many of you heard me temper expectations on Falcon Shores last month. Based on industry feedback, we plan to leverage Falcon Shores as an internal test chip only without bringing it to market. This will support our efforts to develop a system-level solution at rack scale with Jaguar Shores to address the AI data center. More broadly, as I think about our AI opportunity, my focus is on the problems our customers are trying to solve, most notably to lower the cost and increase the efficiency of compute. AI is not a market in the traditional sense. It's an enabling application that needs to span across the compute continuum from data center to the edge. As such, a one-size-fits-all approach will not work, and I can see clear opportunities to leverage our core assets in new ways to drive the most compelling total cost of ownership across the continuum. Before I turn the call over to Dave, let me close by speaking as Intel Foundry’s largest wafer customer. I have a pretty simple approach. When we are able to combine world-class products with world-class process technology, we win. As CEO of Intel Products, I’ll always make process technology decisions based on what is best for my customers. And Intel Foundry will need to earn my business every day, just as I need to earn the business of my customers. Having said that, I am confident in the Intel Foundry team's ability to support my current and future product roadmap. And I’m excited to do more business with them as their process technology continues to advance. A stronger Intel Products, combined with a more competitive Intel Foundry, is a recipe for success for Intel overall. Dave, over to you.

Thanks, Michelle. Let me add my welcome. I’m going to address three topics today, an update on Intel Foundry; second, Q4 and full-year financials; and, third, our Q1 guidance. Starting with Intel Foundry. I have had an opportunity to meet with a number of our partners and potential customers for Intel Foundry over the last couple of months. I come away from those meetings encouraged by the opportunity we have in front of us, and I have received clear feedback on what our customers need from us to succeed. This starts with our execution on Intel 18A. This has been an area of good progress. Like any new process, there have been challenges along the way, but overall we are confident that we are delivering a competitive process. We are excited by the launch of Panther Lake this year and the internal ramp of Intel 18A in the second half that will support increased volumes and improved profitability in 2026. From the perspective of external customers, Intel 18A is a very competitive offering that gives each of them a reason to engage with us. However, foundry wins are about more than just technology. Trust is also a significant factor. Customers must believe you can execute consistently and be willing to invest in IP to port a design to a new foundry. That’s why past transitions in the industry have generally started with customers giving new foundry partners smaller volumes then gradually increasing as trust grows. We have made good progress. But to accelerate this, I am asking the team to re-double their efforts on ease-of-porting, IP availability, and best-known foundry methods. I am particularly pleased by the willingness of our suppliers and partners to engage with us, augmenting our expertise and hard work with theirs. Job number one is earning the customer’s trust. The Intel 18A design wins to date provide good validation of the strategy, and we continue to have a healthy RFQ pipeline of potential customers. But we won’t win every deal out of the gates. We will be selective and focus on areas where we are confident that we can be a meaningful contributor to the success of our customer, and we look forward to updating you as RFQs become wins. In addition, we continue to have good momentum in advanced packaging and in our collaborations with Tower Semiconductor and UMC. All three are critical to utilize our assets longer for higher rates of return. This is a good segue into my other key areas of focus for Intel Foundry: improving our financials and making sure that we are deploying your capital appropriately. At roughly $18 billion in revenue, Intel Foundry today is larger than all but one external foundry. That is clearly not reflected on our P&L with negative gross margins and a greater than $13 billion operating loss in 2024. We are going to systematically attack our costs and remain highly focused on our goal of delivering break-even operating income for Intel Foundry by the end of 2027, and we expect to demonstrate improvements this year. The financial benefits of shifting our wafer volumes from Intel 7 to Intel 18A, along with learning to run our fabs more efficiently and our process nodes longer, will be important drivers of improving our financials. Beyond 2027, we need to drive cash flow from operations that support our capital spending needs and ultimately generate a great return on your capital. I remain very optimistic about our opportunity at Intel Foundry. The pervasive growth of AI is driving accelerating and unprecedented demand for silicon, and there continues to be an unmet need for greater choice and overall manufacturing capacity in the industry today. TSMC is a valued supplier to Intel Products and important partner to IMS, and they have established a very high standard for what it takes to be a world-class foundry. But the market overall needs multiple players, and as we execute, Intel Foundry has a very important role to play globally and especially here in the U.S., where we continue to invest in leading-edge R&D and manufacturing capacity. We were also pleased to sign with the U.S. Department of Commerce a definitive agreement awarding us up to $7.86 billion in grants. As you know, these grants are milestone-based, and we have already received $1.1 billion in Q4 and have received an additional $1.1 billion in January of Q1. In addition, we continue to make good progress building out our Secure Enclave in partnership with the Department of Defense. We look forward to continued engagement with the administration as we advance this work and support their efforts to strengthen U.S. technology and manufacturing leadership. Finally, as you will recall, we announced our intention to establish an independent subsidiary structure for Intel Foundry to provide clear governance and operational separation. This structure also enables us to seek additional funding options from both strategic and financial partners, which we are now actively beginning to explore. Let me now turn to our consolidated financial results and Q1 guidance. Fourth quarter revenue was $14.3 billion, up 7% sequentially and at the high end of the range we provided in October, as a result of solid growth in CCG, equipment sales at IMS and the edge business of NEX. Non-GAAP gross margin came in at 42.1%, 260 basis points ahead of guidance on higher revenue, better costs, and the receipt of our first CHIPs grants, offset partially by inventory reserves related to Gaudi. We delivered fourth quarter earnings per share of $0.13 versus our guidance of $0.12. Higher revenue, stronger gross margin, and improved operating leverage were offset by lower interest and other income, which includes an accrual related to our second SCIP agreement of roughly $750 million, reflecting an adjustment in our planned capacity ramp in Ireland. In Q2, we began the process of resizing our expense structure to support more modest long-term growth, including adjusting our capacity plans to more conservative levels, driving impairments in Q3 and this accrual in Q4. Q4 operating cash flow was positive $3.2 billion, down approximately $900 million sequentially due to the cash outlays associated with our Q3 restructuring charges. We had gross CapEx of $6.3 billion with offsets of $1.6 billion in the quarter resulting in an adjusted free cash flow of negative $1.5 billion. As I mentioned earlier, we also received a portion of the CHIPs grants this quarter. For the full year, revenue was $53.1 billion, down 2.1% year-over-year. Modest year-over-year growth in Intel Products was more than offset by lower revenue at Mobileye and Altera, as well as the forecasted decline in Foundry Services due to the end of life on traditional packaging revenue. Full year gross margin was 36% and down 760 basis points due to Q3 impairments, lower revenue, and inventory impacts. Full-year EPS was minus $0.13 and down $1.18 on lower revenue, lower gross margin, and higher period charges. We generated $8.3 billion in cash from operations, made $24 billion of gross capital investments and generated capital offsets of approximately $13.4 billion from SCIP partner contributions and government grants and incentives. As a result, adjusted free cash flow was $2.2 billion and we ended the year with $22.1 billion of cash and short-term investments. Moving to segment results for Q4. Intel Products revenue was $13 billion, up 7% sequentially. CCG revenue was up 9% quarter-over-quarter as the rate at which our customers digested inventory slowed meaningfully from Q3. While difficult to quantify, we suspect a portion of Q4 revenue upside was due to customers hedging against potential tariffs. DCAI revenue was up slightly sequentially off a better-than-expected Q3, as demand for traditional servers remained stable. Revenue for NEX was up 7.5% sequentially and is now up more than 20% from Q2 lows, as customers are returning to more normal buying patterns especially in our edge business. Operating profit for Intel Products was $3.6 billion, 28% of revenue, and up $300 million quarter-over-quarter on higher revenue and reduced operating expenses. Intel Foundry delivered revenue of $4.5 billion, up 3% sequentially, on increased EUV wafer mix and higher equipment sales by IMS. EUV wafer revenue grew from 1% of total revenue in 2023 to greater than 5% in 2024. Intel Foundry operating loss in Q4 of $2.3 billion improved meaningfully sequentially as Q3 was impacted by $3.1 billion of impairments. Excluding impairments, operating loss would have been roughly flat quarter-on-quarter. Turning to All Other, Mobileye reported revenue of $490 million, up 1% sequentially, with operating profit of $103 million, and earlier today guided for full year 2025 increases to both revenue and operating income. Altera delivered revenue of $429 million, up 4% sequentially. Operating margin was 21% versus 2% in Q3 on better gross margins and operating leverage. For Q1, we expect Altera revenue to be down sequentially less than overall Intel consolidated. We continue to make good progress on the stake sale of Altera and see a path for an IPO in the coming years. Now turning to guidance. Q1 has historically been our seasonally weakest quarter of the year, down high single to low double digits percentage sequentially on average. In addition, we see added pressure coming from macro uncertainty especially around tariffs, balancing of PC inventory and increasing competition. These mitigating factors support a more-tempered revenue outlook as we come into the new year. As a result, we are forecasting a revenue range of $11.7 billion to $12.7 billion in the first quarter of 2025, down between 11% to 18% sequentially. Within Intel Products, we expect revenue to decline across all three of our segments at roughly similar rates. We expect Intel Foundry revenue to be roughly flat to down modestly quarter-over-quarter helped by continued mix shift to EUV wafers, Intel 18A samples, and advanced packaging. At the midpoint of $12.2 billion, we expect gross margin of approximately 36%, with a tax rate of 12% and break-even EPS, all on a non-GAAP basis. Let me take a few moments to provide some commentary that may be helpful for your full-year 2025 modeling. At the consolidated level, we expect gross margin to improve from Q1. Intel Products gross margin was 51% in 2024 and is expected to decline this year due to product mix in both CCG and DCAI. Intel Foundry gross margin will improve on EUV mix shift and growth in advanced packaging despite expected depreciation growth in 2025 of roughly 10%. We continue to target 2025 OpEx of $17.5 billion with further reductions in 2026. We expect non-controlled income, or NCI, to net to roughly zero in Q1 and be in a range of $500 million to $700 million impact this year, on a GAAP basis. NCI is expected to grow in fiscal year 2026 to a range of $1.2 billion to $1.4 billion, on a GAAP basis, and increase further in future years, as we increase wafer outs at our fabs where we have agreements with SCIP partners. We anticipate that our 2025 gross capital investments will be approximately $20 billion and at the low end of our previous guide of $20 billion to $23 billion, reflecting further capacity adjustments to Ohio and Ireland, as well as better utilization of what we call our construction-in-progress. Specifically, we invested ahead of demand over the past few years and these capital investments will enable us to meet expected demand at a lower level of spending, as we drive to more efficiently deploy our capital. We expect 2025 net CapEx of $8 billion to $11 billion with roughly half of the offsets expected to come from government incentives and tax credits and half from partner contributions. De-levering in 2025 remains a top priority for us on lower CapEx, increased cash from operations, and value unlock across our non-core assets. Finally, I’ll remind you that we will provide new segment reporting in conjunction with our Q1 earnings. We expect to make further changes to our segments, including moving the edge portion of NEX into CCG, and our auto business from All Other into CCG. In addition, we expect to move the networking portion of NEX, which includes Xeon sales, into DCAI, and the IMS equipment business out of Intel Foundry into All Other. I’ll wrap up by saying that Q4 was a solid quarter to close out a challenging year. With that said, our profitability is below where it needs to be, and we must enhance our competitive position in the market. Michelle and I will continue taking actions to improve the operational and financial trajectory of the business. We will remain focused on building a stronger Intel Products business and becoming a more efficient Intel Foundry. And by driving continued progress in these areas, we are confident in our ability to unlock value for all our stakeholders. Before we open the line to questions, it’s worth mentioning that the board remains intensely focused on the search for a permanent CEO. The search is progressing, but we have nothing new to report and won’t be able to add additional information on this topic today. With that, I'll turn it over to John to start the Q&A.

Thank you, Dave. We will now transition to the Q&A portion of our call. As a reminder, we would ask each of you to ask one question and a brief follow-up question where applicable. With that, Jonathan, can we take the first question please?

Certainly, and our first question for today comes from the line of Ross Seymore from Deutsche Bank. Your question please.

Hi guys, thanks for letting me ask a question. I guess the first one would be for MJ. You talked about no quick fixes, but a lot of things to improve the roadmap. Specifically on the DCAI side of things. Can you talk about how much you think Granite is closing the gap? It sounds like Clearwater Forest is not mentioned nearly as much as far as a 2025 event neither from a launch or from a revenue perspective. So if there are any updates on that? And then just overall, what it's going to take? And when do you think we will be able to externally see that gap close versus competitors?

Sure. Thanks for the question, Ross. I look at it this way. So when I talk about no quick fixes, I think it's going to be one to two years of consistent execution and continuing to see better products each year, really to bring our customers back to the table and be excited about Intel's roadmap. Granite Rapids is a good first step in doing that. It does close the gap. Our customers are excited about it, and we are starting to see the competitiveness of that product materialize in volume. But I'm also very clear about where we stand. And so we've just got to see that continued throughout '26 when we get to Diamond Rapids, et cetera. So you also asked me about Clearwater Forest. So I really look at the data center market in kind of two buckets. We have our P-core products, which, you know, is Granite Rapids, and then we have our E-core products, which equates to Clearwater Forest. And what we've seen is that's more of a niche market, and we haven't seen volume materialize there as fast as we expected. But as we look at Clearwater Forest, we expect that to come to market in the first half of 2026. 18A is doing just fine on its performance and yield for Granite Rapids, but it does have some complicated packaging expectations that move it to 2026. But we expect that to be a good product and continue to close the gap as well. But this is going to be a journey. It's not a destination. Ross,

Ross, do you have a follow-up question?

Yes, switching over to Dave on the profitability side. Can you just walk us through some of the puts and takes on the gross margin sequentially in the first quarter? Obviously, revenues are down, but anything else? And then you mentioned that it would be the low point of the year gross margin in the first quarter. But what would be the headwinds and tailwinds as you think through 2025 as a whole on that metric? Thank you.

Thank you, Ross. For the first quarter, the main factor affecting gross margins sequentially is the decline in revenue, which is down a little over $2 billion at the midpoint. Since our business has mostly fixed costs, this has a significant impact. In the fourth quarter, we also had a couple of beneficial events. One was exceeding revenue expectations, which boosted revenue. The other involved the CHIPS agreement; we were able to use some of the grant to offset prior period expenses, which positively influenced our cost of sales. We were uncertain about signing this agreement last quarter, which is why it wasn't included in previous guidance, but its realization helped improve gross margins for Q4. Looking ahead to the first quarter, we have indicated for several quarters now that gross margins for Intel Products will face pressure this year. Some products, particularly Lunar Lake, have increased costs due to memory and packaging. Essentially, we are purchasing that memory and selling it at the same price, which is negatively impacting margins. Thus, margins for our products will likely remain under pressure throughout the year. However, as Panther Lake ramps up volume next year and we introduce additional products, we expect to see margin improvements for Intel Products. This will also be counterbalanced to some extent by Intel Foundry margins, as we expect an increased mix of EUV wafers with better pricing and costs leading to improvements throughout the year. We are also reducing spending on period expenses as part of our overall cost reductions exceeding $10 billion, but these changes won’t be visible until the second and third quarters. Overall, these are the major factors influencing margins in the first quarter, which we anticipate to be the low point for the year. The key benefits will come from improving margins at Intel Foundry as the mix of EU wafers increases throughout the year, particularly with Panther Lake in the later part of the year and higher-margin 18A wafers. Next year, we expect Panther Lake to contribute more volume, which will significantly benefit Intel overall.

Thank you, Ross. Jonathan, can we have the next question, please?

And our next question comes from the line of Stacy Rasgon from Bernstein Research. Your question please.

Hi guys. Thanks for taking my question. First question just on the segment guide for next quarter. Why are all three product segments down equally when it sounds like you've gotten more headwinds just on the surface of PC's inventory digestion and maybe the roll-off of some of that tariff pull forward. What's going on in the data center and the NEX businesses that makes them as bad as a client into Q1?

Well, broadly across all markets, and we didn't necessarily telegraph every market in terms of where we think. But I'd say broadly, we are a little bit cautious on the macro, and that affects all markets. In addition, seasonality does play in most of the markets, and that does impact the first quarter as well. So I’d say, a combination of just macro uncertainty combined with kind of typical seasonality across all the businesses.

Stacy, do you have a follow-up question?

Yes, I do. Thank you. So you also talked about increased competitiveness weighing on margins at least into Q1. So again, I presume that's a question on pricing. I guess is that right? Do you expect that to persist through the year? And how do you think about that competitiveness, potentially weighing on pricing across client and especially in the data center?

Yes, okay. The co-CEOs are deciding who should respond. Go ahead, Michelle. I think anyone can take it.

Yeah. The way I look at that is we do have increased competition as we see new market entrants particularly come into CCG. We've got a very good product in Lunar Lake there, but as Dave talked about, the margins on that product are more pressured based on the cost of the product. But we are going to stem the market segment share decline in client, and we're going to go after winning every socket. That mirrors itself when you think about the data center market as well. As I said, Granite Rapids is a very positive step in a competitive direction, but we have to stem the tide of share loss in data center. And so we will be fighting for every socket in that business. And the way I look at it is we need to be aggressive. We need to win share, and we need to show our customers that they can win with us.

Thank you, Stacy. Jonathan, can we have the next question please?

Certainly. And our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question please.

Yeah, good afternoon. Thank you for taking the question. I guess first question under your new co-leadership. I would be curious to hear how your strategy has potentially evolved specifically for IFS.

I think we've discussed this over the past few quarters. We are not going to spend in advance of achieving success. As a result, our CapEx guidance has lowered from the range of $20 billion to $23 billion down to $20 billion, which supports that approach. We want to impress our customers, but we need to be cautious about what we promise them. You'll see a more conservative approach in how we allocate capital and engage with customers. Our intention is to exceed the expectations of all our stakeholders, including investors, customers, and suppliers. This is essentially our strategy. Our primary goal of building a world-class foundry remains unchanged. We believe there is definitely a need for another player in the leading-edge semiconductor manufacturing sector, particularly in the U.S., which also aligns with the interests of the U.S. government. Therefore, we are fully committed to this initiative. Moving forward, we must be very careful to generate the best return on invested capital for our shareholders.

C.J., do you have a follow-up question?

I do. Thanks. I guess, Dave, another question for you. I believe that three months ago, the stated goal for 2025 was to be free cash flow positive, I guess given kind of the weakness we are seeing in Q1 and uncertainty, can you kind of walk through how you are thinking about the path to turning free cash flow positive?

Yes, we are not providing guidance beyond the first quarter. However, I can say that we managed our cash flow from operations well in a challenging situation in '24 by improving our working capital and adjusting our capital expenditures, which helped mitigate the negative impact. Although we were in the negative for '24, we were closer to breakeven than we should have been given our top-line performance. We expect a similar approach in '25, focusing on cash flow from operations and effective working capital management. We've reduced our CapEx in response to a revised outlook and anticipate significant offsets, totaling over $10 billion, which will contribute positively. While I won't provide a specific figure for adjusted free cash flow for the year just yet, it's a key area for improvement. Additionally, we are exploring opportunities to monetize our non-core businesses, which will assist us in reducing debt, a significant focus for us in 2025. We are making good progress with Altera and anticipate having updates by the time of our next earnings report that will help generate cash for debt reduction.

Thanks, C.J. Jonathan, can we have the next question please?

Certainly. And our next question comes from the line of Joe Moore from Morgan Stanley. Your question please.

Great. Thank you. In the prepared remarks, you made reference to the sort of tempering of expectations of Falcon Shores. Can you talk about what was behind that? And kind of what does it take for you to get competitive in that space?

Yes, of course, Joe. It really comes down to the time spent over the last six weeks engaging with the teams, reviewing our road maps, and assessing our competitive and execution standings, which led to that decision. I had many discussions with our customers about what they believe is necessary to remain competitive and provide the right product. In evaluating this, we’ve learned a lot from our Gaudi product, but it's clear that merely delivering the silicon isn't sufficient. We need to provide a complete rack scale solution, and that's what we'll achieve with Jaguar Shores. Falcon Shores will assist us in that process, covering system integration, networking, memory, and other component functions, but customers ultimately expect a full rack solution, which we can deliver with Jaguar Shores. This week, we've also seen much excitement around the idea that a one-size-fits-all approach doesn’t work. I’m examining our road map and recognizing the valuable IP and assets we have at Intel Product to address this market. We have excellent CPUs, GPUs, ASICs, and FPGAs that we need to utilize effectively. We've observed that when customers face constraints, they find alternative ways to deploy technology, presenting us with an opportunity to innovate and possibly disrupt the market.

Joe, do you have a follow-up question?

I do. And thank you for your candor about all of that. I think separately, you mentioned in your prepared remarks about potentially seeing tariffs driving some pull forward. Can you just talk about how pervasive that might be? Is that conservatism that might be happening? Are you seeing evidence that's happening? Just some color on where that's coming from.

Yes. I mean, we obviously have a fairly good sense of what customers need from quarter to quarter. And in a couple of instances, customers ordered more than we think they were digesting. And so it was really just the analytics that gave us insight into – they are doing that for a reason, and we know tariffs are a big subject of a lot of our customers. It was in the region you might expect in the Asian region that we saw this. It is hard for me to extrapolate this beyond this quarter. A lot not known yet around what might be the plans on tariffs. I just thought it was a little bit of hedging going on by customers that pulled revenue into the fourth quarter and away from the first quarter.

Thank you, Joe. Jonathan, can we have the next question, please?

And our next question comes from the line of Timothy Arcuri from UBS. Your question please.

Thanks a lot. Dave, I also wanted to ask about gross margin. I think the message you were saying is that it's kind of 60% incremental, and that was kind of off of the 39.5% that you guided for Q4, but obviously, you came in, you had these one-timers and now we're down to March. So can you just sort of level set us for kind of how to think of the incrementals from here?

Are you asking if the incrementals from Q2, Q3, and Q4 are what you mean?

Yes. Yes. Just kind of like is it off of 39.5%, is about 36.5%.

Yes. The rule of thumb has generally been 60% in this period of what I call catch up. Obviously, we think we can do better fall-through, as we get more stabilized. The one dynamic in '25 is this kind of margin pressure around product like Lunar Lake. That probably pulls the range down to probably something more like in the 40% to 60% fall-through is probably the right way to think about it just for that dynamic. Now we get into '26 and you start to see a lot more 18A volume through Panther Lake, I think we are in the 60%-plus range at that level.

Tim, do you have a follow-up question?

I do. Yes, Dave, also, so you took the CapEx to the low end, but there's $1.2 billion outflow that's in the financing section of the cash flow statement. What is that? I guess I'm trying to figure out just on an apples-to-apples basis, is like CapEx really coming down this year? And is that a line item in the financing section, is that going to keep getting bigger this year? Thanks.

Yes, let me revisit the capital expenditures. For 2025, the forecast of $20 billion is driven lower by more efficient use of assets currently under construction. Our approach has been to invest ahead of need, resulting in over $50 billion in assets still under construction. This means we have considerable capital on our balance sheet that hasn't yet been utilized. We have encouraged our teams to maximize the use of this existing capital and minimize external purchases, which will help us reach the $20 billion target. Transparency is important, so I’d clarify that capital expenditures consist of equipment orders and when the cash is disbursed. We are actively improving our payment terms with suppliers to lower our capital expenditures, deferring some spending even as we receive the assets. However, by the time we actually deploy these assets and start depreciating them, we typically have already incurred the expense, as the funds go to assets under construction and may sit there for about nine months before deployment.

Thank you, Tim. Jonathan, do we have the next question?

Certainly. Our next question comes from the line of Vivek Arya from Bank of America Securities. Your question please.

Thanks for taking my question. First kind of related questions are on the data center server CPU market. M.J. I'm curious, when you look at Intel versus your x86 competitor, do you think these share gains are because of better design or access to better manufacturing? And so what can be fixed and what will take time to fix or if you were to outsource more, right to external foundry does that help you regain share, and I imagine that applies more to cloud. And then on the enterprise side, have you seen any share shifts at all over the last few years?

Thanks, Vivek. Well, as you look at data center and the competitiveness, as I said and stated earlier, Granite Rapids did a good job of making a good first step in closing the gap versus competition, but we still have a gap. And so we've got to be laser focused next on delivering Diamond Rapids. And the feedback for both of those products early is very positive. When it comes to external manufacturing, I've been pretty transparent about this in the way I think about it in my philosophy. The way I look at it is you have to have the right product at the right process and you have to deliver that within the right market window. If you look at Intel's overall today, we do about 30% of our manufacturing externally across a variety of partners. That's probably the high for where we are today, but it will never be 0%. What I can tell you is 18A is going well. They earn my business, obviously both for Panther Lake and for Clearwater Forest. But as I think about being more competitive in data center moving forward and I look at future designs, I will ask myself that question every time, as we look at the roadmap. So I think it would not be unfathomable that I would put a data center product outside if that meant that I hit the right product, the right market window, as well as the right performance for my customers.

Vivek, do you have a follow-up question?

Thank you, John. I have a question for Dave regarding non-controlling interest. I believe David mentioned an estimate of $500 million to $700 million for this year, which is a bit lower than the previous estimate of $700 million. However, it appears to increase to between $1.2 billion and $1.4 billion thereafter. Will this trend of growth continue? What is the best approach for us to model this, considering that the less we outsource and the more we rely on Intel Foundry might impact the reversals we have to account for in this part? Is it reasonable to consider the potential headwind this poses to your reported EPS?

Yes, that’s a good question. To clarify, it's not just about the SCIPs; SCIPs 1 and 2 are included, but Mobileye also contributes to noncontrolling interest. As we reduce our stakes in companies like Mobileye and Altera, it actually increases that noncontrolling interest. There are several factors involved, which makes it challenging to forecast because we need to know two things with certainty: the exact share of every asset we own and how our production will look in the fabs with these SCIPs. We are comfortable guiding for 2025 and providing an indication for 2026, with an expectation that it will likely rise in 2027. However, it may be premature to pinpoint the exact number at this time.

Thanks Vivek. Jonathan, can we have the next question please?

Certainly. And our next question comes from the line of Ben Reitzes from Melius. Your question please.

Hi everyone. Thank you for the question. Dave and MJ, I know you mentioned in your prepared remarks that you're looking forward to collaborating with the administration. Could you provide more details about your initial discussions with them? Have they made contact? Who is leading the conversations on your side? What specific topics are being discussed, and what are their main areas of interest? It seems that Howard Lutnick holds this issue close to his heart, especially during his confirmation hearings, so I would appreciate more insight into what you have accomplished so far and your expectations moving forward. I have a follow-up question as well. Thank you.

Yes. Okay. Thanks, Ben. Maybe I'll take that as the co-CEO. Yes, we have good engagement with them. We've really been engaged since the election, with the team at various levels, obviously, at the CEO level, but also we have a strong government affairs team that engages with them every day. I feel really good about their outlook on bringing semiconductor manufacturing back to the U.S. I think this is a very positive sign, obviously, for us. Quite honestly, we never left the U.S. So we are in a kind of the pull position in that regard. And I think they understand the value of doing R&D in the U.S. for advanced semiconductor manufacturing, which also is positive. They want to see more jobs coming back to the U.S. We pay high wage, high tech jobs. So that's obviously positive for them. But more importantly, this is about security, both in terms of just the supply chain but also in kind of secure manufacturing for the Department of Defense, which we are obviously in a position to do for them. I imagine that as we progress, we will be more engaged with them to make this a reality. And both Michelle and I will be meeting fairly regularly with the administration officials to go make their goals or reality for the U.S.

Ben, you said you had a follow-up?

Thank you. I wanted to dive deeper into a previous question regarding gross margins and ask it in simpler terms. You mentioned that the first quarter was the low point. I'm trying to understand how much higher we can expect gross margins to rise as the year progresses, especially since it seems like you'll be more aggressive on pricing for server and client CPUs. I'm also considering the impact of potentially increasing outsourcing to TSMC this year. If the first quarter is indeed the low point, could you provide more detailed insights on how we might move beyond that, especially in light of your comments on pricing? That would be really helpful. Thank you.

Yes, I mean, we tend to be competitive in the product space. And also, as I mentioned, the cost structure is under some pressure, in particular because of Lunar Lake. So that absolutely will impact the gross margins on products. There won't be a lot of lift in that business unit through the year. And it is really not until Panther Lake comes that they, I think, start to see some better cost structure and have a part that's very competitive that I think allows us to perhaps even relax some of that pressure in a competitive market. That said, the Foundry business will see improvements. Over the course of the year, more wafers will be coming back. With Panther Lake, it becomes even better in the following year. We are improving the cost structure of the foundry business as part of our overall spending reduction plan. So that will also help. And then just keep in mind, these wafers that we are producing at Intel and 18A have much better cost structure and margin structure relative, I should say, relative to the price structure than their predecessors, and that will be beneficial on the Foundry side. So in the caveman macro sense, I think the best thing to do is probably take this like somewhere in the 40% to 60% fall-through, and that's probably the right rough order math to get you to where the margins will go in any quarter based on what you're projecting the revenue to be in that quarter.

Thanks Ben. Jonathan, can we have the next question please?

Certainly. Our next question comes from the line of Aaron Rakers from Wells Fargo. Your question please.

Yeah. Thanks for taking the question. I want to build off of that last question a little bit. During the prepared remarks, you had mentioned 1% in 2023 with EUV wafer mix and that progressed to north of 5% this year. Can you give us a framework of how you would define success looking through 2025, maybe exiting the year as far as EUV wafer mix? And remind us again what the delta is in terms of cost structure, the margin dynamics of an EUV wafer.

Certainly. Regarding the second part of your question, I would say that the price of those wafers increases at a rate three times the cost, meaning the blended average selling price and cost rises by three times when moving to 18A compared to previous costs. This represents a significant improvement in gross margins as we transition to 18A from pre-EUV wafers. It's difficult for me to predict exactly how we'll finish the year concerning our percentage of EUV production, but it will definitely increase. Granite will use Intel3, Panther Lake will be on Meteor Lake at Intel3 or 4, and this year, Panther Lake will be utilizing 18A. Therefore, we should see a substantial increase in the percentage of EUV wafers by the end of 2025.

I have a question that might seem basic, but I’m a bit unclear about the SCIP impact moving from $500 million to $700 million up to $1.2 billion. Can you confirm that when you report EPS on a non-GAAP basis, that figure is included in the EPS number? I want to ensure I’m modeling this correctly, and I believe my colleagues are as well, but I want to ensure I understand it thoroughly.

I just want to be clear. It's not just SCIP. I mean that includes the Mobileye income and will include the Altera income to some extent. But yes, all of that in the NCI, we do take it against our non-GAAP number to get our fully diluted non-GAAP EPS number.

Thank you, Aaron. Jonathan, we have time for one more question.

Certainly. And our final question for today comes from the line of Srini Pajjuri from Raymond James. Your question please.

Thank you. Thanks for squeezing me in. Dave, on the foundry breakeven, I guess target for 2027. Maybe can you talk about what are the assumptions behind that? I mean do you think you can get there with mostly internal wafers? Or do you need external customers as well? If so, what sort of revenue do we need from external customers to, I guess, achieve that breakeven?

Yes, we are still aiming for breakeven in 2027, as you mentioned. This goal relies heavily on our internal wafers, specifically those from Intel products, with a significant focus on EUV wafers, which have better margins. As the mixture of wafers improves, our margins will benefit greatly. More importantly, the purpose of structuring our P&L differently was to enhance the foundry business, which was previously just about manufacturing, by emphasizing efficiency, extracting more from our existing resources, being capital-conscious, and considering return on invested capital in all decisions. This approach has been effective. I've witnessed a remarkable transformation during staff meetings, where the focus has shifted to profitability. I believe we will see even greater efficiency as we progress through 2025 and into 2026, and I'm optimistic about our path to breakeven. We do want to attract external customers, and we have accounted for a small amount in our 2027 projections. If 18A performs well based on customer feedback, I expect we will exceed expectations regarding the ratio of external to internal customers. These factors will drive profitability in 2027, and ultimately, we aim to reach breakeven and achieve a profitable level aligned with industry standards in the foundry space.

Srini, do you have a quick follow-on?

Yes. A quick one. So on the 18A Panther Lake, I think in the past, I think, Dave the comment was that you expect to bring roughly 70% of the die in-house. Is that still the plan? And then is it pretty set in stone that you are bringing it back for sure? Or do you have any flexibility whether to bring back more of the die or less of the die if you need to. So just trying to understand.

I'm going to let Michelle answer that because it really is her decision on how she builds her products.

Yes. So we did move Panther Lake inside of 18A design win. But as I stated before, we look at each generation of products based on what's the right product, what's the right process, what's the right market window and what allows our customers to win. So for Panther Lake, that was 18A. And as I said, we are very happy with where we are from a performance and yield perspective at this point in the process. So that will stay on 18A. Then as you look forward, to our next-generation product for client after that, Nova Lake will actually have die both inside and outside for that process. So you'll actually see compute tiles inside and outside. Again, it's about optimizing to what allows us to win in the market, what allows us to win with our customers and optimizing the overall product portfolio because at the end of the day, if our customers are successful, we win, that drives more wafers and Intel Foundry and that allows us to win. But I'll continue to have a balance. And as I said, we will be doing the same look across our data center portfolio as well.

Great. Thanks, Michelle. So with that, let me wrap up by saying thank you, as always for joining the call. MJ and I appreciate the opportunity to discuss our progress and the actions we've taken. Q4 was a good step forward, obviously but we have a lot of hard work ahead of us, and we are looking forward to updating you as we go along. We hope to see many of you in person at the investors' conferences we'll be attending in Q1. And I would also like to highlight that the Intel Foundry team will be hosting their second annual Direct Connect User event on April 29 in San Jose, and we hope many of you will join that in person. So thank you, and good night.

Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.