Intel Corp Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Vivek Arya - Bank of America Securities - Analyst : 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?

Question: Vivek Arya - Bank of America Securities - Analyst : Yeah. Thank you, John. For my follow-up, I'm curious, what impact do the restrictions -- sorry, the restructuring actions have on either your R&D roadmap, your long-term external foundry opportunity, and any CHIPS Act funding? I think in the past you had suggested about $15 billion in long-term value from external foundry, is there any impact on those growth targets because of the restructuring action? Just what changes with these restructuring actions? Thank you.

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Hi, guys. Thanks for me asking the question. Want to follow-up on the first two, and Pat, maybe just ask it a different way. Part of what you're saying, it sounds like you're adjusting your spending across the Board to reflect the macro reality, slower growth, et cetera. But it seems like that would be difficult to do if it didn't impact any of the structural dynamics as well. So I guess the real question is, are there any changes either to your competitiveness, the structure of the company, the long-term, $100 billion target that you just saw weren't happening and therefore felt these cuts were necessary. So do any of the structural changes -- or can you describe any of the structural changes and what the outcome to your financial targets might be?

Question: Ross Seymore - Deutsche Bank Securities Inc. - Analyst : Yeah, I do. Dave, you went through with the good details of the cost structure and what would change the puts and takes for next year. I wondered -- I know you're not going to guide to 2025 revenue. But the puts and takes from maybe a competitive positioning point-of-view, how you're feeling in CCG, DCAI, primarily relative to the competition, any sort of tailwind, headwind analysis or description for 2025 would be helpful.

Question: CJ Muse - Cantor Fitzgerald & Co., Inc - Analyst : Yeah. Thank you for taking the question. 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 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 phenomenon or something else we should be thinking about into '25, '26?

Question: CJ Muse - Cantor Fitzgerald & Co., Inc - Analyst : Yeah. Just a quick one on OpEx. You gave us the $17.5 billion for all of calendar '25, 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?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. Thank you. You talked about the server roadmap with Sierra Forest shipping and Granite Rapids shipping this quarter. Can you talk about how that -- where that puts you competitively? Do you think you're kind of have closed the gap or is it leadership product, and obviously, Clearwater for us is the longer-term focus, but where are we in the interim?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Yeah. Just on the notion that AI has kind of stolen some of the focus from server, it seems like we would be looking at a ceiling in overall power budgets in a couple of years that would mean we need to invest in traditional server ecosystems and maybe do a significant refresh. Do you see any indications of that and given that? I perceive you guys are stronger in enterprise than in cloud right now, like how are you positioned to take advantage of that when it does come?

Question: Timothy Arcuri - UBS - Analyst : Sure, thanks. Dave, can you again explain how June gross margin was so much worse than you thought just three months ago? I mean, revenue is basically in line. I know you talked about mix, but it seems like it was probably a pretty small part of it mix was and it was really more of the decisions around Intel 4 and Intel 3. So can you just explain again, I'm not sure -- I understand why that was such a big.

Question: Timothy Arcuri - UBS - Analyst : Yeah. Pat, can you just talk about the foundry strategy given the CapEx cut? My question is how you sort of execute on the plan with this lower CapEx. I mean kind of on one hand, you keep -- we keep talking about bringing all these wafers back in-house to help gross margin in 2026. But I also hear about a lot more outsourcing to TSMC even in real-time so, is the cut more that some of your foundry customers are maybe structurally deciding that they're not as committed? I'm just trying to understand how you can cut CapEx and still execute on this strategy. Thanks.

Question: Srini Pajjuri - Raymond James - Analyst : Thank you. A couple of follow-ups. Dave, on the move from Oregon to Ireland fab, you talked about that being a gross margin headwind. Can you talk about how much -- can you clarify how much of a headwind that is right now? And also when it's fully loaded on a like-for-like basis, how much of a headwind do you think that's going to be on an ongoing basis?

Question: Srini Pajjuri - Raymond James - Analyst : Ongoing basis. Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2024 / 9:00PM, INTC.OQ - Q2 2024 Intel Corp Earnings Call

Question: Srini Pajjuri - Raymond James - Analyst : Yeah. So, Pat, I think in the past, you talked about the foundry business potentially breaking even sometime 2027. And given all the cuts, you seem to at least sound confident that foundry opportunity is not changing, so I'm just curious, do you see a possibility that Foundry business could actually breakeven sooner given all the cuts? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2024 / 9:00PM, INTC.OQ - Q2 2024 Intel Corp Earnings Call

Question: Matt Ramsay - TD Cowen - Analyst : Yes, good afternoon. Thank you, guys. 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 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.

Question: Matt Ramsay - TD Cowen - Analyst : Yes, I do. Thanks, John. I wanted to ask -- I think in some of the prepared script and maybe early in the Q&A, Pat, you kind of reiterated the $15 billion funnel for the Foundry business. And I know in the medium term, a lot of that is packaging. But I wanted to ask about the customers that you've engaged with on 18A and maybe early on 14A, how have you seen the charts of the programs that they're planning to bring into your foundry progress in the last few quarters. Are people still committed to ramping those things? Are they taking PDKs and maybe doing tape-ins? Are things moving forward? Have you seen any acceleration? Have you seen hesitation or maybe wait-and-see from those customers? I'm just trying to figure out how that stuff is progressing on 18A? Thanks.