Intel Corp Q4 2024 Earnings Call Transcript

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

Question: Ross Seymore - Deutsche Bank AG - Analyst : I guess the first I would be for MJ. You talked about no quick fixes, but a lot of things to improve the road map. 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's 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 1 to 2 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 road map. 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 2 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. And 18A is doing just fine on a 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.

Question: Ross Seymore - Deutsche Bank AG - Analyst : 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?

Question: Stacy Rasgon - Bernstein Research - Analyst : 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 got more headwinds just on the surface of PC inventory digestion and maybe the roll off of some of that tariff pull forward. What's going on in the, in the data center and the NEX businesses that makes them as bad as a client in into Q1. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, INTC.OQ - Q4 2024 Intel Corp Earnings Call

Question: Stacy Rasgon - Bernstein Research - Analyst : Yeah, I do. Thank you. So you also talked about increased competitiveness, weighing on margins, at least in the Q1. So a again, I presume that's a question pricing, I guess. Is that right? Do you expect that to persist through the year? And how do you think about that competitiveness potentially weigh on pricing across client and especially in the, in the data center?

Question: Joseph Moore - Morgan Stanley - Analyst : 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? . REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, INTC.OQ - Q4 2024 Intel Corp Earnings Call Yes, of course, I can, Joe. I think it really comes down to taking the time over the last 6 weeks to actively engage with the teams, look at our road maps, look at where we are from a competitive perspective and from an execution perspective, and that really resulted in that decision. A lot of conversations with my customers as well in regards to what they see is needed to be competitive and to deliver the right product. And so when I looked at that, obviously, we have our Gaudi product, we're learning a lot from that. But 1 of the things that we've learned from Gaudi is it's not enough to just deliver the silicon. We need to be able to deliver a complete rack scale solution, and that's what we're going to be able to do with falcon -- excuse me, with Jaguar Shores. Falcon Shores will help us in that process of working on the system, networking memory, all the component functions of that, but what customers really want is that full sale rack solution. And so we're able to get to that with Jaguar Shores. I think we've also seen a lot this week with DeepSeek and a lot of the excitement around not one size fits all. And so I'm also trying to look at the road map to say there's a lot of IP and assets that we have at Intel Product co that we can leverage to address this market. We've got great CPUs, GPUs, ASICs, FPGAs, and we need to figure out how we harness those because if we've seen anything this week, when there are constraints put on customers, they figure out different ways to deploy technology. And so that's also a great opportunity and something that I'm looking at and looking at if there's ways that we can be disrupted there.

Question: Joseph Moore - Morgan Stanley - Analyst : I do. And thank you for your candor about all of that. I think separately, you mentioned in his prepared remarks about potentially seeing tariffs driving some pull forward. Can you just talk about how pervasive that might be? Is that conservatism that, that might be happening? You're seeing evidence that's happening? Just some color on where that's coming from.

Question: Timothy Arcuri - UBS. - Analyst : 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?

Question: Timothy Arcuri - UBS. - Analyst : Yes. Yes. Just kind of like is it off of [3.95%], is about [3.65].

Question: Timothy Arcuri - UBS. - Analyst : I do. Yes, Dave, also, so you took the CapEx to the [land], 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?

Question: Vivek Arya - BofA Securities - Analyst : First kind of related questions are on the data center server CPU market. MJ. 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 road map. 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.

Question: Vivek Arya - BofA Securities - Analyst : Yes. Thank you, John. So maybe one for Dave on this noncontrolling interest. I think David said $500 million to $700 million for this year, so a little bit lower than I think the $700 million you had before. But then it starts to grow to $1.2 billion or $1.4 billion. Is this always going to keep on increasing, right? Like what is the right way for us to model it because the less you outsource -- I guess the more you insource, the more you give to interfoundry, the more reversals, right, you have to do on this NCI part, I would imagine. So is it a reasonable way to model how much of a headwind this is to your reported EPS?

Question: Benjamin Reitzes - Melius Research - Analyst : Dave and MJ, I wanted to -- I know in your prepared remarks, you said you look forward to working with the Trump administration. I was wondering if you could just give a little more detail about your initial talks with them. Have they reached out? And who's like leading the discussions from your side? And any color on what you're exactly talking about and what they're particularly interested in? I mean Howard Lutnick, obviously, it sounds like this is very near and dear to him during his confirmation hearings and would love to just kind of get a little bit more color on where you -- what you have done so far and where you think it's going? And then I'll have a follow-up.

Question: Benjamin Reitzes - Melius Research - Analyst : I wanted to double-click on a prior question on gross margins and ask it a little bit more in caveman terms rather than incremental. You talked about being the bottom. I'm trying to figure out how high it goes sequentially as we go throughout the year, given -- it sounds like you're going to be a lot more price aggressive in server CPUs and client CPUs from what I heard. So in addition to -- I'm trying to balance that with the thought of outsourcing more to TSMC for the year, et cetera. So if that's the low point. I guess what I'm trying to say, can you be more prescriptive in light of that pricing comment I made and if it's right, then just give us a little more color on where we go from the 1Q, that would be great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, INTC.OQ - Q4 2024 Intel Corp Earnings Call

Question: Aaron Rakers - Wells Fargo Securities - Analyst : 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.

Question: Aaron Rakers - Wells Fargo Securities - Analyst : I do, and it's probably a dumb question, but I'm just going to ask it because I'm just a little confused that the Skip impact, this $500 million to $700 million going to $1.2 billion. Just remind us again, though we're all clear that when you report EPS on a non-GAAP basis, that's in that EPS number, just so we -- I'm modeling it correctly. I'm sure my my peers are already, but I want to make sure I've got that all clear in my head. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, INTC.OQ - Q4 2024 Intel Corp Earnings Call

Question: Srinivas Pajjuri - Raymond James & Associates, Inc. - Analyst : 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?

Question: Srinivas Pajjuri - Raymond James & Associates, Inc. - Analyst : 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're 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. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, INTC.OQ - Q4 2024 Intel Corp Earnings Call