Blaine Curtis

Blaine Curtis from Jefferies Financial Group questioned the reiteration of the $18 billion CapEx target given Q3 spending, and the timing of 18A capacity additions in Arizona. He also inquired about the current 18A yield progression compared to successful historical product ramps and its impact on gross margins.

Answer

CFO David Zinsner confirmed the $18 billion CapEx target, noting lumpiness in payments, and stated no significant near-term 18A capacity increases are expected as peak supply isn't until the end of the decade. Regarding yields, Mr. Zinsner indicated 18A yields are adequate for supply but need improvement for appropriate margins, expecting industry-acceptable levels by late next year, while Intel 14A is off to a better start.

Blaine Curtis from Jefferies Financial Group asked for clarification on the reiterated $18 billion CapEx target for 2025, given Q3 spending, and the timing of 18A capacity additions in Arizona. He also sought insight into the gross margin trajectory as 18A layers in, specifically comparing current 18A yields to historically successful products and their expected impact in the first half of the year.

Answer

CFO David Zinsner confirmed the $18 billion CapEx target for 2025, acknowledging lumpiness in spending, and stated that significant 18A capacity increases are not expected in the near term, with investments continuing over time. Regarding yields, Zinsner noted 18A yields are adequate for supply but need improvement for optimal cost structure, expecting industry-acceptable levels by the end of next year. He highlighted Intel 14A's strong start in performance and yield compared to 18A at a similar maturity point.

Blaine Curtis followed up on the loading comments, asking if the strategy to keep inventory flat until a more robust top-line recovery marks a new approach after many quarters of inventory growth. He also questioned if the impact of lower December quarter loadings was fully reflected in the gross margin guidance or if it would spill into March.

Answer

CEO Haviv Ilan confirmed comfort with the $4.8 billion inventory level, noting its low obsolescence. He explained that moderating loadings is a sustainable capital allocation strategy to keep inventory flat to down while maintaining high customer service. Mr. Ilan clarified that the lower loadings (step-downs in Q3 and Q4) are fully embedded in the current EPS guidance.

Blaine Curtis followed up on the loading comments, asking if the company plans to keep inventory flat until a more robust top-line recovery is observed, given past inventory growth. He also inquired if the lower loadings in Q4 2025 are fully reflected in the gross margin guidance or if there's a spillover effect into Q1 2026.

Answer

CEO Haviv Ilan clarified that they are comfortable with the current $4.8 billion inventory, which has low obsolescence, and moderating loadings is about sustainability and good capital allocation, aiming for flat to slightly down inventory while maintaining high customer service. He confirmed that the step-down in loadings (Q2 to Q3, and Q3 to Q4) is embedded in the current EPS guidance.