Intel - Q3 2023

Transcript

Operator (participant)

Thank you for standing by, and welcome to Intel Corporation's third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Mr. John Pitzer, Corporate Vice President of Investor Relations. Please go ahead.

John Pitzer (Corporate VP of Investor Relations)

Thank you, Jonathan. By now, you should have received a copy of the Q3 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 CEO, Pat Gelsinger, and our CFO, David Zinsner. In a moment, you will hear brief comments from both, followed by a Q&A session. Before we begin, please note that today's discussion does contain forward-looking statements based on the environment as we currently see it, and as such, they 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 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 Pat.

Pat Gelsinger (CEO)

Thank you, John, and good afternoon, everyone. Before we begin, given our significant and now almost 50-year presence in Israel, we are deeply saddened by the recent attacks and their impact on the region. Our utmost priority is the safety and welfare of our people in Israel and their families. But I also want to recognize the resilience of our teams as they have kept our operations running and our factory expansion progressing. Our thoughts are with all of those affected by the war, and I am praying for a swift return to peace. Turning to our results, we delivered an outstanding Q3, beating expectations for the third consecutive quarter. Revenue was above the high end of our guidance, and EPS benefited from both strong operating leverage and expense discipline.

More important than our standout financial performance were the key operational milestones we achieved in the quarter across process and products, Intel Foundry Services, and our strategy to bring AI Everywhere. Simply put, this quarter demonstrates the meaningful progress we have made towards our IDM 2.0 transformation. The foundation of our strategy is reestablishing transistor power and performance leadership. While many thought our ambitions were a bit audacious when we began our five nodes and four-year journey roughly 2.5 years ago, we have increasing line of sight towards achieving our goal. Intel 7 is done with nearly 150 million units in aggregate of Alder Lake, Raptor Lake, and Sapphire Rapids already in the market. In addition, Emerald Rapids has achieved product release and began shipping this month.

In Q3, we began initial shipments of Meteor Lake on Intel 4, which we are now aggressively ramping on the most productive fleet of EUV tools in the industry, providing us with a greater than 20% capital efficiency advantage compared to when EUV tools were first launched. High-volume EUV manufacturing is well underway in Oregon and more recently in Ireland. Our Fab 34 in Ireland represents the first high-volume EUV production in Europe, underscoring our commitment to establish geographically diverse and resilient supply. We are the only leading-edge semiconductor manufacturer at scale in every major region of the globe. Our Intel 3 process is tracking to be manufacturing ready by year-end, supporting our first two Intel 3 products, Sierra Forest and Granite Rapids.

In fact, our production stepping of Sierra Forest is already out of fab, and what we expect to be the production stepping of Granite Rapids has already taped in and is in the fab now. We are particularly excited by our move into the Angstrom era with Intel 20A and Intel 18A. Adding to our accelerating adoption of EUV are two key new innovations, RibbonFET and PowerVia, representing the first fundamental change to the transistor and process architecture since we commercialized FinFET in 2012. I have been studying some diagrams for almost 40 years. RibbonFET and PowerVia are true works of art, the most exquisite transistors ever created. We expect to achieve manufacturing readiness on Intel 20A in the first half of 2024. Arrow Lake, our lead product on 20A, is already running Windows and demonstrating excellent functionality.

Even more significant, we hit a critical milestone on Intel 18A with the 0.9 release of the PDK, with imminent availability to external customers. In simple terms, the invention phase of RibbonFET and PowerVia is now complete, and we are racing towards production-ready, industry-leading process technology. Our first products on Intel 18A will go into fab on schedule in Q1 2024, with Clearwater Forest for servers, Panther Lake for clients, and of course, a growing number of IFS test chips. We expect to achieve manufacturing readiness for Intel 18A in second half 2024, completing our incredible five nodes in four years journey on or ahead of schedule. While Intel 18A reestablishes transistor leadership, we are racing to increase that lead. We announced at Innovation, our plans to lead the industry in a move to glass substrate for high density, performance, and unique optical capabilities.

We also announced our plans to begin installation of the world's first High-NA EUV tool for commercial use by the end of the year to continue our modernizations and infrastructure expansions of our Gordon Moore Park in Oregon, home of our technology development team. Moore's law continues to be the foundational driver of semiconductor technology and economics, which in turn fuels broader innovation in every industry across the globe. We remain committed to be good stewards of Moore's law and drive advancements until we have exhausted every element on the periodic table. Importantly, our progress on process technology is now being well-validated by third parties. We have made great progress with early IFS customers this quarter, which we expect to only accelerate with the release of the 0.9 PDK for Intel 18A.

A major customer committed to Intel 18A and Intel 3, which includes a meaningful prepayment that expedites and expands our capacity corridor for this customer. The customer is seeing particularly good power, performance, and area efficiency in their design. This opportunity is very significant and highlights our full systems foundry capabilities in high-performance computing, big die designs, leadership performance, and area-efficient transistors, advanced packaging, and systems expertise. In addition, we are extremely pleased to announce today that we have signed with two additional 18A customers. Both are particularly focused in areas of high-performance compute and benefiting from power performance per unit silicon area. We have also made substantial progress with our next major customer and are expecting to conclude commercial contract negotiations before year-end.

Finally, we were also very happy to expand our growing foundry ecosystem by completing our strategic partnership with Synopsys in Q3 to include IP for Intel 3 and Intel 18A for both Intel internal and external foundry customers. With the rise of AI and high-performance computing applications, our advanced packaging business is proving to be yet another unique advantage. We have seen a surge of interest in our advanced packaging from most leading AI-chip companies. With capacity corridors quickly available, this is proving to be a significant accelerant and on-ramp for Intel Foundry customers. During the quarter, we were awarded two customer AI designs for our advanced packaging, and with an additional six customers in active negotiations, we expect several more awards by year-end.

We have also established an important business relationship with Tower Semiconductor, utilizing our manufacturing assets in New Mexico, along with Tower, investing capital expenditures of roughly $300 million for its use in this facility. This represents an important step in our Foundry strategy, improving cash flows by utilizing our manufacturing assets over a significantly longer period of time. Finally, we have submitted all four of our major project proposals in Arizona, New Mexico, Ohio, and Oregon, representing over $100 billion of U.S. manufacturing and research investments to the CHIPS Program Office and are working closely with them as they review these proposals. We look forward to providing a deeper update on our Foundry business during our planned IFS industry event in Q1 of 2024. We are on a mission to bring AI Everywhere.

We see the AI workload as a key driver of the $1 trillion semiconductor TAM by 2030. We are empowering the market to seamlessly integrate and effectively run AI in all their applications. For the developer working with multi-trillion parameter frontier models in the cloud, Gaudi and our suite of AI accelerators provides a powerful combination of performance, competitive MLPerf benchmarks, and a very cost-efficient TCO. However, as the world moves toward more AI-integrated application, there's a market shift towards local inferencing. It's a nod to both the necessity of data privacy and an answer to cloud-based inference cost. With AI-accelerated Xeon for enterprise, Core Ultra launching the AI PC generation, and OpenVINO enabling developers seamless and versatile support for a range of client and edge silicon, we are bringing AI to where the data is being generated and used rather than forcing it into the cloud.

Our expansive footprint, spanning cloud and enterprise servers to volume clients and ubiquitous edge devices, positions us well to enable the AI continuum across all our market segments. The AI continuum enables AI everywhere. DCAI exceeded our forecast this quarter, with server revenue up modestly sequentially. We continue to see a strong ramp of our 4th-gen Xeon processor, with the world's top 10 CSPs now in general availability and improving strength from MNCs. During the quarter, we shipped our 1,000,000th 4th-gen Xeon unit and are on track to surpass 2,000,000 units next month. 4th-gen Xeon includes powerful accelerators demonstrating best-in-class CPU performance for AI, security, and networking workloads. Our AI-enhanced Xeons are primed for model inferencing, enabling seamless infusion of AI into existing workloads. This was visible this quarter, with over one-third of 4th-gen Xeon shipments directly related to AI applications.

We are the clear leader in AI CPU results, as seen in MLCommons benchmarks today, and our roadmap provides significant further improvements, with Granite Rapids expected to deliver an additional 2-3x AI performance on top of our industry-leading fourth-gen Xeon. We continue to make excellent progress with our Xeon roadmap. Our fifth-gen Xeon processor, codenamed Emerald Rapids, is in production and ramping to customers, and will officially launch on December fourteenth in New York City. Sierra Forest, our first E-core Xeon, is on track for first half 2024, with customers well into their validation process. Sierra Forest will feature up to 288 E-cores, targeting next-generation cloud-native workloads, delivering even more price, performance, and power efficiency for our customers. Granite Rapids, which shortly follows Sierra Forest, is also well into our validation cycle with customers.

While the industry has seen some wallet share shifts between CPU and accelerators over the last several quarters, as well as some inventory burn in the server market, we see signs of normalization as we enter Q4, driving modest sequential TAM growth. Across most customers, we expect to exit the year at healthy inventory levels, and we see growth in compute cores returning to more normal historical rates off the depressed 2023. More importantly, our successful roadmap execution is strengthening our product portfolio with Gen 4 and Gen 5 Xeon, Sierra Forest and Granite Rapids, positioning us well to win back share in the data center. In addition, we expect to capture a growing portion of the accelerator market in 2024 with our suite of AI accelerators led by Gaudi, which is setting leadership benchmark results with third parties like MLCommons and Hugging Face.

We are pleased with the customer momentum we are seeing from our accelerator portfolio and Gaudi in particular, and we have nearly doubled our pipeline over the last 90 days. As we look to 2024, like many others, we now are focused on having enough supply to meet our growing demand. Dell is partnering with us to deliver Gaudi for cloud and enterprise customers with its next-generation PowerEdge systems, featuring Xeon and Gaudi AI accelerators to support AI workloads ranging from large-scale training to inferencing at the edge. Together with Stability AI, we are building one of the world's largest AI supercomputers entirely on 4th-gen Xeon processors and 4,000 Intel Gaudi 2 AI accelerators. Our Gaudi roadmap remains on track, with Gaudi 3 out of the fab, now in packaging, and expected to launch next year.

In 2025, Falcon Shores brings our GPU and Gaudi capabilities into a single product. Moving to the client, CCG delivered another strong quarter, exceeding expectations for the third consecutive quarter, driven by strength in commercial and consumer gaming SKUs, where we are delivering leadership performance. As we expected, customers completed their inventory burn in the first half of the year, driving solid sequential growth, which we expect will continue into Q4. We expect full year 2023 PC consumption to be in line with our Q1 expectations of approximately 270 million units. In the near term, we expect Windows 10 end of service to be a tailwind, and we remain positive on the long-term outlook for PC TAM returning to ±300 million units.

Intel continues to be a pioneer in the industry as we ushered in the era of the AI PC in Q3 when we released the Intel Core Ultra processor, codenamed Meteor Lake. Built on Intel 4, the Intel Core Ultra has been shipping to customers for several weeks and will officially launch on December 14, alongside our 5th-gen Xeon. The Ultra represents the first client chiplet design enabled by Foveros advanced 3D packaging technology, delivering improved power efficiency and graphics performance. It is also the first Intel client processor to feature our integrated neural processing unit, or NPU, that enables dedicated low-power compute for AI workloads. Next year, we will deliver Arrow Lake as well as Lunar Lake, which offers our next-gen NPU, ultra-low power mobility, and breakthrough performance per watt.

Panther Lake, our 2025 client offering, heads into the fab in Q1 2024 on Intel 18A. The arrival of the AI PC represents an inflection point in the PC industry not seen since we first introduced Centrino in 2003. Centrino was so successful because of our time to market advantage, our embrace of an open ecosystem, strong OEM partnerships, our performance silicon, and our developer scale. Not only are these same advantages in place today, they are even stronger as we enter the age of the AI PC. We are catalyzing this moment with our AI PC acceleration program, with over 100 ISVs already participating, providing access to Intel's deep bench of engineering talent for targeted software optimization, core development tools, and go-to-market opportunities. We are encouraged and motivated by our partners and competitors who see the tremendous growth potential of the PC market.

NEX is also seeing early signs of the benefits from growing AI use cases. Our Ethernet and IPU businesses are well-suited to support the high I/O bandwidth required by AI workloads in the data center, with growth expected to accelerate for both in 2024. Additionally, at the Edge, as part of Intel's focus on every aspect of the AI continuum, NEX launched OpenVINO 2023.1, the latest version of the AI inferencing and deployment runtime of choice for developers on client and edge platforms. With AI.io and Fit:match demonstrating how they use OpenVINO to accelerate their applications at our Innovation conference. We have leadership developer software tool chains that have seen a doubling of developer engagements this year. While NEX entered their inventory correction after client and DCAI, Q3 results beat our internal forecast and grew sequentially. We see continued signs of stabilization heading into Q4.

Finally, our Smart Capital strategy underpins our relentless drive for efficiency and our commitment to be great allocators of our owners' capital, while consistently looking for innovative ways to unlock value for all our stakeholders. We remain on track to reducing costs by $3 billion in 2023, and we continue to see significant incremental opportunities for operational improvement as we execute on our internal Foundry model. In addition, in Q3, we made the decision to divest the pluggable module portion of our silicon photonics business, allowing us to focus on the higher value component business and optical IO solutions to enable AI infrastructure scaling. This marks the tenth business we have exited in the last two and a half years, generating $1.8 billion in annual savings and a testament to our efforts to optimize our portfolio and drive long-term value creation.

Mobileye's solid Q3 and Q4 outlook continues to underscore the benefits of increased autonomy afforded by our initial public offering last year. In addition, we added TSMC as a minority investor in our IMS Nanofabrication business in Q3, and earlier this month, we announced our plans to operate PSG as a standalone business beginning January 1. Similar to Mobileye and IMS, this decision gives PSG the mandate, focus, and resources to better capitalize on their growth opportunities. We plan to report PSG results as a standalone segment in Q1 to bring in private investors in 2024, and to create a path to an initial public offering over the next two to three years. In summary, we continue to deliver tangible progress 2.5 years into our transformation journey. We are on track with five nodes in four years.

We are hitting or beating all our product roadmap milestones. We are establishing ourselves as a global at-scale systems foundry for both wafer processing and advanced packaging. We are unlocking new growth opportunities fueled by AI, and we are driving financial discipline and operational efficiencies as we continue to unlock value for our shareholders. While we are encouraged by our progress to date, we know we have much more work in front of us as we continue to relentlessly drive forward with our strategy, maintain our execution momentum, and deliver our commitments to our customers. I'd like to personally thank the Intel family for all their efforts. With that, let me turn it over to Dave to go through our results in more detail and provide guidance for Q4.

David Zinsner (CFO)

Thank you, Pat, and good afternoon, everyone. We delivered another strong quarter financially on top of outstanding execution on our product and process roadmaps as we continue to drive our IDM 2.0 transformation. We beat our guidance across revenue, gross margin, and EPS. While we continue to monitor economic indicators and geopolitical risks, we're pleased with the momentum and health of our business, and we'll continue to focus on prioritizing our investments prudently and aggressively managing near-term expenses and driving fundamental improvements to our cost structure longer term. Third quarter revenue was $14.2 billion, up 9% sequentially, and $750 million above the midpoint of our guidance. Revenue exceeded our expectations across all major lines of business.

Gross margin was 45.8%, 280 basis points better than our guidance, driven by higher revenue and ASPs and better sell-through of previously reserved inventory. EPS for the quarter was $0.41, beating guidance by $0.21 as our revenue strength, improving gross margins, and disciplined OpEx management resulted in sequential EPS growth of $0.28. Q3 operating cash flow was $5.8 billion, up $3 billion sequentially. Net inventory was down $500 million or seven days in the quarter. We also significantly improved the linearity of our shipments, which brought DSO down by five days. In total, our working capital improvement initiatives have yielded more than $2 billion of cash year to date.

Net CapEx was $4.9 billion, resulting in positive adjusted free cash flow of approximately $950 million, and we paid dividends of $500 million in the quarter. In Q3, we announced the sale of 10% of our IMS Nanofabrication business to TSMC, following the investment from Bain Capital in June. When combined with the Mobileye IPO, these transactions have unlocked more than $30 billion of value. Earlier this month, we signaled our intent to pursue private investment and ultimately an IPO for our PSG business as we continue to pursue opportunities to increase value for our shareholders.... Moving to third quarter business unit results. CCG delivered revenue of $7.9 billion, up 16% sequentially, and ahead of our expectations for the third consecutive quarter.

Customer inventory levels are healthy, and the market remains on track to our January consumption TAM signal of roughly 270 million units for 2023. CCG's operating profit doubled sequentially to $2.1 billion on higher revenue, sell-through of reserved inventory, and stronger ASPs, driven by strength in our commercial and gaming products in the quarter. DCAI revenue was $3.8 billion, ahead of our internal forecast. Despite continued unit TAM softness, the Xeon business was up sequentially, with MNC customers showing a better-than-seasonal recovery in the quarter. Favorable customer mix, along with strong adoption of newer products with higher core density, led to record Xeon ASPs in Q3. Despite sequential revenue decline, DCAI returned to profitability and contributed operating profit of $71 million, improving sequentially on better ASPs, reduced factory underload charges, and continued spending discipline.

Within DCAI, revenue for the programmable solutions group declined mid-teens percent sequentially. As we discussed earlier this month, after a period of strong growth and tight supply, the FPGA business is entering a period of inventory burn. We expect PSG to decline in Q4 and be depressed for the next few quarters as customers work through inventory before returning to a more normalized run rate and growth. NEX revenue was $1.5 billion, up 6% sequentially. Edge markets showed signs of recovery in Q3, leading NEX revenue to exceed our expectations. Network and telco markets continue to work through elevated inventory and weak demand, which we expect to persist through the end of the year. NEX also returned to profitability in Q3, with operating profit of $17 million, up $200 million sequentially on stronger revenue and reduced operating expenses.

Intel Foundry Services revenue was $311 million, growing 4x year-over-year and 34% sequentially on increased packaging revenue and higher sales of IMS tools. IFS operating loss was $86 million, as ramping factory and operating expenses offset stronger revenue in the period. Mobileye continues to perform well. Q3 revenue was $530 million, up 18% year-over-year and 17% sequentially, with operating profit of $170 million on a consolidated basis, up 32% sequentially. This morning, Mobileye increased their fiscal year 2023 outlook for adjusted operating income by 7% at the midpoint. Q3 represented another outstanding quarter of cross-company spending discipline and focused portfolio management, with operating expenses down 15% year-over-year.

While we're on track to achieve $3 billion of total spending reductions in 2023, we expect sequentially higher OpEx in Q4 due to seasonal marketing activities, higher profit-dependent compensation, and the end of some temporary austerity measures taken earlier in the year. We also had a one-time credit in Q3 associated with an asset sale, which will impact the sequential comparison in Q4. Now turning to Q4 guidance. We expect fourth quarter revenue of $14.6 billion-$15.6 billion, delivering on our January commitment to grow revenue sequentially throughout 2023. In the client business, we're encouraged by the return of historical purchasing cycles as our channel checks, partner feedback, and ASPs all point to healthy inventory levels and growing demand.

We expect moderate sequential growth from DCAI, with Xeon strength more than offsetting a decline in PSG, and continued recovery in edge markets, roughly offsetting persistent network weakness. At the revenue midpoint of $15.1 billion, we expect gross margin to flow through at approximately 60% of revenue growth, resulting in Q4 gross margin of approximately 46.5%, with a tax rate of 13% and EPS of $0.44. We continue to operate under our Smart Capital framework. In Q3, we received a capital grant from the state of Ohio and our first foundry prepay. In addition, we continue to work with the U.S. CHIPS office on their review of our four U.S. applications, and we continue to work with Germany, Poland, and the European Commission on our planned expansions in Europe.

There are no changes to our prior forecast of mid-30s% net capital intensity across 2023 and 2024 in aggregate. Capital offsets will trend towards the higher end of our 20%-30% range in that time frame, though we do expect the vast majority of those offsets to land in 2024. In closing, Q3 was Intel's strongest quarter since we began our transformation. We achieved significant milestones toward regaining process leadership on Intel 18A, delivered Meteor Lake and Emerald Rapids on time, secured multiple wafer and advanced packaging foundry customers, and delivered another quarter of financial results that exceeded our expectations on both the top and bottom lines. We will continue to make significant investments as we execute the IDM 2.0 strategy, and we remain confident and committed to our long-term financial targets. We're participating in a large and growing semiconductor TAM.

Our Foundry and AI assets are showing great momentum in the market. We're steadily closing structural cost gaps, and we continue to make progress toward delivering the financial returns that we and our owners expect. With that, let me turn the call back over to John.

John Pitzer (Corporate VP of Investor Relations)

... Thank you, Dave. We will now transition to the Q&A portion of our call. As a reminder, and as is our normal practice, we would request that each of you ask one question with a brief follow-up question, to be able to get to as many of your questions as possible. With that, Jonathan, can we go to our first caller?

Operator (participant)

Certainly. One moment for our first question. Our first question comes from the line of Timothy Arcuri from UBS. Your question, please.

Timothy Arcuri (Managing Director of Equity Research)

Thanks a lot. Dave, I just wanted to see if you can clear up some of the confusion on gross margin that sort of came out of the Innovation event. You're now coming out of the year at 46.5%, but you did roughly 43% for the year. I think at that event, you said next year is going to be up, but probably not a couple hundred basis points. Did you mean off of the Q4 run rate, or do you mean off of the 43% for the year? Can you kind of, you know, shape that for us throughout the year? Thanks.

David Zinsner (CFO)

Yeah. Well, let me just—if I don't mind, if you don't mind, let me step back. I want to talk a little bit about Q3 for a second, because Q3, I was really proud of the team's performance in terms of gross margins, for Q3, you know, coming in just shy of 46%. It was great execution in terms of spending from the team. They also did work on the underloading, which helped, and we were able to sell through some previously reserved inventory. And so that really helped propel the gross margin. So we had phenomenal fall-through in the third quarter.

I'd say fourth quarter, you know, we start to go back to what would be more of our typical fall-through range, somewhat muted by the fact that we are still going through five nodes in four years. There is spend associated with that, which kind of mutes it. So we're probably a little bit higher normally in terms of fall-through, but with that, it's probably like a 60% fallthrough. That's kind of the normal range we think of, and that's what we're guiding for the fourth quarter. Beyond that, we'll save the rest of the commentary for next year, when we close out 2023.

I would just say, you know, just on a longer-term basis, you know, Pat has talked a lot about gross margins of 60%, and I feel like we are even more confident around our ability to hit that 60% threshold for a number of reasons. One, you know, the execution that Pat talked about on five nodes in four years. When we get through that, you know, of course, we eliminate the headwind on margins, but it turns around to a tailwind because when you're a process leader, you get, you know, better gross margins. Also, as product execution improves, that also, you know, when—as we launch the products that are, that are competitive in the marketplace, and we've seen that already in the client space, you know, that helps on the gross margin side.

But then, more importantly, maybe the thing that's near and dear to my heart is this internal Foundry model that we've built, where we're now measuring the manufacturing and TD organization as a separate P&L. We'll officially do that next year, and we'll segment report it that way, but we're already, this year, starting to look at it that way in operations reviews. We're starting to do the planning for next year with that lens. We're doing the long-term plan in that lens. And, you know, all the things that we thought we would see in the dialogue between those functions, we're already starting to see now.

You know, we see the product organizations already starting to optimize around test times, around steppings, around how many samples and hot lots they do in the fab. Suddenly, things they didn't spend a lot of time thinking about before, they care a lot about now, and we're already starting to see improvements in the P&L because of that. On the same front, in manufacturing, you know, they're now really, really worried about loadings. They're worried about a P&L. They want to drive the most revenue they can in their P&L, try to drive the cost down as much as possible. So I just think that we will see a lot of opportunities as we progress through 2024 and beyond, that are really going to make an impact on gross margins and give us a lot of confidence around this 60%.

John Pitzer (Corporate VP of Investor Relations)

Tim, do you have a quick follow-up?

Timothy Arcuri (Managing Director of Equity Research)

I do. I do, yeah. Pat, can you just talk about the dynamics and maybe the allocation that you're getting from your major foundry partner? They went kind of out of their way to sort of go at the idea that you're, that you, that, you know, 18A is going to be comparable to what, to what they'll have in that same time frame. So now that it's becoming a little more apparent that you are making progress, has there been any change in that relationship and the allocation that you're getting from them? Thanks.

David Zinsner (CFO)

Yeah. You know, and first I'd say, you know, we're, you know, come to a different conclusion than what you might have heard from them. You know, we feel that our 5 nodes in 4 years, the leadership position that we expect with Intel 18A, you know, this is a remarkable set of work, and, as you heard me say in my formal comments, we think of 18A as a work of art. You know, this is the finest transistor, right? And we've invented the last 30 years of transistors. This is the best one that's ever been built, right? And that in PowerVia, we feel very confident that, we are on track to the leadership position that we described.

And as we've also said, hey, we're way in, well underway on the things after that, and things like High-NA, the next generation of EUV, you know, our advanced packaging with glass. You know, all of these are now being backed up and reinforced by the external customer commitments. You know, three 18A customers now, you know, making commitments, the prepay customer I spoke about earlier, two additional customers. You know, partners, we announced the Arm relationship in April, and they're now, you know, seeing very positive results in power performance area from 18A. And as we think about the relationship with TSMC, hey, this is a great company and one that we partner with, you know, one that we are a competitor to, one that we're a customer of. We collaborate with them.

You know, as you saw, they became an investor in the IMS business this quarter, as well. And as a customer of those, we're very happy with how they're supporting us in our products as we're racing many of these products forward. So they're, you know, a critical supplier to us as we're a critical supplier to them. This is one of the most critical relationships in the industry. I spend a lot of time personally on it. We're very confident in our roadmap, and this is really a-

Pat Gelsinger (CEO)

... exceptional quarter for 5 nodes in 4 years and getting back to process leadership. We are well on our way to doing exactly what we said we would.

John Pitzer (Corporate VP of Investor Relations)

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

Operator (participant)

Certainly. One moment for our next question. Our next question comes from the line of Ross Seymore from Deutsche Bank. Your question please.

Ross Seymore (Managing Director)

Hi, guys. Thanks for letting me ask a question. Pat, I wanted to follow up on one of the topics you just mentioned about your partnership with Arm. The flip side of that is there's been reports recently of a number of people entering the CPU business for PCs using Arm architectures, similar to what we've seen over the last couple of years on the data center side of things. Can you just talk about the competitive landscape of x86 versus Arm? And, potentially more importantly, if in fact, Arm was gaining traction, would you consider using that architecture and kind of broaden your technology internally?

Pat Gelsinger (CEO)

Yeah. Thank you, Ross. You know, overall, I think, you know, what you're seeing is the industry's excited around the AI PC. As I declared this generation of AI PC at our Innovation conference, you know, a couple of months ago, we're seeing that materialize and, you know, customers, competitors, seeing excitement around that. You know, Arm and Windows client alternatives, you know, generally they've been relegated to, you know, pretty insignificant roles in the PC business, and we take all the competition seriously, you know, but I think history is our guide here. You know, we don't see these as potentially being all that significant overall. You know, our momentum is strong. You know, we have a strong roadmap, Meteor Lake launching this AI PC generation, December fourteenth.

Arrow Lake, Lunar Lake, you know, we're already demonstrated the next generation product at Lunar Lake, which has, you know, significant improvements in performance and capabilities. We'll be sending Panther Lake, the next generation, into fab in Q1 and Intel 18A. You know, we announced our AI acceleration program, you know, which already has over 100 ISVs part of it. You know, we'll have, we expect in the next two years, over 100 million x86 AI-enhanced PCs in the marketplace. This is just, you know, an extraordinary amount of volume, the ecosystem benefits that that brings into the marketplace.

You know, and, you know, thinking about other alternative architectures like, Arm, we also say, "Wow, what a great opportunity for our Foundry business." And, you know, given the results I referenced, before, we see that as a, you know, a unique opportunity that we have to participate in the full success of the, Arm ecosystem or whatever market segments that may be, as an accelerant to, to our foundry, offerings, which are now becoming, we think, you know, very significant around the Arm, ecosystem with our foundry packaging and, 18A wafer, capabilities as well.

John Pitzer (Corporate VP of Investor Relations)

Ross, do you have a quick follow-up?

Ross Seymore (Managing Director)

Yeah, I do. One for Dave. The OpEx side of things, you guys did great in the third quarter. You talked about it going up in the fourth quarter, but I still think the full year is ahead of what you originally had targeted. How do we think about next year's OpEx, just conceptually? I know you said you're gonna have $3 billion in total cost savings this year, $8 billion-$10 billion longer term. What are the puts and takes on OpEx as we look into 2024?

David Zinsner (CFO)

Yeah. I, I back to the pride thing, you know, I'm really proud of what we did in the third quarter and really what we've been able to execute for the year on that spend, on that spend reduction. There was a lot of work associated with that. We had to drive a lot of, obviously, efficiency, but more importantly, as Pat talked about, you know, we, you know, kind of end of-- or we, we took 10 of, 10 programs or product areas and, you know, either divested them, of them or, or closed them out, in an effort to improve our spending. You know, and as we see...

In addition to that, you know, I would say that, you know, we also looked at businesses where we thought we could dramatically unlock value, and we think we've done the three areas that we thought most likely unlock value. I think from that perspective, we feel we're pretty done with the activities associated with spending. That said, you know, we do think we'll see benefit from our internal Foundry model, not only on the cost side, but also on the OpEx side. That's the area that we'll focus over the long term in terms of managing spending. You know, ultimately, the goal is to get to 60% gross margins, but it's also to get to 40% operating margins.

You know, that does entail driving efficiency and OpEx, and we think there's plenty of opportunity. I'd say the same thing on OpEx that I said on gross margins. We'll save the fourth quarter or the 2024 visibility for 2024 when we close out 2023.

John Pitzer (Corporate VP of Investor Relations)

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

Operator (participant)

Certainly. One moment for our next question. Our next question comes from the line of Joe Moore from Morgan Stanley. Your question, please.

Joe Moore (Managing Director)

Great, thank you. I think you talked about the Gaudi pipeline doubling in the last 90 days. I guess you're nearing kind of $2 billion of visibility there. Can you talk to that a little bit? How much of that is training versus inference? Thank you.

Pat Gelsinger (CEO)

Yeah, thank you. You know, overall, I'd just say, you know, there's a lot, a surge of interest in this category, Joe.

... you know, in the Gaudi business for us, you know, we're coming from a small base, but it's expanding rapidly. We do see a mix of training opportunities and inferencing opportunities. When we go to the inferencing side of the workload, which we think will be the significant expansion of workload going forward, you know, a few people generate models, a lot of people use them. Sort of like, how many people do weather modeling? Not many. How many people use weather models? A lot. You know, and that's how we think about training and inferencing. So the power, right, the market will be in the inferencing deployments, and that will be both a Gaudi play, as well as a Xeon play.

I would point to the example that we spoke about, for instance, with Dell, you know, where they really see bringing together both of those to give us a full portfolio of adding inferencing to existing workloads, where our AI-enhanced Xeons will be strong, as well as creating farms for inference or for training, where Gaudi will be more of a play. You know, the interest that we've seen in Gaudi is a worldwide statement, so we have a demand portfolio that really sort of matches the Intel balance across all geographies. You know, we're also seeing a huge upsurge in the amount of DevCloud, where this provides the fast on-ramp to the Intel AI and all of our advanced silicon offerings.

I'd also say, Joe, that, you know, this is an AI Everywhere play, as I said in my formal comments, you know, which is also Edge and Client as well. We view it as Edge, Client, on-premise data center, as well as, Cloud. This AI continuum is a unique position for Intel that we think gives us, you know, a very large opportunity to see this, upside of capabilities that the AI workload is going to drive across all elements of computing.

John Pitzer (Corporate VP of Investor Relations)

Joe, do you have a follow-up?

Joe Moore (Managing Director)

Yeah, I do. Thank you. In terms of that Gaudi business, do you anticipate any impact from the China export controls? And more broadly, are there any other impacts from the China export controls on Intel's business?

Pat Gelsinger (CEO)

Yeah. Thanks, Joe. You know, I do think there's a lot of interest in that. You know, the export controls, as you look at them and read them, they're very much aimed at the high-end training and these accelerator, you know, the high-end accelerators and where they're aimed. Now, obviously, some of that was for us as well in China, but we also, as I said, in the first part of your question, you know, we saw a worldwide demand for our activities there. And overall, you know, we're now supply constrained on Gaudi and racing to catch up to that supply worldwide. Of course, we're studying those, the new BIS released rules, you know, carefully. We're working with BIS.

We're in the 60-day comment period with BIS, so we're actively working with them. You know, we do believe that we'll have plenty of opportunity in China, you know, continuing to deploy our products there broadly, even as we, you know, comply and work with BIS, specifically around the regulations that they're putting in place, particularly around high-end accelerators and AI training. So overall, we feel and have included that as part of our overall guidance for the fourth quarter. We feel good about the momentum that we have for AI Everywhere, and we'll of course be engaging with our customers, you know, the governments, and as we build out our roadmap, taking all of that into consideration.

John Pitzer (Corporate VP of Investor Relations)

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

Operator (participant)

Certainly. One moment for our next question. Our next question comes from the line of Ben Reitzes from Melius Research. Your question, please.

Ben Reitzes (Partner and Head of Technology Research)

Hey, thanks a lot, guys. Congrats on the quarter. Pat, I was wondering if you could unpack your foundry comments. You have the customer that we've known about, where there's prepays. I think you mentioned there's 2 more customers that you're signing up, and another by year-end, and then there's an event in the first quarter. I just wanted to see if you could give us a little more detail, you know, and talk about the how that's going to flow through, and the materiality into the coming years as well. Thanks a lot.

Pat Gelsinger (CEO)

Yeah. Thanks, Ben. Happy to unpack that a little bit more. So, you know, we announced back at the Deutsche Bank conference that we had our first major prepay customer, you know, for that. That effort has continued to go very well, you know, since that point in time, and the relationship is expanding with that customer. But we also added two more customers, this quarter as well. So now we have three committed external customers on Intel 18A. At the beginning of the year, I promised you one. Here we are in the third quarter, we have three, and I hope to finish at least a fourth before the end of the year. Also, with 18A, this PDK, you know, milestone, and if you're inside of the industry, hitting PDK 0.9 is a really critical milestone.

You know, as I said in my formal comments, this is when the invention phase is done, and now we're into the productization phase. You know, ramping yields, refining performance, you know, and getting the process capabilities ready for manufacturing. So a critical milestone, which we also say now as we release that to external customers, now a lot of them can start looking at 18A, and we start you know, fanning out the engagements that we have in the industry. So a critical milestone on 18A. But the other thing that we saw this quarter, which was a little bit unexpected, was this huge surge in interest for AI customers and Intel's advanced packaging technology. And this is the one that probably we didn't even quite, you know, realize.

We always knew that Intel's packaging technology was the best in the industry, but the amount of interest that we've seen... We completed two additional customers, so three 18A wafer customers, two additional packaging customers, and we have a pipeline that we're in active negotiations with six additional-... packaging customers as well. I think about this as the fast on-ramp, you know, to the Intel Foundry Services. You know, and a wafer customer is a $1 billion, you know, multiple billion-dollar customer. A packaging customer is hundreds of millions of dollars, and that billions of dollars takes two to three years to materialize. The wafer customers takes two to three quarters to materialize, right, in the packaging.

This is a much faster way for us to build out, that business, and we're going to start to see those packaging customers start to materialize, you know, for us in, revenue, next year. You know, and you add to that the Synopsys partnership, the Arm momentum, the Tower, agreement. You know, this was, really the flywheel of momentum has now begun for the Intel Foundry Services, business. You know, it, you know, really, is putting points up across the board for that, business and super happy with the amount of energy that we're now seeing across the industry for the, Foundry business. This was a great quarter for foundry at Intel.

John Pitzer (Corporate VP of Investor Relations)

Ben, do you have a follow-up?

Ben Reitzes (Partner and Head of Technology Research)

Yeah, thanks, John. I'm going to switch gears to PCs, your comments there. You've talked about inventories normalizing. I just wanted to hear a little bit more detail on your confidence in that. You know, are you, do you have confidence that the inventory builds are matching demand? You know, how do you see that playing out next year? It sounds like you think the TAM will grow back to 300. Just wanted some comments on that. Thanks.

Pat Gelsinger (CEO)

Yeah. You know, in three quarters in a row, we've seen the client business being very healthy, now for us. You know, our customers' inventory levels are, you know, very healthy in that regard. We see our sell-in being matched by a sellout for those customers. As we said, the $270 million consumption TAM is something we indicated earlier in the year, and now we're seeing that play out, exactly. Here we are, three weeks into the quarter, and I'd say it's looking really good. Our, you know, views and forecasts of our client business is very healthy for the fourth quarter. We do think this idea of ushering in the AI PC, you know, generation will be a multiyear cycle.

We do think this will bring excitement into the category, even starting with the Meteor Lake or the Core Ultra launch in Q4. You know, we also have some other incremental tailwinds with the Copilot launch from Microsoft coming up this quarter. We also have the Windows 10 end of service support coming up. Those are just incremental tailwinds that just build us more confidence in it. You know, and finally, our roadmap is great. You know, Meteor Lake, looking good, rapidly ramping. What we have coming with Arrow Lake and Lunar Lake, and then Panther Lake in the future. You know, every aspect of this business is, you know, demonstrating health, maturity, momentum, and great opportunity for tomorrow.

David Zinsner (CFO)

I'd just add one other thing. You know, what we track the linearity of shipments, linearity was really, really good, in the third quarter, and it's off to a really good start for the fourth quarter. And generally, when you see, you know, really steady, shipment across the entire quarter, that's a good sign that you've kind of balanced out the inventory, and you're really just kind of shipping in what's shipping out.

John Pitzer (Corporate VP of Investor Relations)

Perfect. Thank you, Ben. Can we have the next question, please?

Operator (participant)

Certainly. One moment for our next question. Our next question comes from the line of Ambrish Srivastava from BMO. Your question, please.

Ambrish Srivastava (Senior Research Analyst)

Hi, thank you very much. This is either for Pat or for Dave. I just wanted to come back to the DCAI. In the PowerPoint, you mentioned competitive pressure, but I think, Dave, if I heard you correct, you said ASPs were record. Could you just explain what you meant by competitive pressure? Because I would have thought that would have led to ASPs being lower, or was the impact on the unit side?

Pat Gelsinger (CEO)

Yeah, and there's a couple things to unpack there. Just, you know, our views of the quarter, you know, we would have expected that we lost some market share. You know, that was based on, you know, competitive losses from last year even that are just rolling through our customers. You know, that said, you know, we did a bit better than we thought we would in the quarter. We are ramping Sapphire Rapids, which has a higher ASP, you know, more rapidly than we would have expected. Also, as we go to the higher core count versions, you know, that drives up the per socket ASP more aggressively. So overall, we definitely feel those competitive pressures and as I say, we're working for, you know, issues that began years ago.

But we're also combining that with Sapphire Rapids, Emerald Rapids, Gen 5, you know, the roadmap for Sierra Forest and Granite Rapids, which have, you know, much higher core counts, which will drive higher ASPs as well. So all of that put together, we do feel like we're on a very solid trajectory for the business overall. We will see ASPs continue to rise. You know, the roadmap's very healthy as we go forward, and I feel like the market and our customers are starting to feel that, you know, competitiveness come back to our business here. And looking forward to the benefits that a stronger Intel roadmap will offer to them and their businesses.

John Pitzer (Corporate VP of Investor Relations)

Ambrish, do you have a follow-up question?

Ambrish Srivastava (Senior Research Analyst)

I did. Thank you, John. I have a follow-up. Intel is showing pretty steady execution, and I can't say that in the last several years we haven't seen that. Just coming back to the long-term model that, Dave, you were talking about, can you just help us understand what are the parameters around that revenue, mix of the business? Because you would have an IFS, which would be diluted to gross margin, but potentially not to operating margin. What's the right way to think about that 60/40 in terms of the business mix and even size of the business?

David Zinsner (CFO)

Yeah. I'd say, you know, I think the first thing to kind of improve the gross margins is going to be around, you know, getting ourselves finally to process leadership, and getting the products completely, you know, as Pat was talking about, the product roadmap, improving significantly, getting to the, you know, to where we have, you know, definitive leadership, across all products. I think those two things will drive a significant lift, on the gross margins, irrespective of anything else we have on the business front.

And then when I look at, as I talked about this internal Foundry model, I just think there's so much low-hanging fruit on the cost side, both in the business units and also in, you know, what, you know, the manufacturing TD, our kind of internal Foundry business, that there's significant improvement that we can make on gross margins. Yeah, you know, mix does have an impact on the business, and we have a wide range of products that, you know, that will have different margins. But almost all of them are punching below their weight right now. And, you know, as we improve all of them, you know, all that should lift the gross margins meaningfully over time.

John Pitzer (Corporate VP of Investor Relations)

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

Operator (participant)

Certainly. One moment for our next question. Our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

Aaron Rakers (Managing Director)

Yeah, thanks for taking the question, and also congrats on the execution in the quarter. Kind of going back to the prior question, just thinking about the trajectory of the ASP expansion in the data center segment, you know, how do I look at that and kind of think about what the normalizing operating profit might look like in DCAI, as you guys look out over time? I know that you turned profitable this quarter. I'm just trying to think about, you know, understand how you guys are thinking about the path of profitability in that segment.

David Zinsner (CFO)

Yeah, maybe I'll start, Pat. You feel free to chime in. You know, obviously, it was, I think, pretty important for us to show profitability this quarter. That was one of Pat and I's goals written on a sheet of paper, that we wanted to see this business return to profitability. That said, it's making a lot of investments right now to, you know, improve the product portfolio on the CPU side and make the investments necessary on the AI front. This business, longer term, you know, should have margins that are very similar to margins you see from its peers, you know, when they are operating at healthy levels of margins.

And so we have a lot of work to do to get there, but I think the path is pretty clear. You know, of course, ASP will be a component of that, but there's a lot of efficiencies they can drive beyond just ASPs that will improve the margins longer term.

Pat Gelsinger (CEO)

Yeah, as Dave and I think about the 60/40 model that we're driving to long term, we think about the data center business being above that, for it, where some of the more volume-oriented businesses, like client, might be a little bit below that. Taken together, you know, that's how we're driving the business. Overall, as we said, we see a lot of margin expansion potential across data center, client, networking, and foundry as we get back to process leadership and build that business up. You know, I'd also emphasize that, you know, as we build our foundry capacity, we build more capacity in our factory network for our internal and external customers.

That's a tide that lifts all boats for us because it improves the profitability, not just the foundry, but the competitiveness and the profitability of our product businesses as well. Overall, we feel like this is a really important milestone for us this quarter. You know, seeing, you know, not just great financial results, but the operational results were even better than that, you know, which is what led me to say, "Hey, this was an outstanding quarter for us overall.

John Pitzer (Corporate VP of Investor Relations)

Aaron, do you have a quick follow-up?

Aaron Rakers (Managing Director)

Yeah, I do. Thanks, John, and thanks for the detail there. As a quick follow-up, just kind of, you know, thinking about the gross margin line, you know, I'm curious, Dave. I know last quarter, I think it was, I want to say it was $220 million or so factory underload, you know, impact in gross margin. It sounds like you had a reversal of inventory reserve and gross margin this quarter. Are we done with the factory underload, or what was that number, and how are you thinking about that embedded in the gross margin guide?

David Zinsner (CFO)

Yeah. I mean, it was a meaningful benefit, the underload improvement in the quarter. That said, there was still a reasonable amount of underload charges in the quarter. That does improve a bit in the fourth quarter, but we'll be kind of dealing with this underload hangover, I'd call it, probably all through next year, as we kind of progress. But largely in part because while we will improve the loadings and probably get beyond underload charges on a quarterly basis, we'll still have all of that underload kind of tied up in the cost of the wafers in inventory, and that still has to get flushed through before we're completely done.

So meaningful improvement, you know, I'd say we have, we're, we're largely out of the woods, but still some wood to chop through next year to where we're completely clean of underload.

Thanks, Aaron.

Aaron Rakers (Managing Director)

Thank you.

John Pitzer (Corporate VP of Investor Relations)

Jonathan, I think we have time for one last caller.

Operator (participant)

Certainly. One moment for our final question. Our final question for today comes from the line of Matt Ramsay from TD Cowen. Your question please.

Matt Ramsay (Managing Director)

Thank you very much. Good afternoon, guys. Before I start, I just wanted to say a bit, Pat, Dave, and all the Intel folks, we're thinking about all your folks in Israel. And so maybe you'll take these questions that I need to ask with, I guess, due reverence to that. Unlike a lot of your competitors and peers, you guys actually have operations and fabs in Israel. Maybe you could give us a little bit of an update there of how things are going operationally, just given the atrocities that have gone on, what the size of the wafer outputs of those fabs are, what nodes they're on. Any kind of details there would be really helpful. Thanks, guys.

Pat Gelsinger (CEO)

Yeah. Yeah. And, hey, as one of the earliest companies in Israel now, almost 50 years that we're in country, you know, I appreciate deeply. And these are, you know, the Intel team. This is people that I consider friends, you know, personally as well. You know, that said, the resilience of the Intel team is remarkable. And, despite all of these challenges, we'll say, they're not missing a single commitment. They're performing extremely well. We continue to, you know, deliver the products that they're working on and continuing to drive the factory operations and our factory expansions that we have there. You know, that said, you know, one of the benefits of Intel's multi-geo supply chain that we uniquely have in the industry is resilience.

You know, Intel 7 is running in the factory there, in Israel. We also have two other locations that we run Intel 7. You know, we're making sure that we have the resilience of our supply chain, for all of those products so that we can be very assured, even as we're highly confident in the capabilities of our Intel Israel team to continue to perform despite the atrocities. We're also confident that we have a resilience in our core business model, you know, that gives us flexibility to assure supply and continued operation across the globe. Regardless of what issue you may have in Asia, you know, Americas, Europe, Middle East, we're well positioned to deliver that for our customers across all of our operations.

John Pitzer (Corporate VP of Investor Relations)

Matt, do you have a quick follow-up?

Matt Ramsay (Managing Director)

Yeah, I do, and thanks for that, Pat. As my follow-up, one of the things that I keep getting asked about a ton is the CapEx swing that's happened towards Gen AI infrastructure. And I guess the way that I've been kind of phrasing the question is the Video Killed the Radio Star question, right? Is this the death of CPU growth in the data center? And I don't think it is, to be clear, but there's some out there that do. So, Pat, you made some comments in your script and then some other answers about return to normalcy on data center CPU from a growth perspective. Maybe you could give a few data points or anecdotes that might support that. Thank you.

Pat Gelsinger (CEO)

Yeah. You know, I do think there's, you know, clearly been this surge of interest in Gen AI, which has, over a couple of quarters, you know, driven a bias on the part of the cloud guys in particular, to, you know, where do they put their floor space? Where do they put their power budgets, right? That's been driving, you know, largely a race for the largest system environments that they can put in place. You know, that said, training of these large models is interesting, but the deployment of those models, the inferencing use of those models, is what we believe is truly spectacular for the future.

And that will, some of that will run on the accelerators, but a huge amount of that is going to run, right, on Xeons as we bring AI into those applications or AI-ification of existing applications. And, you know, given the leadership performance that we have, you know, on our Gen 4 for AI applications, that gets better with Gen 5. And, when we deliver Granite Rapids, it gets 2-3x better, as I said in the comments. You know, it gets even better as we go into further out into the roadmap. You know, so the ability for us to do inferencing at scale on our Xeon product line, you know, we think is very profound as we go forward. The roadmap is very healthy.

The combination of Gaudi and our Xeons, you know, that is exactly what you heard Dell announce in their roadmap. And we're just seeing, I'll say, the normalcy of that in the buying behavior. We saw a very good uptick for our OEMs this quarter, you know, as they're seeing their Xeon businesses. You know, we're also seeing more ecosystem embrace. Our DevCloud, lots of customers coming on it, you know, for both AI use cases on Xeon and on Gaudi. You know, key announcements like we had from Deloitte, as they're partnering, you know, with us across application optimization, as well as AI development on the Xeon platform. So overall, we feel pretty comfortable, you know, that we're in a cycle that there will be growth in CPUs led by Xeon as well as accelerators.

Intel is going to be participating in both of those capacities in meaningful ways. This is part of what we said is AI Everywhere. AI at the edge, AI at the client, AI in the data center, and AI in the cloud. But inferencing will be the discussion topic, you know, for the industry as we go into 2024. That'll be done at scale, and much of that is going to be done on Xeons. So with that, you know, let's just thank you for joining us. Again, I want to reiterate our thoughts, you know, for our resilient Intel team in Israel and for all of those in the region that are affected by recent events. You know, I also want to thank you for joining us on the call again today and your interest in Intel.

We appreciate the opportunity to update you, answer your questions, respond to that. Most important, we're excited by the momentum we're seeing. As I said, the financial results were great. You know, the operational results were truly outstanding, this quarter. And it's a confirmation of our Foundry strategy, of our five nodes everywhere, of our AI Everywhere, strategy. And we do hope that you're able to join us for our launch of Emerald Rapids, Gen 5, Meteor Lake, Core Ultra in, New York, in, December. And I do also hope to see you all at our Q1 Intel Foundry Day. Thank you. Good afternoon, good night, wherever in the world you be. Take care and be safe.

Operator (participant)

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