Gross Margin Outlook
Q: What caused Q3 gross margin upside and why is it declining in Q4?
A: The Q3 gross margin of 41% was better than expected due to better sell-through of previously reserved inventory, which won't repeat in Q4. - In Q4, margins will be pressured by increased start-up costs associated with 18A, guiding to a 39.5% gross margin - , which serves as a clean starting point for 2025 gross margins. -

2025 Revenue and Margin Expectations
Q: How should we think about 2025 sales growth and gross margins?
A: They're managing investments to a 3% to 5% growth rate next year. - The 39.5% gross margin guide for Q4 is a starting point for 2025. - They expect more headwinds in the second half due to Lunar Lake becoming a meaningful part of volume, which pressures gross margins in 2025. -

Foundry Business Revenue Growth
Q: How large is external foundry revenue currently, and how will it grow?
A: External foundry revenue will be a modest portion for the next few years, dominated by internal products. - They aim for $15 billion-plus in external foundry revenue by the end of the decade. - Majority of foundry revenues will come from internal products in the near term. -

18A Defect Density and Yields
Q: How does 0.4 defect density on 18A translate to yields?
A: A defect density of less than 0.4 is healthy at this development phase but not yet at high-volume production levels. - Defect density needs to be markedly lower for high-volume production planned for the second half of next year. - They're on track and see all necessary signs to achieve this. -

Impact of Lunar Lake on Margins
Q: How much does memory packaging in Lunar Lake affect gross margins?
A: Lunar Lake, with memory in the package, significantly impacts gross margins. - Originally expected to be one-third of volume next year, they've increased volume due to the AIPC market - , which puts pressure on gross margins in 2025. -

Intel's AI Strategy
Q: Without a competitive AI product, is being CPU-centric enough?
A: The CPU plays an increasing role in data center AI compute. - Intel's strategy is CPU plus accelerator or CPU plus Gaudi. - They've seen good early interest in Gaudi 3 - and are focusing on the x86 ecosystem, which has significant industry interest. -

Recapturing Server CPU Share
Q: How do you plan to stabilize or recapture server CPU market share?
A: The goal is to stabilize position and grow from there. - With Xeon 6, Granite Rapids, and Sierra Forest fully shipping, they aim to hold share and then regain it. - The AWS deal reinforces Xeon and their customization role. -

Capacity Optionality and 18A
Q: If 18A gets delayed, what capacity options do you have?
A: They have optionality in the product portfolio and more resilience in their supply chain than competitors. - They value the relationship with TSMC and have flexibility to scale up if market conditions require. -

CapEx and OpEx Flexibility
Q: How much flexibility is there in CapEx and OpEx in '25 and '26?
A: The $17.5 billion for OpEx is a firm plan with little variability. - CapEx has flexibility in capacity investments based on demand and cash flow. - The goal is to generate free cash flow and adjusted free cash flow next year and onwards. -

Panther Lake Production Plans
Q: Are most Panther Lake tiles still being outsourced?
A: Some tiles are external, but over 70% of the silicon area is back in-house. - The majority of Panther Lake wafer capacity is coming back inside. - For Nova Lake, the large majority is committed to Intel's internal production or foundry. -

Demand for Foundry Packaging Services
Q: Why aren't we seeing more interest in your packaging services?
A: They see significant interest, but moving supply chains is complicated and takes time. - They've made progress with design wins included in their lifetime deal value and have a strong pipeline of additional designs. - Advanced packaging was profitable this quarter. -

Narrowing Product Focus
Q: What does narrowing product focus and prioritizing x86 mean?
A: They're simplifying product lines and reducing SKUs to focus on core investments. - Actions include consolidating products and leveraging investments to meet the $17.5 billion OpEx target while aiming for profitable growth. -

IDM 2.0 Model Considerations
Q: Does prioritizing x86 change the IDM 2.0 model?
A: External foundry requires a different management approach, but wafers and cash flows come from internal business. - The subsidiary model is key to drive cultural transformation while maintaining a leading-edge foundry model. -

"Better Together" Strategy Rationale
Q: Explain the rationale for the "Better Together" strategy.
A: Moving to a subsidiary model for foundry aims for operational integrity and clearer communication with customers. - The synergies of co-development and customer relationships are substantial, and the success of the foundry is tied to internal products. -