The paragraph announces the start of Intel Corporation's First Quarter 2025 Earnings Conference Call, where all participants are initially in listen-only mode with a subsequent Q&A session. John Pitzer, Corporate Vice President of Investor Relations, hosts the call, joined by CEO Lip Bu Tan and CFO David Zinsner. The call will cover Q1 results and future guidance, and will include forward-looking statements that involve risks and uncertainties. The earnings release and presentation are available online, and references to non-GAAP financial measures are included to aid investors.

Lip Bu Tan, who recently joined Intel Corporation, expressed his commitment to transforming the company to improve market share and drive sustainable growth, highlighting some achievements in Q1. He identified organizational complexity and bureaucracy as significant barriers to innovation and agility, leading to delays in decision-making and poor execution due to unnecessary silos. To address these issues, he is simplifying business operations, enhancing transparency and accountability, and empowering smaller teams for faster decision-making. As an initial step, he has restructured his leadership team to reduce layers and streamline reporting.

The paragraph outlines a strategy to enhance company efficiency by collaborating closely with product and engineering teams to outpace competitors. The plan includes streamlining operations company-wide, lowering operating expenses to $17 billion for the current year and $16 billion next year, and achieving $2 billion in CapEx savings. It emphasizes optimizing the manufacturing network and the factory footprint, reducing distractions from core business projects, and revitalizing the engineering team through talent development and recruitment. Additionally, a four-day-per-week return to office policy will be implemented by Q3 2025 to foster collaboration, improve efficiency, and drive innovation. These efforts aim to cut costs while maintaining long-term strategic focus.

The paragraph outlines the speaker's commitment to refocusing their company on creating best-in-class products, particularly in the AI sector. They emphasize the importance of optimizing their product portfolio to support emerging AI workloads, with a focus on maintaining their strong market presence. Acknowledging the need for a strategic overhaul, the speaker highlights their plan to evolve the company's design and engineering approach based on customer feedback. They aim to lead in the next era of computing marked by AI agents and reasoning models, leveraging experience from incubating AI startups to develop comprehensive, efficient, and secure AI solutions for enterprise clients.

The paragraph emphasizes the importance of building trust with foundry customers, highlighting that success in the foundry business is based on customer service and the ability to accommodate diverse customer needs in design tools and methodologies. Intel is focusing on delivering Intel 18A while collaborating with customers to ensure successful future launches like Intel 14A. The company is adopting industry-standard EDA tools and enhancing processes to meet customer requirements. Additionally, Intel plans to strengthen its balance sheet through prudent capital management, operational efficiency, and monetizing non-core assets, with support from investors like Silver Lake.

The paragraph discusses Intel's strategic decision not to spin off Intel Capital, focusing instead on monetizing its existing portfolio while being selective about new investments to support its strategy. The company aims to strengthen its balance sheet and begin deleveraging. Intel is committed to driving changes and regaining customer trust by focusing on sustainable growth, gaining market share, and delivering consistent shareholder returns. The Q1 results indicated potential growth in Intel's biggest markets, driven by factors like the end of Windows 10 service and increased AI adoption. However, the economic landscape has become uncertain due to trade policies, inflation, and regulatory risks, prompting a conservative approach. Q1 revenue was $12.7 billion, boosted by better-than-expected Xeon sales and customer purchasing behavior related to potential tariffs.

In the first quarter, Non-GAAP gross margin was higher than anticipated at 39.2%, driven by strong demand for Raptor Lake and cost improvements for Meteor Lake. The company reported earnings per share of 13¢, surpassing the breakeven guidance due to higher revenue, better gross margins, and lower operating expenses. Operating cash flow was $800 million, but the quarter saw an adjusted free cash flow deficit of $3.7 billion due to capital expenditures. The cash balance at the end of the quarter was $21 billion, bolstered by funds from CHIPS grants and the sale of the NAND business. Segment reporting was updated for Q1 2025, revealing Intel products revenue at $11.8 billion, a 10% sequential decrease but better than expected. CCG revenue dropped 13% quarter over quarter, while DCAI revenue fell 5%, exceeding expectations due to demand for AI servers. Intel products' operating profit was $2.9 billion, 25% of revenue, though it decreased $632 million from the previous quarter.

In the paragraph, Intel Foundry reported a revenue increase to $4.7 billion due to factors like Intel seven wafers and advanced packaging services, but faced a $2.3 billion operating loss due to startup costs. Revenue from other segments, including Mobileye, Altera, and IMS, was $943 million with a $103 million operating profit. Intel plans to sell 51% of Altera to Silver Lake Partners, expecting to receive $4.4 billion, and anticipates that retaining a 49% stake will grow in value. The deal is expected to finalize in the second half of 2025. Looking ahead, Intel notes the risk of an economic slowdown and recession, which complicates financial forecasting, and acknowledges potential increased costs due to volatile trade policies. They remain cautious about a possible decline in total addressable market (TAM) due to reduced investments and spending.

Intel is forecasting a Q2 revenue range of $11.2 to $12.4 billion, reflecting a 2% to 12% sequential decline. The company anticipates that its Data Center and AI (DCAI) segment will decline faster than its Client Computing Group (CCG). Intel expects foundry revenue to drop quarter-over-quarter due to early demand in Q1, lower wafer and packaging volumes, and persistent capacity constraints in its Intel 7 process. Gross margins are projected to be 36.5% with a neutral EPS on a non-GAAP basis and a tax rate of 12%. For the full year, Intel suggests using ten-year seasonal trends adjusted for current market uncertainties, like tariffs and supply issues with older nodes. Non-controlled income (NCI) is expected to be zero in Q2 but around $500 million for the year, with significant growth anticipated by 2026. The company is also streamlining its organizational structure to enhance innovation and adaptability, which will lead to reduced operational expenses, with a 2025 target of $17 billion and $16 billion for 2026. These changes may incur restructuring charges, not yet included in current guidance.

The paragraph outlines Intel's strategic focus areas for 2025, including portfolio refocusing, reducing organizational complexity, transforming engineering functions, and improving SG&A efficiency. The company plans to lower its gross capital investment for 2025 to approximately $18 billion from a previous estimate of $20 billion by achieving operational efficiencies and better utilizing construction in progress. Despite this reduction, the net capital expenditures are expected to remain between $8 to $11 billion due to uncertainties with the US government's CHIPS agreement obligations. Deleveraging the balance sheet is a top priority, demonstrated by reduced operational and capital expenditures and unlocking value from non-core assets. The paragraph ends with a positive note on Lip Bu's leadership in enhancing Intel's competitive position and being prepared for the Q&A session. Ross Seymore from Deutsche Bank is the first to ask a question during the Q&A.

In the paragraph, a discussion takes place regarding Intel's efforts to balance its internal product roadmap with its foundry business. Lip Bu Tan emphasizes the importance of flattening the organizational structure to focus on key products and ensure timely, high-performance solutions for customers. The focus is also on improving the yield and reliability in the foundry to benefit internal customers. Ross Seymore then asks Dave about the impact of strategic changes on Intel's gross margins, seeking insights into cost-cutting measures, operating expenses, lower capital expenditures, and projections for 2025 and 2026.

David Zinsner discusses the challenges and goals for the company's financial outlook, acknowledging the uncertainties in the industry due to tariffs and macroeconomic factors. He mentions a shift towards the Lunar Lake products, which face margin pressures, and the startup costs of ramping up 18A production in Arizona, impacting gross margins. However, he is optimistic about improved margins in 2026 with the introduction of Panther Lake, which offers better margins and margin stacking benefits from bringing wafers back into production facilities. He emphasizes that the overall margin outlook is dependent on top-line performance and the company's ability to navigate tariff impacts with its global supply chain.

The paragraph features a discussion during a financial earnings call where Timothy Arcuri from UBS asks about the implications for gross margins, specifically for March, and whether the numbers could dip below the projected figures in Q2. David Zinsner responds by explaining that while Q1 results exceeded expectations, putting pressure on the second quarter's margins, factors such as tariff dynamics and product mix, notably higher volumes from Raptor Lake versus Lunar Lake, influenced the numbers. He highlighted that better-than-expected revenue and effective cost management helped improve gross margins, suggesting that without these factors, results would have aligned more closely with their initial guidance.

In this paragraph, Lip Bu Tan discusses Intel Foundry's strategic priorities, emphasizing the importance of ramping up internal customers like Pentelic and building trust with foundry customers through robust PDKs and scheduling. He highlights a focus on yield reliability and a customer service mindset to tailor solutions to different customer needs. The goal is to enhance efficiency and scale the business. Following Lip Bu Tan's remarks, Joseph Moore from Morgan Stanley asks about the progress and leadership position of Intel's products, Panther Lake and Clearwater Forest, which Lip Bu Tan begins to address, with Michelle expected to contribute further.

The paragraph discusses the company's focus on execution and meeting customer and industry demands. It highlights the priorities related to Panther Lake and Clearwater Forest product lines. Panther Lake is emphasized as a key focus, with initial SKU releases planned for the end of the year and into the next. Michelle Johnston Holthaus notes the strategic alignment of product releases to the commercial marketplace and mentions customer interest in Panther Lake. Clearwater Forest is set to follow, with unique packaging and a release in the first half of 2026, being more of a purpose-built product. Joseph Moore's follow-up question addresses concerns about constraints in the seven-nanometer process and its potential impact, which David Zinsner is expected to elaborate on.

The paragraph discusses Intel's performance with Raptor Lake, an Intel 7 processor, and the strategic planning required to manage production capacity effectively. When production constraints occur, the factory benefits from increased wafer production, lowering costs per wafer. The focus then shifts to gaining market traction for AIPC products, despite current macroeconomic challenges. Consumer demand remains strong for older generation products (n minus one, n minus two), affecting gross margins. Despite a slowdown in AIPC ramp-up, Intel continues to invest in this segment, viewing it as a long-term growth area. There is excitement around the upcoming Lunar Lake and balancing the product mix across foundries, as highlighted in their recent AI symposium.

In the article paragraph, C.J. Muse from Cantor Fitzgerald asks Lip Bu Tan about their AI strategy, specifically whether they plan to reinvent the x86 architecture to succeed in AI or if they'll include broader options like ARM, and if their focus is more on edge AI. Lip Bu Tan emphasizes the importance of understanding the workload and partnering with industry leaders to build optimized silicon and software, particularly targeting low-power, efficient architectures for edge and inference areas. Additionally, David Zinsner addresses a follow-up question about OpEx guidance for 2025 and 2026, affirming a focus on making the company leaner and more efficient, driven by Lip Bu's direction.

The paragraph discusses efforts to streamline operations and eliminate bureaucracy to reach financial goals of $17 billion in 2025 and $16 billion in 2026. The process of achieving these numbers, including potential impacts on headcount and other operational expenses, is still being worked out. Updates with more details will be provided after the second quarter earnings in July. There's confidence in meeting the $16 billion target, but potential investments in other areas might affect this. The paragraph concludes with a transition to a new question from Vijay Rakesh regarding the outlook for the data center site, indicating some issues with clarity at the beginning of his question.

The paragraph discusses the outlook for a data center company in the second half of the year. Michelle Johnston Holthaus expresses optimism due to higher-than-expected growth in Q1, driven by a few hyperscalers, and mentions new products like Granite Rapids and Xeon six. However, there are concerns about macroeconomic conditions and strong demand for older generation parts. The main goals for the year are to stabilize market segment share, improve margins, and increase average selling prices. While there is strength in hyperscalers and enterprise, there are challenges in other market segments. A follow-up question from Vijay Rakesh to David Zinsner addresses capital expenditure plans, with Zinsner stating they aim to operate with an $18 billion number for 2025-2026.

The paragraph discusses a company's strategy regarding its assets and capital expenditure. They have approximately $50 billion in assets under construction, and are focusing on maximizing returns from these assets to reduce future capital spending. They anticipate following a similar approach next year but have not provided guidance on capital expenditure for that period. The strategy involves leveraging existing assets, and acknowledges a high capital intensity model with an estimated 25% capital intensity as part of a long-term strategy. Additionally, a discussion ensues about the demand for older generation products like Raptor Lake, which remains high despite upcoming new products. The demand is partly due to customer preferences for older products that meet desirable price points amidst economic concerns and tariffs.

The paragraph discusses the launch and market positioning of Intel’s upcoming Panther Lake product. While Meteor Lake and Lunar Lake have higher costs for both Intel and OEMs, the demand for older, cost-effective products like Raptor Lake remains strong due to economic factors. Despite this, Intel’s Michelle Johnston Holthaus is optimistic about Panther Lake, predicting strong adoption due to its performance, price, and AI capabilities, especially within the commercial sector, which tends to adopt new technology faster. The success of Panther Lake will depend on the state of the economy at the year's end, but customer feedback has been encouraging.

In the paragraph, Srini Pajjuri from Raymond James asks Michelle Johnston Holthaus about the weaker Q2 guidance and market share expectations given increased competition from ARM, particularly in server head nodes. Michelle explains that the strong performance in Q1 was due to a few hyperscalers and doesn't expect that to continue in Q2. She mentions macroeconomic concerns such as tariffs, restrictions, and demand for older generation parts that can't be fully supplied. Michelle also points out the need to balance maintaining market share with margin and ASP pressures throughout the year. She notes that while there is excitement around their Granite Rapids product, especially in Edge AI and service revenue potential, competition remains strong.

The paragraph discusses Intel's strategic goals and decisions regarding their product manufacturing, specifically focusing on their 18A and Panther Lake initiatives, as well as Nova Lake. The company aims to achieve a 70% internal production mix for 18A, with Panther Lake supporting this effort. Intel values the flexibility of building products with various partners, including TSMC and Samsung, but emphasizes a strong commitment to expanding wafer production internally. For Nova Lake, they intend to optimize production at the SKU level, with a greater number of wafers built on Intel's process compared to Panther Lake. Overall, their strategy focuses on growing internal wafer production.

The paragraph discusses a company's strategy to balance internal and external manufacturing of wafers as part of its capital strategy, aiming to maintain reasonable capital intensity and a good return on assets. The goal is to avoid over-investing in capital while fully utilizing existing assets. Following this, Thomas O'Malley from Barclays asks Dave for insights on the current quarter's performance, noting some weakness in the client sector and data center. Dave responds that the quarter has started strong, but the company expects a slowdown due to macroeconomic factors and tariffs, with June likely to be softer than the initial start.

In the dialogue, Thomas O'Malley asks Michelle Johnston Holthaus about the strategy for data center products, specifically referring to previous discussions on product focus. Michelle explains that in the initial weeks of leadership under Lip Bu and Sachin, they have reassessed the AI strategy and asset portfolio, emphasizing a workload-first approach. They decided not to proceed with Falcon Shores but will continue with the Jaguar product roadmap. Over the coming months, they plan to communicate their AI roadmap and engage with customers to adapt their strategy, aiming to compete more aggressively in the data center market segment they are currently not competing in.

In the article's paragraph, Vivek Arya from Bank of America Securities questions how long it will take for Intel to achieve a turnaround and what metrics should be used to measure this progress. Lip Bu Tan responds by acknowledging that there are no quick fixes and highlights the importance of a strong product roadmap that includes both short-term and long-term goals. He emphasizes the need for addressing CPU, GPU, and AI workloads and potentially partnering with disruptive technologies to meet market demands quickly. The metrics to measure progress include having the best products, focusing on power efficiency, performance, and timely market entry to meet industry and customer needs. John Pitzer then prompts Vivek Arya for a follow-up question.

In the paragraph, Lip Bu Tan discusses the challenges and strategies of Intel's Integrated Device Manufacturing (IDM) structure in the semiconductor business. Despite financial challenges, including negative gross margins, Tan emphasizes the importance of a balanced approach, which includes delivering quality products to internal and external customers, collaborating with partners like TSMC, and driving efficiency and yield improvements. He highlights the need for continuous evaluation and strategic use of foundry capacity in order to create a win-win situation for Intel and its partners. The conversation ends with Aaron Rakers from Wells Fargo preparing to ask the last question in the session.

The paragraph discusses the financial outlook and strategic plans related to Intel's operations. David Zinsner clarifies that the projected operating expenses for 2025 and 2026 include Altera's expenses, as the divestiture of a 51% stake in Altera has not yet closed, making it difficult to predict the timing and impact on financial forecasts. Aaron Rakers then shifts the conversation to Intel's strategy in the AI and data center space, asking about the role of RackScale and other internal components in enhancing cloud infrastructure AI capabilities. Lip Bu Tan and Michelle Johnston Holthaus emphasize the importance of a full-scale system approach leveraging Intel's CPU and GPU technologies to develop impactful products in this area.

The paragraph discusses Intel's optimistic outlook on two key areas: IPU products and rack scale architecture which incorporates optics. Intel anticipates doubling its revenue from these IPU products between 2024 and 2025. Additionally, it highlights Intel's unique position as the only foundry offering optics-based options and the strong interest in building AI infrastructure using the x86 ecosystem. The paragraph also mentions a recent large custom design win and expects more in the future. Lip Bu Tan concludes by expressing optimism about strengthening Intel's business through its products and foundry opportunities, and aims to better serve customers and create shareholder value. The operator then ends the conference call.

This summary was generated with AI and may contain some inaccuracies.