Intel Corporation

Thank you for standing by and welcome to the Intel Corporation's third quarter 2026 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 this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. John Pitzer, Corporate Vice President of Investor Relations. Please go ahead, sir.

Thank you, Jonathan, and good afternoon to everyone joining us today. By now, you should have received a copy of the Q3 earnings release and presentation. Both are available on our Investor Relations website, intc.com. For those joining us online today, the presentation is also available in our webcast window. I'm joined today by our CEO Lip-Bu Tan and our CFO, Dave Zinsner. Lip-Bu will open on comments on third quarter results and progress on our strategic priorities. Dave will then discuss overall financial results, including fourth quarter guidance, before we transition to answer your questions. Before we begin, please note that today's presentation does contain forward-looking statements based on the environment as we currently see it. 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 specific risk factors that could cause the actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures including reconciliation were appropriate to our corresponding GAAP financial measures. With that, let me turn it over to Lip-Bu.

Good afternoon and thank you for joining us. The demand environment in Q3 was more balanced than previous quarters. Strong momentum in DCAI drove upside and enabled The strongest revenue growth for the segment in 15 years. This was partially offset by weakness in CCPG driven by the industry wide impacts from higher memory prices and limited IT budgets. The industry continues to navigate one of the most significant supply shortages in the history. Driven by the unprecedented demand for superintelligence against this backdrop, I am pleased by the progress we make growing our server supply in Q3. I am mindful about the ongoing challenges we face in the future quarters to keep pace with the server demand. The successful completion of our equity offering in August provided us with the necessary financial resources to capture the growth ahead. I'm very pleased to add new sovereign funds and long-term growth investor in addition to our existing shareholders. We are deploying this capital quickly and prudently. We expect CapEx and purchase commitments for key components to increase significantly over the next several quarters. I want to thank our subscript, memory, foundry, equipment suppliers for their strong partnership and collaborations as we work together to expand supply and support growing demands. Turning to business units, first DCAI, Within our server business, we are making steady progress on our roadmap. Granite Rabbits on Intel 3 has become one of the fastest ramping server products. Clearwater Forest, our first Intel 18A server product, is shipping for revenue and demand for 2027 is significant. especially in CPU dense agentic rack scale infrastructure. Diamond Rabbits, our first Intel 18 AP server product is sampling and on track to RAM in 2027 with strong interest for inference and agentic workloads. We were pleased to recently announce an agreement with Oracle Cloud Infrastructure to deploy our latest generation CPUs to support their AI build-out. I also want to acknowledge Headwinds limiting our progress to meet this extremely high AI-driven demand. First, Intel 3U and CycleTime continue to improve, but I am demanding significant execution from the team. Second, even as our Intel 3 wafer outputs ramps quickly, an industry-wide shortage of advanced organic subscripts for our eMIP packaging is also impacting our ability to scale output. Finally, early this month, an unfortunate and tragic accident led to an extended shutdown in our Israel factory. While the teams have worked quickly to address the situation, it will impact our Q4 10 nanometer server shipments. Purpose-built silicon remains our fastest growing business segment. tripling over the last three years and post to triple again over the next few years. We see further growth opportunity with both existing and new potential customers including AI Labs and expanding our IP portfolio to meet the needs of a wider array of customers. Lastly, We recently unveiled our Crescent Island Inference Optimized GPU. Early feedback is encouraging. Performance is tracking well. This is a new market for us, and it will take time to scale. But customer engagements are progressing towards firm commitments. Turning to our client business, in recent weeks, our customers began signaling a PC slowdown based on the memory prices and availability. Year-to-date system endpoint prices have increased significantly, placing additional pressure on already limited IT budgets. The pace of the PC correction has accelerated over the last two months. as our OEM partners are aggressively managing inventory to match the softer sell-through. We expect the current environment to persist until memory availability and prices begin to normalize. While the next few quarters will be challenging for the PC market, our roadmap continues to strengthen and our long-term outlook remains positive. We have successfully rammed Penta Lake on Intel 18A and demand for the Wildcat Lake is outstripping supply. Nova Lake, our first Intel 18AP client product, is tracking ahead of schedule with design wins expecting to be twice those of Penta Lake at launch. We look forward to sharing more at CES in January. As the market normalizes, we expect this portfolio drives meaningful share gains. Intel foundry execution continues to improve consistently. During the quarter, Intel III and Intel 18A yields both increased again. with Intel 18A improving at the double digit rate. Wafer output on both nodes exceeded expectation. Intel 18AP remains on track for launch by year end across our internal product portfolio and external customer engagement continue to build. We are engaged with a couple of highly strategic customers, and I'm increasingly confident that our Intel 18AP will be an attractive node for external foundry customers. Intel 14As also remains on track. In October, as committed, we released our industry standard 0.9 PDK to select customers. It is our highest quality 0.9 PDK, meeting industry standard yield and performance criteria at release. As is standard practice in the foundry business, I have consistently maintained that we will not disclose customer details. That being said, I remain highly encouraged by the progress we are making with multiple potential customers on 14A. On advanced packaging, we are pleased by the progress we are making with EMIP and EMIP-T for our internal products. Both continue to see significant external customer traction as well. We continue to improve on execution, working with our supply chain to secure the capacity to meet the needs of our advanced packaging customers. We are also seeing robust progress in the readiness of HBI, which is an enable of 3D chip stacking for our upcoming server products. Across our manufacturing network, additional capacity continues to come online. Intel 3.2 installation is progressing well in Ireland, as is in the realm of the 18A in both Oregon and Arizona, including FAB 62, our second high-volume 18A FAB. In New Mexico and Malaysia, we are adding capacity to support strong customer ramps for advanced packaging next year. In New Albany, Ohio, the team recently achieved important construction milestones with installation of the first major structural truss. and we continue to evaluate unique and highly differentiated opportunity to accelerate our Ohio build out. And I hope to share more on this in the near future. Looking to the future, I have always emphasized that rebuilding Intel is going to be multi-year journey. And I remain firmly committed to making it happen. We are only one year and a half into this journey. We have made enormous strides in these 18 months, including a dramatic resizing of our workforce, eliminating middle management and bureaucracy, streamlining our executive ranks, and establishing an almost entirely new leadership team. We have installed once again an engineering-centric culture, streamlining our product portfolio and put in place a more competitive roadmap for Intel products and Intel foundry. We still have much more to do. The resurgence in demand for CPU is a meaningful tailwind for us along our transformation journey. Increasingly, energy efficiency is becoming the most important matrix for the AI infrastructure build-out. While GPUs are great at thinking tasks, deterministic CPUs are far more efficient at finding tasks. While GPU reasoning queries run as high as multiple watt-hours of energy, A single CPU quarry could cost only juice of energy. Applying even conservative estimates to the total number of digital agents and agents served per CPU, it is easy to anticipate a massive dollar and unit temp for CPUs over the coming five years. By our estimates, Server CPU TAM largely driven by agentic workloads could increase as much as five times from where it is today from $40 billion to more than $200 billion over five years. This makes the opportunity for Intel enormous. We are, of course, mindful of fierce and many more. have an exciting tip-top group map of CPU innovations in the pipeline. In addition, for the first time, we are making fully modular, verified instances of our x86 CPUs optimized for the custom workloads available to our customers. Second, As one of the just three advanced node semiconductor foundries in the world and the only one domiciled in the United States, we are well positioned to support not only our own demand, but also the demands of wider fabless industry. We are also open to building any CPUs at scale for our customers, fully Acoustic to underlying ISA. Third, as modern computing platforms increasingly become complex systems in the package, our leadership in advanced packaging offers highly differentiated solutions, especially to meet the requirements of the massive AI infrastructure build-out underway. This is why I remain optimistic on the opportunities ahead for Intel, even as we have work to do. Lastly, while we remain focused on executing against our near-term priorities, we cannot lose sight of what comes next. Intel has a deep portfolio of technology and IP that positions us to drive the next wave of computing. We'll continue to invest in breakthrough technologies, including silicon photonics, neuromorphic computing, advanced materials, and quantum computing that we believe can unlock the importance of new opportunities over time. This week, we announced our intent to acquire Classic and Israel-based quantum software provider, moving our quantum efforts from foundational research towards commercialization. Classics overarching hardware acoustic software platform layer provides a gateway for more consumers to explore quantum computing and it is a wonderful compliment to our already strong internal quantum hardware and software stacks and enable us to further extend our compute platform offerings to include QPUs in addition to CPUs, GPUs and ASICs. Post acquisition, Intel will become a full stack revenue generating quantum computing company. In summary, while we did well in Q3, there's clearly more work to do. I'm disappointed that we were not able to meet strong customer demand in this quarter. We face near term challenges, including manufacturing supply shortage, The unprecedented memory crunch and the resulting softness in PC demand. But I remain confident in our path forward. We need to address these challenges with urgency without losing sight of the massive opportunity in front of us. I want to thank our employees, partners and suppliers for their tireless effort in this quarter. With that, I will turn the call over to Dave for additional details.