Intel CEO Pat Gelsinger Discusses Company’s Financial Results and Outlook

In the quarter gone we were just talking about how you made painful decisions and those showed up as impairment charges and were reflected on the bottom line. To start, could I ask if that's it now, that those actions are taken and you now have line of sight on what you want to do or if there will be more sort of restructure to come? Yeah, we worked very hard this quarter to get this done. And the people actions, the restructuring charges largely finished this quarter. So it was a challenging quarter that way. But to also deliver better than expected results if we eliminate those one-time charges and to take our guidance up for Q4, I'm very proud of our team being able to do both of those this quarter. Some of the most difficult restructuring charges maybe in the history of Intel since our memory microprocessor decision almost 40 years ago. Getting that done and still beating results and taking the guide up. This was a very significant quarter for our team to execute. Very proud of their disciplined results. Pat, the investor base are cheering you. I'm going on the reaction of your stock in after hours. But a lot of that does seem to be a focus on what you were guiding to in the final three months of this year. Away from sort of the financials and numbers, could you talk a little bit about the product business and the foundry business that gave you some confidence in that guide? Yeah. And if we take it apart a little bit, the client business, we've launched our Lunar Lake product, the second generation of our AIPC. And the AIPC category, very solid. We'll be launching the commercial version of that into a good market we believe next year for a Windows refresh, a corporate refresh cycle. And we start to see more strength in the AIPC category overall with strong set of use cases and ISVs bringing new software into the marketplace. So we feel good about the client business. Data center quarter on quarter, a little bit better than people forecast for that business. And a stronger product line with our Xeon 6 products now starting to ramp. And finally, on the Intel foundry, quarter on quarter growth in that area and a strong pipeline of external customers. We announced Amazon and two other 18A customers, some additional advanced packaging customers. So we're starting to see that business come to life. And that's a long-term business because when people move designs, it takes several years for major designs to move into our foundry. So we've been at it now a couple of years and we're starting to see the results of those hard work and getting back to competitive process technology with 18A. So a very good quarter of operational results. Pat, we have a question from our audience and that question comes from Clem Delong, who's the CEO and founder of Hugging Face. And he makes the point that on his platform, there are many more smaller models now available. And it's leading him to have a question for you about Intel's place in the on-device trend we're seeing with AI and how you're going to enable more on-device AI use. Well, thank you, Clem. A great question. And Hugging Face, a great company. And as you think about these models, we do see it moving from the training phase of trillions of parameters to the inferencing phase. And exactly like the questioner says, in that inferencing phase, more of that will happen on-prem for data center customers. And many of those smaller models will be retrained with enterprise's own data. A lot of those will just run on Xeon. We don't need a special accelerator or it'll be Xeon plus an accelerator. But also then the edge use cases and AI PC use cases. And I call it the three laws of the edge, right? The laws of physics, right? You know, speed of light. If I have to go to the cloud, I add time. You know, second law is the law of economics, right? It's cheaper to run it on my device. And finally, the laws of the land, my data on my device in my data center. So we see it moving from a cloud training world to an edge and on-prem world for inferencing for the future. Pat, I therefore have to ask you about Gaudi. Your AI accelerator did not get the traction that you'd hoped and you won't be making the outline target of $500 million in sales for this fiscal year or calendar year. Why? Is it a use case issue that the data center operators aren't looking at it or something else? Yeah, two factors that we pointed out. One is that now we have Gaudi 3 coming out. So there's more enthusiasm for the next generation product that we're just starting to ramp now. The second one is the software. And the software use cases, the AI world has moved very rapidly and innovating very quickly. And the robustness and the completeness of the Gaudi software stack hasn't been as great. And it's an accelerator, not a full reprogrammable GPU. So that makes some of the software porting and optimizations a bit more difficult. Obviously, as we get more of that running on Gaudi, we solve the software problems. But secondly, then it's also to move to a complete GPU capability, which we'll be doing out in time. And that development effort is also well underway. So we feel we have a solid position. The world is coming to more on-prem and enterprise use cases, like the last question asked. And Gaudi 3, good early indications from the marketplace and its success as we ramp it in 2025. If you're just joining us on Bloomberg Television and Radio, we're live with the Intel CEO, Pat Gelsinger. Pat, Bloomberg's reported that Arm and Qualcomm, two of your peers, are interested in buying some or part of Intel. Can you confirm whether or not you received a formal offer from them or anyone else, and what Intel's consideration of them would be? Yeah, and obviously there's been rumors and churn in the industry. And I think all of that just indicates how important Intel is to the industry structure and semiconductors, and how important those supply chains are for the world. We don't view any of these rumors as particularly meritorious. We laid out a strategy. We reaffirmed that with our board of directors. And obviously, as we've taken these steps this quarter and restructuring and getting our costs where they need to be, we have the capacity to go on the journey that we've laid out to produce sustainable profitability and result to shareholder return. So with that, I'm committed. The team's committed. We have the board support for the strategy that we've laid out. And Q3 shows that's exactly what we're going to do. Pat, I've been trying to help our audience understand Intel's historic and current business, the products but also foundry. And what you said was that 2026 is when those third-party customers start to show up. But could you just outline the path to that, what you want to hold yourself to for next year in developing that business as a sort of standalone unit? Yeah. And it's a great question. And clearly, we started to see that already emerge. And even this quarter, we saw quarter-on-quarter growth of the external foundry business, largely driven by some of those early packaging design wins. So these advanced packages are sort of a faster on-ramp. But ultimately, it's becoming a wafer foundry for the industry. And as we said, three major design wins this quarter, one with Amazon and two other compute use cases. So we'll be updating the market as we win more of those customers and describing the lifetime deal value of those to the marketplace as well. So we'll give some of those breadcrumbs along the way. But it takes a couple of years for people to move these designs, a year to design it, a year to bring it into production, until it starts to ramp in the marketplace. So key milestones for 18a, that customers are now beginning those design cycles, the design tools, the design libraries are being moved over to 18a. But it really isn't until 26 that those results start to really help Intel's products, and then 26, 27 until we start to see meaningful volumes externally. Pat, we're just days away from an election in this country. And I'm particularly interested in your assessment and planning for what might happen to the ChIPS Act programs. Of course, I don't expect you to know what will happen in the election. You do not have a crystal ball. But former President Trump has kind of made disparaging remarks about President Biden's agenda. How are you planning for that, please? Yeah, and I'd say, maybe three different perspectives. Number one, the ChIPS Act was a bipartisan act. And with that strong support from both sides of the aisle, you know, and with that, we believe the importance of that in terms of industrial policy, the semiconductor industry is well supported by Congress and both parties. Second, you know, we are disappointed by how long and how slow the dispensing of funds has been. And it's well over two years at this point, I've invested 30 billion in capital, and we've seen zero dollars of the ChIPS grants at this point. So we do believe that that has been too slow. And we're somewhat frustrated by that. And we've taken it out of our financials for this year. That said, you know, there's also the investment tax credit that we are seeing, and it is much larger than the grant portion of the ChIPS Act. And that is now law, and that will be beneficial. But clearly, I think whoever wins the election, the importance of this industry, the importance of rebuilding the supply chain and manufacturing is well supported. And Intel as a designer, R&D, and manufacturer is unique in the United States and in the overall structure of the industry. And we expect the broad support, right, of the administration, regardless which party wins as a result. Thank you. Pat, two quarters ago, your CFO told me you were too overindexed to CPU. And we know what happened with Gaudi. You made painful decisions in the quarter gone, reduced headcount by 16,500. Do you now have the plan in place? And are you confident from here? You know, we laid out a clean sheet program that we went through to really benchmark the business. We took a conservative view of the funding plan, as we call it internally, saying, you know, we're taking a modest growth outlook and we're building our cost structure to that very modest outlook. But we've also built now a lot of optionality to scale up into the business. We have a shell ahead, right? We have capacity that we can scale into if necessary. And we've made, you know, a smaller, more efficient, nimbler company that is able to execute with more agility and speed as well. So we feel like we're now well set up for the future. This was a challenging quarter, you know, for me, for the company, but we feel like we're well set up for the future. And the good operational results that exceeded the market's expectations and the increased guidance for Q4, we feel like we're now in a very solid position.