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DATE

Thursday, Apr. 23, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chairman — Lip Bu Tan
  • Chief Financial Officer — David Zinsner
  • Corporate Vice President of Investor Relations — John Pitzer

TAKEAWAYS

  • Revenue -- $13.6 billion, exceeding the midpoint of company guidance by $1.4 billion, as demand continued to outpace supply across all businesses.
  • Non-GAAP Gross Margin -- 41%, or approximately 650 basis points above guidance, attributed to higher volumes, favorable mix, improved pricing, and execution on new node ramps, particularly Intel 18A.
  • Non-GAAP Earnings Per Share (EPS) -- $0.29, with a $0.06 contribution from a one-time interest and other gain, versus prior guidance of breakeven.
  • Cash Flow -- $1.1 billion of operating cash flow, gross capital expenditures of $5 billion, and adjusted free cash flow of minus $2 billion in the quarter.
  • AI-Driven Business Growth -- AI-related businesses constituted 60% of revenue and grew 40% year over year, according to Zinsner.
  • Client Computing Group (CCG) Revenue -- $7.7 billion, down 6% sequentially but above internal expectations; CCG operating profit was $2.5 billion, equal to 33% of revenue, and up about $300 million sequentially.
  • AIPC Revenue -- Increased 8% sequentially, representing over 60% of client CPU mix.
  • Data Center and AI (DCAI) Revenue -- $5.1 billion, up 7% sequentially and 22% year over year; operating profit of $1.5 billion, or 31% of segment revenue.
  • ASIC Revenue Growth -- Revenue more than 30% higher sequentially and nearly doubled year over year.
  • Intel Foundry Revenue -- $5.4 billion, up 20% sequentially, with external foundry revenue at $174 million; Q1 operating loss of $2.4 billion, improved by $72 million from the prior quarter.
  • Advanced Packaging Backlog -- Increased during the quarter, with demand reaching "billions of dollars per year," per Zinsner.
  • Q2 Guidance -- Revenue expected between $13.8–$14.8 billion, up 2%–9% sequentially; midpoint gross margin guided to 39% (non-GAAP), with EPS of $0.20.
  • OpEx Outlook for 2026 -- Expected to be above prior $16 billion target due to inflationary pressures, increased variable compensation, and targeted investments.
  • CapEx Outlook for 2026 -- Reiterated as flat to last year; tool spending specifically projected to rise ~25% year over year as space-related expenditures decline within the total.
  • Fab 34 Buyout -- Intel repurchased the 49% equity interest in the Fab 34 joint investment in Ireland for $7.7 billion in cash and $6.5 billion in new debt, with an expected noncontrolling interest net of ~$250 million per quarter for Q2–Q4, and ~$1.1 billion each for 2027 and 2028.

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RISKS

  • David Zinsner said, "constraints and rising prices around key components like memory, wafers, and substrates are driving higher costs that could impact demand for our product at some point in the year."
  • Zinsner warned, "We are prudently planning for PC demand to weaken in the second half of the year and expect the full-year PC unit TAM to be down low double-digit percent, in line with industry peers and experts."
  • Zinsner said, "Intel 18A is still early in its ramp, and rising input costs, especially in memory, present growing headwinds in the second half that we need to overcome."
  • Operating expenses for 2026 "are likely to be higher due to inflationary pressures, variable compensation, and targeted investments," according to Zinsner.

SUMMARY

Intel (INTC +2.31%) emphasized rapid AI-driven demand and significant supply constraints, reporting a sixth consecutive quarter of surpassing financial expectations and highlighting momentum in Xeon server CPUs and new process node ramps. Management detailed the accelerated growth of AI-focused revenue streams, outperformance in gross margins on improved volume and yields, and pivotal long-term contracts in data center with customers such as Google. The call outlined capacity expansions—including tool spend increases, advanced packaging backlog in the billions of dollars, and the strategic buyout of Fab 34 to consolidate economics on a key European fab. Company leaders reiterated that server CPU demand is outpacing expectations with market unit growth expected at double digits through year-end, while warning of anticipated PC market contraction and near-term gross margin pressures linked to elevated costs and early-stage 18A yield dynamics.

  • Lip Bu Tan stated, "Customers are deploying server CPUs alongside accelerators in a ratio that is moving back towards CPU," indicating a reversal from prior GPU-centric AI infrastructure patterns.
  • Intel signed multiple long-term agreements in the quarter—including one with Google—for volume and pricing of server CPUs and ASICs, typically lasting three to five years, with some contracts kept confidential at customer request.
  • Core Ultra Series 3 and Intel 18A–based Core Series 3 entered full-volume production and marked the fastest new product ramps for Intel in five years.
  • Intel Foundry achieved better-than-expected yields on Intel 4, Intel 3, and 18A nodes, while 14A node maturity outpaced 18A at a comparable stage, with multiple external PDK evaluations underway and early design commitments expected to emerge starting in 2026.
  • Management described the advanced packaging business as having shifted from expectations in the "hundreds of millions" to "billions of dollars per year" in demand, set to comprise a major portion of foundry revenue this decade.
  • Executive commentary highlighted relationships with key partners—including TSMC and SpaceX, Tesla, and xAI through the TeraFab project—to support innovation and address global semiconductor supply challenges.
  • The ASIC segment reached a run rate above $1 billion, with growth described as rapid and further expansion anticipated, bolstered by customer-specific solutions and purpose-built silicon.

INDUSTRY GLOSSARY

  • PDK (Process Design Kit): A comprehensive set of files used by semiconductor designers to model, simulate, and lay out ICs for a specific process node.
  • TAM (Total Addressable Market): The overall sales opportunity available for a product or service within a market, cited in reference to the AI semiconductor industry approaching $1 trillion.
  • ASIC (Application-Specific Integrated Circuit): Custom-designed silicon tailored to customer-specific workloads, now a rapidly growing business segment at Intel.
  • AIPC (AI-Powered PC): Client PCs leveraging advanced on-device AI features and architectures, representing a rising share of Intel client revenue.

Full Conference Call Transcript

Lip Bu will open with comments on first quarter results, as well as provide an update on the progress we are making on our strategic priorities. Dave will then discuss our overall financial results, including second quarter guidance, before we transition to answer your questions. 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, 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 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 Lip Bu.

Lip Bu Tan: Thank you, John, and good afternoon, everyone. Q1 results demonstrate continued and steady progress across the business, reflecting strong demand for our products and disciplined execution to expand available supply. Revenue, gross margin, and earnings per share were all above the high end of guidance, marking our sixth consecutive quarter of exceeding financial expectations. Even as we improve factory output, demand continues to run ahead of supply for all our businesses, especially for Xeon server CPUs where we expect sustained momentum this year and next. Intel 3–based Xeon 6 and Intel 18A–based Core Series 3 products are now in full volume production ramp, and each represents the fastest new product ramp in five years.

We are maximizing and optimizing our factory output to meet customer needs. It is our top priority. Intel is now a very different company than when I first joined over a year ago. We have taken, and continue to take, deliberate steps to rebuild Intel into a more competitive and more profitable company. Our cultural transformation is well underway, and we are embracing our roots as a data-driven, paranoid, and engineering-centric company. We are also listening closely to our customers and putting them at the center of everything we do. Intel processors are some of the most vital assets necessary to be successful and to flourish in this era of extraordinary opportunity for the semiconductor industry.

With a stronger balance sheet, a new leadership team, a rejuvenated and motivated workforce, and a renewed focus on engineering execution, we are turning our attention squarely towards innovation to capture opportunities in the near term and to position the company for robust growth in the long term. Driven by tremendous demand for AI, the semiconductor industry TAM is now approaching $1 trillion. Intel is well positioned to benefit from this demand with three strategically important assets: our x86 CPU franchise, our advanced packaging technology, and our vast manufacturing network. Artificial intelligence is now moving into the real world towards more distributed inference and reinforcement learning workloads, like agentic, physical AI, robots, and edge AI.

This shift is now beginning to show up in our results, and I want to spend some time on this today. For the last few years, the story around high performance computing was almost exclusively about GPUs and other accelerators. In recent months, we have seen clear signs that the CPU is reinserting itself as the indispensable foundation of the AI era. The CPU now serves as the orchestration layer and critical control plane for the entire AI stack. This is not just our wishful thinking; it is what we hear from our customers, and it is evident in the demand profile for our products. Xeon server demand is seeing strong and sustained momentum.

Customers are deploying server CPUs alongside accelerators in a ratio that is moving back towards CPU. The accelerator remains central to frontier AI, and we will continue to participate, innovate, and partner in that category. Our recent announcement with SambaNova Systems is an example of such partnership on heterogeneous compute architectures. But the backbone of AI computing in production remains a CPU-anchored architecture. That is good news for the x86 ecosystem. It is great news for Intel Corporation. And it is a structural reason I am confident that the CPU franchise will continue to be a meaningful growth engine for the company in the years ahead, not just the quarters ahead.

Turning to Intel Foundry, the accelerating deployment of AI infrastructures creates a meaningful opportunity for us as we continue to build our foundry business. I am pleased with the progress we have made in foundry technology development over the last year, even though I will continue to remind you this will be a long journey for us. We have made steady progress with Intel 4 and Intel 3, and 18A wafers are now running ahead of internal projections, representing a meaningful inflection in our execution and our factory finished-good output. We also continue to make steady progress on our advanced packaging technologies, including additional growth in customer backlog in the quarter.

On Intel 18AP and Intel 14A, we continue to be encouraged by our external engagements. Intel 14A maturity, yield, and performance are outpacing Intel 18A at a similar point in time, and we continue to develop PDKs with multiple customers actively evaluating the technology. Their partnership has been critical, and their feedback is continuing to help us define the technology so that we can cater to their needs. We expect to see earlier design commitments emerge beginning in 2026 and expanding into 2027. I am particularly pleased that our progress to date has driven us to land more of our own future product tape-outs on Intel 14A as well.

At a time when advanced wafer capacity is in short supply, this enables us to have better control over our supply chain. Intel has pioneered nearly every major innovation that has enabled dimensional scaling and high-volume manufacturing of silicon transistors over the last six decades. We have always been willing to take measured risks that have eventually paved the way for step-function improvements in transistor density, cost, power, and performance. As we look to continue challenging the status quo, I can think of no better partner than Elon Musk. We recently announced our partnership with SpaceX, xAI, and Tesla to support TeraFab.

Elon and I share a strong conviction that global semiconductor supply is not keeping pace with the rapid acceleration in demand. We are excited to explore innovative ways to refactor silicon process technology, looking for unconventional ways to improve manufacturing efficiency that will eventually lead to a dynamic improvement in the economics of semiconductor manufacturing. A year ago, the conversation about Intel Corporation was about whether we could survive. Today, it is about how quickly we can add manufacturing capacity and scale our supply to meet enormous demand for our products. This is a fundamentally different company today, and we still have a lot of work ahead.

I would like to take this opportunity to thank our many customers, partners, and our hardworking employees across the world for their contributions towards building a new Intel. I remain firmly convinced of, and focused on, the opportunity ahead for Intel Corporation. With that, I will pass it to Dave.

David Zinsner: Thank you, Lip Bu. We delivered robust Q1 results reflecting strong demand and better-than-expected available supply. We also benefited from improved product mix and pricing actions, in part to offset higher costs. First-quarter revenue was $13.6 billion, $1.4 billion above the midpoint of our guide. Q1 revenue would have been meaningfully higher, but demand continues to outpace our growing supply. Our collective AI-driven businesses now represent 60% of revenue and grew 40% year-over-year. These results reflect real and deliberate changes we have made to be more responsive and accountable. This quarter, our teams worked directly and diligently with customers to reach mutually beneficial outcomes in weeks, not months.

We value the partnership and support shown by our customers, partners, and suppliers as we work to navigate this environment together. Non-GAAP gross margin came in at 41%, approximately 650 basis points ahead of guidance due to the combination of higher volume, which included previously reserved inventory, mix, and pricing. In addition, better yields on Intel 18A offset some of the higher costs we always incur in the early part of ramping a new node. We delivered first-quarter non-GAAP earnings per share of $0.29 versus our guidance of breakeven on higher revenue, stronger gross margins, and continued spending discipline. Q1 EPS included a roughly $0.06 one-time gain in interest and other.

Q1 operating cash flow was $1.1 billion with gross CapEx of $5 billion in the quarter and adjusted free cash flow of minus $2 billion. Moving to segment results. CCG revenue was $7.7 billion, down 6% sequentially and better than our expectations. Even with improved factory output, demand outstrips supply against a client TAM that remains resilient despite industry-wide component shortages and inflationary pressures. Our AIPC revenue grew 8% sequentially and now represents greater than 60% of our client CPU mix. Operating profit for CCG was $2.5 billion, 33% of revenue, and up approximately $300 million quarter-over-quarter on improved mix and product margins, sales of previously reserved inventory, better 18A yields, and lower operating expenses.

Within the quarter, CCG launched Core Ultra Series 3 and expanded our offerings across consumer, commercial, and edge. This has proven to be our strongest product launch in five years, delivering better performance-per-watt, stronger integrated graphics, and more capable on-device AI features, all while maintaining our broad ecosystem of compatibility that partners and customers value. In Q1, CCG also expanded the reach of our Core family by launching the Intel Core Series 3 processor, which brings the latest IP, modern features, and all-day battery life to the mainstream for the first time. We are enabling a new class of mainstream systems that once again set the standard for everyday computing.

DCAI revenue was $5.1 billion, an increase of 7% sequentially and 22% year-over-year, well above expectations and reinforcing the strong year of growth for DCAI we signaled 90 days ago. Strength continued across all segments and customers, as investments in CPUs are accelerating to support the evolution of AI from foundational training to inference and from inference to agentic. We also saw strong ASIC growth with revenue up more than 30% sequentially and nearly doubling year-over-year. Operating profit for DCAI was $1.5 billion, 31% of revenue, and up approximately $292 million quarter-over-quarter on improved product margins, better cycle times and yields, especially on Intel 3, and lower operating expenses.

Within the quarter, DCAI signed multiple long-term agreements, including Google, supporting our view that the current business momentum is sustainable. In addition, Xeon 6 was selected as the host CPU for NVIDIA’s DGX Rubin NVL8 systems, and Xeon remains the most deployed host CPU due to its industry-leading memory, security, and networking orchestration. Lastly, DCAI also established a multiyear collaboration with SambaNova to design a next-generation heterogeneous AI inference architecture combining SambaNova’s RDUs and Intel Xeon 6 processors. Intel Foundry delivered revenue of $5.4 billion, up 20% sequentially, on increased EUV wafer mix driven by Intel 3, and significant growth in advanced packaging. External foundry revenue was $174 million in the quarter.

Intel Foundry operating loss in Q1 was $2.4 billion, improved $72 million quarter-over-quarter as better yields across Intel 4, Intel 3, and 18A drove higher gross margins. This was mostly offset by increased operating expenses associated with an intentional step-up in Intel 14A investments to support both internal and external customer evaluations. As a reminder, Intel Foundry carries the bulk of the cost associated with the early ramp of Intel 18A, and we expect Intel Foundry’s operating loss to improve through the year as 18A continues to ramp into volume and yields improve further. Within the quarter, Intel Foundry delivered output above our expectations, drove steady improvements in yields, and met key 14A milestones.

Intel Foundry also added to its backlog of advanced packaging services and announced a multiyear expansion of our back-end facilities in Malaysia. This expansion will help support the committed demand that will begin to convert to revenue in 2027. Turning to All Other. Revenue came in at $628 million and was up 9% sequentially due to a strong quarter for Mobileye. Collectively, the category delivered an operating profit of $102 million. Now turning to guidance. As we look ahead, we remain mindful that the macroeconomic and geopolitical environments are dynamic. Views on global growth, policy, and trade continue to shape customer behavior and investment decisions.

In addition, constraints and rising prices around key components like memory, wafers, and substrates are driving higher costs that could impact demand for our product at some point in the year. We are prudently planning for PC demand to weaken in the second half of the year and expect the full-year PC unit TAM to be down low double-digit percent, in line with industry peers and experts. Offsetting this, near-term customer order patterns remain very robust across all of our businesses. In addition, our confidence in the sustained growth of CPUs, driven by the AI infrastructure buildout, is growing.

Our outlook for server CPU demand has improved over the last 90 days, and we expect a strong year of double-digit unit growth for the industry and for us, with momentum extending into 2027. Combining all of these factors, we are guiding Q2 to a range of $13.8 to $14.8 billion, up 2% to 9% sequentially. As we work hard to support the needs of all of our customers, we expect sequential revenue growth in both CCG and DCAI on improved supply and a full quarter of pricing actions, with DCAI up double digits.

At the midpoint of $14.3 billion, we forecast a gross margin of 39%, a tax rate of 11%, and EPS of $0.20, all on a non-GAAP basis. Our Q2 gross margin guide declines modestly from Q1 due to a meaningfully larger contribution from Intel 18A, still early in its ramp, and some inventory benefits in Q1 that are not expected to repeat in Q2. On the full year, we expect our factory network to continue increasing available supply in the third and fourth quarters at a more measured pace than we anticipated 90 days ago, reflecting the base effect of much stronger-than-expected first-half output.

We also expect 2026 revenue on a half-on-half basis to follow the seasonal trends experienced over the last ten years, with servers above and PCs below. We were very pleased with Q1 gross margins, and we will continue to push for gross margin expansion. It is my top priority. Our foundry team is delivering consistent yield and throughput improvements across all process nodes, which will help gross margins. With that said, Intel 18A is still early in its ramp, and rising input costs, especially in memory, present growing headwinds in the second half that we need to overcome.

For OpEx in 2026, we had been directionally targeting $16 billion but are likely to be higher due to inflationary pressures, variable compensation, and targeted investments we are making to capture the opportunities ahead. The drive for efficiency is core to the new culture Lip Bu is creating, and we will remain laser focused on finding additional operational improvements and maximizing ROI on all of our investing activities. We forecast capital expenditures in 2026 to be flat to last year versus our prior expectation of flat to down, reflecting increased capacity investments to support committed demand and a continued emphasis on improving fab productivity and output.

We now expect expenditures to be roughly equal across the year and still to be heavily weighted towards the equipment that directly grows wafer outs to support growth this year and next. We recently closed the transaction to repurchase the 49% equity interest in the joint investment in Fab 34 in Ireland, a highly accretive deal allowing our shareholders to participate in the full economic benefits from a fab just now hitting its stride. As a result, we now expect noncontrolling interest, or NCI, to net to approximately $250 million in each of Q2, Q3, and Q4 of this year, and be approximately $1.1 billion for 2027 and 2028, on a GAAP basis.

Lastly, excluding the buyout of the Fab 34 joint investment, we still expect positive adjusted free cash flow for the full year. As a reminder, we funded our purchase with approximately $7.7 billion in cash and $6.5 billion in new debt. We remain committed to retiring all $2.5 billion of maturities as they come due this year and all $3.8 billion in 2027. In closing, Q1 was a strong quarter financially and operationally. All demand signals continue to emphasize the growing and essential role of the CPU in the AI era and the unprecedented demand for leading-edge wafers and advanced packaging to realize the vision of driving silicon-based intelligence to the edge efficiently and at scale. Our confidence is growing.

We have the right team and the broad IP portfolio needed to solve our customers' most pressing economic challenges and drive long-term value for our shareholders. With that, I will turn it over to John to start the Q&A.

John Pitzer: Thank you, Dave. As a reminder, please ask one question and a brief follow-up in order to allow us to accommodate as many callers as possible. We will now open the call for questions. Jonathan, can we please take the first question?

Operator: Certainly. Our first question comes from the line of Ben Reitzes from Melius. Your question, please.

Benjamin Reitzes: Hey, guys. Thanks a lot, and congrats on the quarter, and this is good news for the country too. Regarding my questions, the first one is on LTAs. Could you just talk about the Google deal, and then there was a comment in the release that you signed other LTAs. How are these structured, and how do they get better for you in the long term in the next phase?

Lip Bu Tan: Yeah. Good question, Ben. Let me describe Google as one of the multiple long-term contract agreements in Q1, and this is significant. With Google, we have the Xeon in production, and we are building a long-term, trusted partnership. It is very important for us. It is evidence of strong demand for our CPU and some of the ASIC business. That is important for us, and this is a good example of how we win in the AI infrastructure buildout. Stay tuned. At the right time, we will announce other contracts. Dave, anything to add?

David Zinsner: Maybe just to add, most of these agreements are structured with volume and pricing, and they are usually somewhere between three and five years. The Google one, I think both parties wanted to see an announcement. In some cases, customers want to keep that confidential, and we respect their desire to maintain confidentiality, so some of them we just did not announce. It is a win-win in a lot of ways. We get a good understanding of the volumes that we can then build into our assumptions around supply. It is good for the customer because they know where the supply is coming from, and they get a good sense of what pricing they can expect.

John Pitzer: Ben, do you have a brief follow-up?

Benjamin Reitzes: Yes, thanks, John. With regard to CapEx, is there anything in there with regard to investing in foundry customers? Or is that still not in there? And when do you think we will hear more about that in the CapEx figure?

David Zinsner: Let me unpack CapEx just for a minute. We are now calling it flat year-over-year. Initial thinking was that it was going to be down. I think we moved it last quarter to flat to down, and now I think we are looking at flat. That is really a function of the current demand environment we are seeing. One thing to keep in mind: in the last few years, a lot of our CapEx spending was space, and I think we are actually in a pretty good position in space. We wanted to have white space available to move into when needed, and I think Lip Bu and I both feel like we are in a good place.

So we will be bringing the space spend down pretty materially, even though the total is flat. What that means is the tool spend is actually increasing pretty significantly. In fact, tool spending will be up year-over-year ~25% or so. That is a function of the fact that we see a lot of demand, and we want to make sure we are catching up on the supply front. As we get into next year, we will have a better sense of what CapEx looks like.

As it relates to external customers on the foundry side, our expectation—which we have been pretty consistent on for about a year—is that customer signals would be more concrete in the back half of this year and into early next year. As we pull that information together, combined with our own requirements, which are growing over time, that will give us a good sense of what supply we need over the next few years, and we will put the spend in place. Lastly, our relationship with the equipment vendors is quite strong, so I think we have a pretty good ability to flex as needed.

Naga and Lip Bu are in regular engagement with all of the CEOs of the equipment suppliers, so we will be able to manage and course correct as necessary as we get a better sense of the supply dynamics for us, both internal and external, and move our capacity accordingly.

John Pitzer: Thank you, Ben. Jonathan, I think we have the next caller.

Operator: Certainly. Our next question comes from the line of Ross Seymore from Deutsche Bank.

Ross Seymore: Hi, guys. Thanks for letting me ask a couple of questions. First, on the server CPU side, can you talk about how Intel Corporation is positioned competitively? Is the strength that you are seeing more that the market demand is just that high, or do you believe that your product line actually has some competitive differentiations versus either other x86 competitors or ARM offerings?

Lip Bu Tan: Yeah, Ross, good question. First, the feedback from the customer is that CPU is very important when you move from training to inference. On the inference side, in terms of orchestration, control plane, and also managing all the different agents with data, CPU is much more efficient. The ratio of CPU to GPUs used to be 1-to-8, and now it is 1-to-4, and I think it could move towards parity or even better. So I think that demand is very strong. On your competitive question, we continue to refine our roadmap—at the end of the day, the best product wins. We have made a lot of changes in terms of CPU architecture to optimize for different workloads.

We also have a big advantage: we do not just have the CPU; we have advanced packaging and foundry. We can drive changes more quickly to serve the customer for their different workloads. It is an exciting time—we call it XPU. Besides CPU, we are also quietly building up the GPU with new hires, and we are moving into accelerators so that we can serve the customer from the edge to physical AI and drive new initiatives to stay competitive.

David Zinsner: Ross, maybe one other thing to add is that it is obviously early in the Granite Rapids life cycle here, but so far, the early traction has been quite good. We see it as a positive step for the data center CPU business.

John Pitzer: Ross, do you have a follow-up question?

Ross Seymore: Yeah, I do. You said a year ago Intel Corporation was trying to survive and now it is trying to scale supply—that is a very positive change year-over-year. How does the business model and the spending behavior strategically change in that environment? Dave talked about increasing CapEx a relatively small amount, maybe $17 billion up to $18 billion this year. But if you are scaling supply and supply is under demand across the board, is that something that you can handle with just improving yields, or does CapEx need to go up and maybe call into question the thesis that you are not going to spend on 14A until you actually get customers?

Lip Bu Tan: Yeah, good question. In terms of spending, like Dave mentioned earlier, over the last year we have driven a lot of efficiency, flattening layers of management. Now we are really focused on customers and engineering. I spend a lot of time meeting with customers and customers’ customers, understanding the workloads and how we can drive improvements in the architecture, execution, tape-outs, and design to drive efficiency. On the foundry side, we have driven yield improvements—we see very nice yield improvement on 18A. On 14A, we already have the 0.5 PDK available and we are aiming for the 0.9 PDK. That is where customers start to decide which products, how much volume, and capacity we need.

Besides driving yield, we are also driving improvement in cycle time so we can meet customer demand and timing and really optimize for them.

Operator: Certainly. Our next question comes from the line of Stacy Rasgon from Bernstein Research. Your question, please.

Stacy Rasgon: Hi, guys. Thanks for taking my questions. I wanted to dig into the segment outlook and the implications for gross margin. You said data center is up double digits, which puts it up roughly 40% year-over-year. Assuming PC is similar, maybe up low single digits, I am just surprised. I understand the inventory benefit in Q1, but it feels like gross margins are probably flat excluding that inventory benefit, maybe even down a little bit. I am surprised given the magnitude of the server growth, especially given the 18A yields are supposed to be improving. Are they still low enough that the 18A mix is completely offsetting that?

Any color on the gross margin drivers in the near term would be really helpful. I am a little confused.

David Zinsner: I obviously do not have your model in front of me, but if I unpack Q2, we will see some benefit from pricing. We got a little bit of pricing benefit in the first quarter, but I would expect to see some more meaningful improvement in the second quarter—that is certainly going to help. Mix will be plus or minus in the zip code; data center is going to grow faster, but I am not sure mix drives much. 18A is going to be a pretty decent headwind to our gross margins. If you look at Panther Lake volume increases, it is going to be up six or seven times in the second quarter relative to the first quarter.

While the gross margins are improving in Panther Lake quarter to quarter, it is still below the corporate average. When you have that big a shift in the mix, with gross margins below the corporate average, it weighs down on the gross margins. But we are roughly in the zip code of what Q1 was like anyway, so I am not too concerned. In the back half of the year, we will have some dynamics helping us. The one cautionary concern I have on gross margin in the back half is some of the materials cost increases—substrates are going up, glass substrates, memory is going up. Those things offset some of the improvements that we are having through the year.

Longer term, I am still hyper-focused on gross margins. We have elements of the roadmap in the right place in terms of cost structure—certainly on client, definitely seeing improvement on the foundry side. We have more work to do on the data center front, but our goal is to get the gross margins up clearly.

John Pitzer: Stacy, do you have a follow-up question?

Stacy Rasgon: I do, thanks. I want to push on the PC a little bit. You said industry volume is probably down double digits, so it is going to be even worse in the second half given you are running pretty strong in the first half. Do you expect your full-year client revenues to be down consistent with that industry outlook, or is pricing helping you or hurting you? Is share helping or hurting? How should we think about the shape of your client business in the wake of that industry forecast?

David Zinsner: Good question. One thing you have to separate is when we talk about the industry, we are generally talking about consumption, and that is different than our billings because of inventory movement to customers. We are not going to be as impacted as the industry TAM because we expect, partly because of pricing a little bit, but also because of inventory replenishment at the customer level. From a modeling perspective, whatever we get to in February is probably what we run the rest of the year roughly. So it is going to be kind of flattish from Q2 onward from a revenue perspective—at least that is how we are modeling it.

Operator: Certainly. Our next question comes from the line of Timothy Arcuri from UBS. Your question, please.

Timothy Arcuri: Thanks a lot. Lip Bu, I wanted to ask about the evolution of your foundry model. You are of course pursuing typical foundry customers, but it seems like TeraFab is a little bit of a different deal and maybe even like a process licensing agreement. I would not normally ask about one particular customer, but he did talk about it yesterday. Is that going to be a typical foundry arrangement, or are you possibly going to turn the keys over on an entire fab to them?

Lip Bu Tan: Yeah, Timothy, thanks for the question. On 14A, we are making great progress in terms of yield and cycle time, and we are engaging heavily with multiple customers. My style is under-promise, over-deliver, so we have no plan to announce the customer unless the customer wants to announce it, and we support that. Back to TeraFab, clearly Elon and I believe that global supply is not keeping pace with the rapid acceleration in demand. We both share the vision that we are going to learn a lot together, exploring innovative ways in process and manufacturing. It is a very broad relationship, and we will update you as we go.

Clearly, this is a very exciting customer to work with, and we have multiple other customers we are engaging. Stay tuned. Do you have a follow-up?

Timothy Arcuri: I do. Dave, is there a way to quantify how much demand you are missing out on? How much are you undershipping the market still in Q2? Is it as much as 10%—so if you were unconstrained, revenue would be like 10% higher? Is that a reasonable number?

David Zinsner: I probably do not want to put a specific number on it. Let us just say it starts with a “b.” So it is meaningful.

Operator: Certainly. Our next question comes from the line of Vivek Arya from Bank of America Securities. Your question, please.

Vivek Arya: For the first one, I wanted to understand the server CPU TAM growth this year. Dave, I think you mentioned up double digit. Can you help tighten that—10%, 15%, 20%? And then how much ASP expansion do you expect this year also? What I am really curious to understand is the new server TAM growth that you have—how does this compare versus what you thought six months ago, just so that we can get a better sense for what this agentic CPU workload means in terms of incremental unit and ASP growth?

David Zinsner: When we are talking about the market, we are generally talking about units. Six months ago, we probably were thinking it would be up instead of down from a units perspective; now it is going to be up meaningfully. I will leave it to industry analysts to pinpoint the exact number. ASPs—we have moved pricing to offset some of the cost increases we have seen over the last couple of quarters, but it is not the biggest driver of our revenue outlook. Unit volume is going to be the biggest driver. That is on an ASP-per-core basis.

Obviously, core count is increasing significantly in the data center CPU space, so we get a lift as core count increases, and that is meaningful.

John Pitzer: Vivek, do you have a follow-up question?

Vivek Arya: Yes, thank you, John. Lip Bu, on server CPU competition—near term versus AMD in x86, do you think you are gaining share and expect to gain share? And then medium to longer term against ARM—NVIDIA is planning to launch a standalone CPU, Amazon has Graviton, Google said they would launch Axion. How do you see competition versus AMD near term and versus ARM longer term?

Lip Bu Tan: Good question, Vivek. First, CPU demand is great right now—we all benefit from that. On our product roadmap, we have been fine-tuning. A typical new chip takes about 12 to 18 months. We are laser focused on execution. We are putting simultaneous multithreading into the roadmap—so we are going to have it in Coral Rapids so we can compete effectively with AMD, and we are trying to accelerate Coral Rapids. We are also looking at CPU and GPU architecture and have been recruiting top talent to refine new products to compete effectively. On ARM, clearly we know ARM well. Rene is a good friend of mine.

They have a licensing model and have been effective; of course they continue to raise license fees. They also have a silicon team building reference silicon. Amazon and Google are using ARM—that is not news. The good news is we have OEM customers working with us and long-term visions with important customers. The roadmap from Granite Rapids to Diamond Rapids and then to Coral Rapids is coming on strong. We like our portfolio. On the server side, besides x86, we also have the SambaNova partnership for dataflow architecture—we already have some success there. We also recruited top talent—Kavault, who used to run ARM data center server chips, and Srini, who worked with me at Cadence on optimization.

All in all, we have the team and the technology roadmap. Over time, we are going to be very competitive.

David Zinsner: Keep in mind, Vivek, that beyond the product side, we have another bite at the apple, or maybe multiple bites, on the foundry side. We can provide customers with advanced packaging and wafers. We have a strong breadth of offerings to support their CPU or AI needs in the marketplace.

Operator: Certainly. Our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question, please.

C.J. Muse: Good afternoon. Thank you for taking the question. Could you walk through how you are planning to drive increased output through the second half of the year? How much of it is yields? How much of it is cycle times? How much is incremental wafer fab equipment, as well as outsourcing to TSMC?

David Zinsner: First and foremost, we are increasing wafer starts in all three of our nodes—Intel 10/7, Intel 3, and 18A. More meaningfully on the EUV nodes, of course, but even Intel 10/7 will be increasing wafer starts this year. That is a key component of our ability to meet demand. That said, Lip Bu has pushed the team really hard to provide more supply the old-fashioned way with better yields and better throughput, and that is largely how we got it in the first quarter. We can expect him to do that through the year, and I think that will be a meaningful contributor to our output. Of course, we use outside foundries as well, and we flex them as needed.

Lip Bu has great relationships with the external foundries, and he is able to leverage that to help us in that area as well. There will certainly be a component of that as we move through the year.

Lip Bu Tan: Just to add, TSMC is a very important partner for us. Morris and C.C. and I have decades of friendship. Our product groups will decide which is the best foundry. We are going to use a multi-foundry approach—our own internal and external—so we can benefit customers.

C.J. Muse: I do. Thanks, John. I would love to level set where we are on the advanced packaging front. You talked about rising backlog. Anything you can share—what that number looks like, revenue targets this year or next, number of customers?

David Zinsner: I have said this in the past—we have been really pleased with our traction there. Maybe naively I thought these opportunities would come in the hundreds of millions of dollars level, but so far what we are seeing is demand in the billions of dollars per year kind of level. This is going to be a big part of the foundry revenue as we get through this decade. The good news is advanced packaging really is a differentiated offering for us and does a lot for the customer, including allowing them to use larger reticles. There is real value to the customer, and as a result we get very attractive pricing relative to some other areas of the foundry business.

We would expect this to be at least at foundry average gross margins over time.

Operator: Certainly. Our next question comes from the line of Suneet Pajjuri from RBC. Your question, please.

Suneet Pajjuri: Thank you. My first question is on 18A yields. Dave, you said the yields are better than you expected and look like they are improving further, but at the same time, it is still a headwind to your gross margin. Can you give us some context as to how much better they are? And as we go through the year, when do you expect that headwind to gross margin to become at least neutral?

David Zinsner: 18A yields are a closely guarded proprietary piece of information for us, so we do not typically disclose specifics. I would just say Lip Bu had a target as we came into the year for the end of this year, and we are probably going to hit that around the middle of this year. He has done a very good job working the team to drive a better response there, and of course that carries on to next year’s expectations around yields. As we get towards the end of the year, on a combined product-plus-foundry basis, we will be in a relatively decent place in terms of the gross margins at Panther Lake.

We have more work to do at the foundry level to drive gross margins to where we want to be—that is going to be multiple quarters before we get those to be foundry-average gross margins—but it is tracking better than we expected, which is good. We have focused a lot on yields. Lip Bu has brought in a lot of talent into that space, and we have brought in external partners that are particularly good at metrology, which has helped us execute better. We are starting to see the benefits this quarter.

John Pitzer: Do you have a follow-up question?

Suneet Pajjuri: Yes, thank you. On the ASIC business, Dave, I think you said it doubled year-on-year. Could you help us with what is included in that? I believe it is IPUs? I just want to get a better sense of how big it is, and as we look out to the next few years, what is the strategy for that business to grow? Are you going after the classic ASICs in terms of XPUs, or is this more adjacencies?

Lip Bu Tan: Thank you. It is a good question. This ASIC business is sometimes purpose-built silicon optimized for specific workloads that customers want, and that is very important. Besides running and focusing on engineering improvement, we are spending a lot of time with customers. It is important to understand the workload and then tailor for their requirement. It is important to have the right, strong IP portfolio to do that. We have a unique position—we have CPU/XPU and advanced packaging and advanced processing so that we can optimize for the customer. It is a very exciting opportunity and a fast-growing area. We already are engaging with a couple of customers; the feedback is very positive.

Stay tuned—over the next five years this is going to be fast growing for us.

David Zinsner: One thing that people have been surprised about is how big the business already is—it is at a run rate that is north of a billion dollars already. I think Lip Bu and his partner, Srini, have barely gotten started in terms of what we can make from that, so it has a really strong base from which to grow meaningfully.

Operator: Certainly. Our next question comes from the line of Joshua Buchalter from TD Cowen. Your question, please.

Joshua Buchalter: Hey, guys. Thanks for taking my question, and congrats on the very strong numbers. I wanted to follow up on Vivek’s question from earlier. You gave some metrics on the near-term CPU TAM, but investors are struggling with how to model CPU demand for agentic workloads. Any help you can provide longer term about how we should think about growth—in units, cores, gigawatts, CapEx? Put bluntly, is the $100 billion number that ARM gave reasonable in your view?

David Zinsner: One statistic we look at is the ratio of CPUs to GPUs. If you look at training solutions, they are generally running seven to eight GPUs to one CPU. As we look into inference, it is probably three to four to one. As you get into agentic and multi-agent, it is potentially even flipping the other direction a little bit. That is one way to think about it. As you think about the growth rate going forward, it is going to become a significant part of the AI TAM.

Keep in mind, data center is where we are focusing a lot of our conversation, but there is going to be AI—and particularly CPU—opportunities in a lot of different areas: the client space migrating toward AIPC, edge computing, and physical AI specifically. All of those can benefit a lot from CPUs because of the nature of the power consumption relative to performance. Those areas could have even more explosive growth than the data center space.

Lip Bu Tan: Just to add, think about the full stack. For agentic AI and later physical AI, how the CPU optimizes working together with foundation models, using data to drive the massive opportunity in agentic AI. Inference is going to be a much bigger market. Physical AI is another big market. It is hard to quantify, but as we go, we will update you.

John Pitzer: Josh, do you have a quick follow-up?

Joshua Buchalter: Sure, thank you. As we think about your capacity tightness, the leading-edge foundries are also quite tight. Has this driven any near- to medium-term share gains? And longer term, how important is your captive capacity to winning business with customers on a multiyear basis?

David Zinsner: Obviously, all the supply right now—or the lion’s share—is internal. We do expect to win external customers over time. Our captive capacity and advanced packaging are important differentiators as customers think multiyear.

Operator: Certainly. Our final question for today comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

Aaron Rakers: Yes, thanks for taking the question. On the supply side, I think in prior quarters you suggested you were reallocating some supply of wafers from client to data center, and the notion was that Q1 would be the peak degree of constraint. As you rolled out your guidance for this current quarter, how would you frame the level of constraints you see in the guidance this quarter, and does the back half improve dramatically?

David Zinsner: Supply will go up in the second quarter. It is going to go up every quarter now going forward. We were certainly at our lowest point in terms of supply in the first quarter relative to the rest of the year. What we were able to do in the first quarter was go through finished goods inventory and find opportunities to sell product we did not think we would be able to move. It was either de-spec product or legacy product we had shelved, and then we worked with customers and found opportunities for them to leverage that technology in their systems. That helped a lot. I am not sure we have that benefit in the second quarter.

We will scrutinize finished goods inventory to see if we can find some opportunities, but for the most part, what we are relying on for volume growth Q2 versus Q1 is increasing supply.

John Pitzer: Do you have a quick follow-up?

Aaron Rakers: I do. As a follow-up, on the progression of your server CPU roadmap—Xeon to Diamond Rapids to Coral Rapids—and really closing the gap with simultaneous multithreading, any color on the cadence of the roadmap would be helpful.

Lip Bu Tan: Clearly, demand is strong, and we have fine-tuned the roadmap. We highlight Diamond Rapids after Granite Rapids, and then Coral Rapids is the next one where we have multithreading. That is our roadmap, and we are laser focused on execution. Meanwhile, we will use our ASIC business to drive some customer requirements with purpose-built silicon in the short term. That is a huge opportunity for us—we have unique assets we can provide. 2026 is the year of execution—we are improving yield, productivity, and cycle time to make sure we can catch up with demand. I would like to thank everyone again for joining us today. It has been an eventful first year for me at Intel Corporation.

It is gratifying to see our progress, even as we know we have a lot more to do. I am looking forward to seeing many of you at the JPMorgan conference in May and at Computex in June.

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