Thank you for standing by and welcome to Intel Corporation's second quarter 2025 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. Now I'd like to introduce your host for today's program, Mr. John Pitzer, Vice President, 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 Q2 earnings release and earnings presentation, both of which are available on our investor website, intc.com. For those joining us online today, the earnings presentation is also available in our webcast window. I am joined today by our CEO, Lip-Bu Tan, and by our CFO, David Zinsner. Lip-Bu will open with comments on our second quarter results, as well as provide an update on our strategy and priorities. Dave will then discuss our overall financial results, including third quarter guidance, before we transition to answer your questions. Before we begin, please note that today's discussion contains 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. Thank you, John. Let me add my welcome. We had a solid Q2 with revenue above the high end of our guidance. This reflects strong demand across our business and good execution by the team. As expected, headline profitability was impacted by several one-time items and impairments. I am pleased by the underlying operating performance in the quarter, even as we have more work to do. Dave will go through our detailed financials shortly. Today, I want to provide you with updates on four major initiatives where we have started to make progress and will continue to focus in coming quarters: our organization and culture, our foundry strategy, our Core X86 franchise, and our AI strategy. First, on organization and culture. Over the last three months, I have completed a systematic review of every organization and function reporting to the CEO. These reviews included detailed analysis of headcount, skill sets, spending, site distribution, executive population, and restructuring plans. We have much work to do in building a clean and streamlined organization, which we have started in earnest and is remaining an area of focus for me during Q3. Our goal is to reduce inefficiencies and redundancies and increase accountability at every level of the company. As mentioned in our Q1 earnings call, we need to right-size and scale back the company while ensuring that we are retaining our best internal talents and hiring the best external talents from industry and universities. During Q2, we completed the majority of the actions needed to achieve our year-end target of 75,000 employees. These were hard but necessary decisions, and we reduced management layers by approximately 50% in the process. We are on track to implement our return-to-office mandate starting September. These actions are necessary not just to reduce our operating expenses, but to make the company more agile, collaborative, and vibrant, to simplify our business and improve our product and process execution. Next, on our foundry strategy, I continue to believe that our heritage and expertise in semiconductor technology development and manufacturing remains a very valuable and vital asset. I also fully appreciate the strategic importance of the US-domiciled semiconductor manufacturing. Transforming this unique asset into a robust foundry business requires us to take a systematic approach and act from the position of strength. The foundry business is a service business that relies on the foundational principle of trust. We need to demonstrate to our customers that we can deliver wafers on time with high quality, reliability, and yield, that we can manufacture their products at scale. We need to have process and packaging technology that is not only competitive, but more importantly, is designed to meet the needs of our customers. In addition, we also need to develop a rich and diverse ecosystem of IP and EDA partners who will enable our customers to seamlessly design chips using our process. Finally, perhaps most importantly, we need to build capacity smartly and carefully. On a schedule that meets the needs of our customers and supports the economics of our business. This approach is fundamentally different than the path we have been on for the last four years. Unfortunately, the capacity investment we made over the last several years was well ahead of demand and was unwise and excessive. Our factory footprint has become needlessly fragmented. Going forward, we will grow our capacity based solely on the volume commitments and deploy CapEx in lockstep with the tangible milestones and not before. As part of this new financial discipline, we have decided not to continue with our manufacturing projects in Germany and Poland. We also plan to consolidate our assembly and test operation in Costa Rica into larger existing sites in Vietnam and Malaysia. We will further slow the pace of construction in Ohio to ensure our spending is aligned with market demand. Importantly, based on the progress we have already made in Ohio, we have flexibility to accelerate work as needed to meet customer needs. Turning specifically to process technology development. On Intel 18A, we will continue to make steady progress on our yield and performance targets. Intel 18A is the foundation of at least the next three generations of Intel client and server products, and we remain committed to ramping this technology to scale. Intel 18A and Intel 18AP are critical nodes for Intel products and will drive meaningful wafer volumes well into the next decade. Our foundry and product teams remain focused on enabling Panther Lake to launch this year. Once we get our own product ramping in high volume, we will be in a better position to attract external customers to this technology. The Intel 18A family is also important as we continue to advance our work for the U.S. government within the Secure and Grave programs, as well as for other initial committed customers. On Intel 14A, the foundry technology team is continuing to focus on the basic building blocks, technology definitions, and transistor architecture, process flow, design enablement, PDKs, foundation IPs, and test chips to validate and improve performance and defect density. Designing 14A at its inception as a foundry node from the ground up better positions us to meet specific customer requirements and address a broad segment of the market. This work is being driven and informed by direct input from large external customers and from our own internal product teams. A key aspect of prudently pursuing our foundry ambition is also making sure we maintain sensible optionality for our internal product teams. They will continue to work closely with both internal and external foundry partners. They will do their homework and make process and supplier decisions based on what is best for our end customers against criteria of performance, cost, yield, and time to market. Our external foundry strategy has always been rooted in the economic reality of semiconductor manufacturing. Up to and through. Intel 18A, we could generate a reasonable return on our investments with only Intel products. The increase in capital costs at Intel 14A makes it clear that we need both Intel products and a meaningful external customer to drive acceptable returns on our deployed capital. I will only invest when I'm confident those returns exist. I'm intimately familiar with the foundry and fabless ecosystem, having helped create it over the last two decades. I'm using that experience to put our Intel foundry on a more solid footing for the future. I will do so while being prudent with our capital and ensure we can deliver attractive returns on the investment we make. I do not subscribe to the belief that if you build it, they will come. Under my leadership, we will build what customers need, when they need it, and earn their trust through consistent execution. Next, onto our call. X86 franchise. In client, our top priority is delivering our first Panther Lake SKU by year-end, followed by additional SKUs in the first half of 2026. The successful launch of Panther Lake will solidify our strong share in the notebook market across consumer and enterprise. We still have gaps to close in the high-end desktop market, but I'm encouraged by our unmatched go-to-market reach, our x86 ecosystem, and the progress we are making on Nova Lake, due out at the end of 2026. In traditional servers, we continue to have solid position in AI host nodes and storage, where our single-threaded performance has been optimized for those workloads. Granite Rapids is ramping as planned, and we continue to see good demand for our more established server products. Sustainable share improvement in this market will take time. Specifically, we need to improve in broader hyperscale workloads, where performance per watt is a key differentiator. I have also taken steps to correct past mistakes regarding multi-threading capabilities on our P-cores. I'm also making progress on bringing in new leadership in our data center business and look forward to being able to announce these changes next quarter. Longer term, my directive to our silicon and platform teams is to define products with clean and simple architecture, better cost structure to simplify our SKU stack, all while enabling a path to robust product margin. I'm also instituting a policy where every major chip design needs to be personally reviewed and approved by me before tape-out. I have already begun this process. This discipline will improve our execution speed and move us towards a first-time-right mindset while also saving development costs. Finally, turning to AI, in the past, we approached AI with a traditional silicon and training-centric mindset without a cohesive silicon systems software stack and strategy. While we do need to build and consolidate upon our silicon franchise based upon our x86 CPU and our Xe GPUs, we recognize the need to move up the abstraction stack into system and software. This is the area where Intel has traditionally been weak or entirely absent. We intend to incubate and grow these important skill sets and capabilities under my leadership. This will take time, but it will be vital for Intel to stay relevant in the next wave of computing. In addition, we see the AI market continuing to evolve, and we are concentrating our efforts on areas we believe we can disrupt and differentiate, like inference and agentic AI. We need to start by first understanding emerging and real AI workloads, then work backwards to design software systems and silicon to enable the best outcome for those particular workloads. We will strive to become the compute platform of choice. We will also work towards a full-stack AI solution, and I look forward to sharing more on our strategy in the coming months. Underpinning all of these efforts is a strong focus on improving our balance sheet. We continue to maintain solid liquidity, but despite meaningful capital spending offsets, our last full fiscal year of positive free cash flow was 2021. This is completely unacceptable. How we allocate our owners' capital and the return we generate for them are of paramount importance to me. We have several major levers to generate better cash flow, including driving operating leverage and managing our capital outlays. I discussed earlier the actions we have taken to reduce operating expenses and improve execution. I'm very confident in our ability to hit our operating expenses targets for 2025 and 2026, respectively. We have already lowered our CapEx guidance from the beginning of the year by roughly $5 billion year-to-date. While purchasing commitments make further reduction in 2025 difficult, we will continue to work to reduce capital spending in 2026. Lastly, as it relates to our non-core assets, we successfully monetized a portion of our ownership of Mobileye earlier this month, and we look forward to closing the Altera transaction with Silver Lake this quarter. I will evaluate other opportunities as we continue to sharpen our focus around our core business and strategy. I believe the actions we have taken during my first few months are steering us in the right direction. That said, I also know that turning the company around will take time and require patience. We have a lot to fix in order to move the company forward, and I'm determined to drive the changes necessary to improve our performance. I am equally optimistic that as we execute, we will rebuild this company and have a bright future. I will now turn it over to Dave to go into more detail on the financials. Thank you, Lip-Bu. I'll start by characterizing the prevailing market conditions in Q2. On our Q1 earnings call, we signaled the economic landscape had become increasingly uncertain, driven by shifting trade policies, persistent inflation concerns, and increased regulatory risk. Fortunately, markets largely functioned normally in Q2, enabling the fundamental demand drivers underpinning our core markets to manifest. In client, we saw continued solid demand driven by the end-of-service for Windows 10 and the aging COVID-era installed base. In addition, AI PCs continued to grow as a percentage of our mix. On the traditional server side, we saw hyperscalers and enterprises continue to refresh their CPU installed base to take advantage of our newer products with better performance within a lower power envelope. Both dynamics underscore the durable demand within our two largest markets and the enduring strength of the x86 ecosystem. Second quarter revenue was $12.9 billion, coming in above the high end of our guidance range, driven by strength across client and data center. Similar to comments we made in Q4 and Q1, we think it's likely Q2 revenue benefited from customer purchasing behavior to mitigate tariff uncertainty, although it continues to be difficult to quantify. Turning to non-GAAP gross margins and EPS, last quarter, we indicated that incremental costs associated with our spending reduction plan would likely impact non-GAAP gross margin. Since those costs were not yet calculated, they were not included in our Q2 gross margin and EPS guidance of 36.5% and break-even, respectively. As such, we recognized approximately $800 million of non-cash impairment and accelerated depreciation charges related to excess prior-generation tools for which we couldn't find reuse, and approximately $200 million of one-time period costs. These charges resulted in Q2 gross margin of 29.7% and EPS of minus $0.10. Excluding these charges, our second quarter non-GAAP gross margin would have been 37.5%, and non-GAAP EPS would have been $0.10, both results ahead of our Q2 guidance. Beyond those costs, we also were impacted by $1.9 billion of charges that are excluded from our non-GAAP results. The large majority of those charges are associated with the severance for our headcount reduction aligned with our restructuring plan. We expect the principal cash cost associated with the restructuring charges to land in Q3 2025. While difficult, these decisions have us firmly on track to meet our calendar year 2025 and calendar year 2026 OpEx targets of $17 billion and $16 billion, respectively. Q2 operating cash flow was $2.1 billion, with gross CapEx of $4.5 billion in the quarter and net CapEx of $3.1 billion, resulting in adjusted free cash flow of negative $1.1 billion. We have $21.2 billion of cash and short-term investments and remain focused on beginning the process of delevering this year as cash from operations continues to improve. Moving to segment results for Q2, Intel products revenue was $11.8 billion, up slightly sequentially and above our expectations across client and server. I was pleased by the team's ability to support revenue upside in the quarter as capacity for Intel 7 remains very tight. CCG revenue was up 3% quarter over quarter and above our expectation with continued PC refresh demand and upside in edge deployments. Within the quarter, CCG launched a number of AI PCs with key OEM partners, announced the expansion of its Arc GPUs for AI use cases tailored to inference and professional workstations, and made its open-edge platform code available to the developer community, all in support of the growing opportunity for us to compete as AI inference moves to the edge. PC AI revenue was down 5% sequentially but above expectations, driven by variability in hyperscale demand, partially offset by continued strength in host CPUs for AI servers and storage compute. In addition, we saw upside to plan on the continued ramp of Xeon 6 code-named Granite Rapids. In Q2, DCII launched three new Xeon 6 processors with priority core turbo technology to boost AI workloads. One of these Xeon 6 SKUs was selected as the host node for NVIDIA DGX B300 AI accelerated systems, and the Imperial College London chose Xeon 6 to power its latest HPC supercomputer, demonstrating Xeon remains the CPU of choice for AI workloads. Operating profit for Intel products was $2.7 billion, 23% of revenue, and down $250 million quarter over quarter, principally driven by the period costs I highlighted earlier. Intel Foundry delivered revenue of $4.4 billion, down 5% sequentially and above expectations on better-than-forecasted output of Intel 7 wafers and increased advanced packaging services. In Q2, 18A reached a key milestone with the start of production wafers in Arizona ahead of Intel products' Q4 launch of its next-generation client product code-named Panther Lake. Intel Foundry released an early version of Intel 14A's PDK to lead external customers and, at Direct Connect in April, announced an EMIB advanced packaging partnership with Amkor. Intel Foundry operating loss in Q2 was $3.2 billion, down $848 million sequentially, materially driven by the $800 million impairment charges I discussed earlier. Turning to all other, revenue came in at $1.1 billion and was up 12% sequentially and above expectations. The three primary components of all other are Mobileye, Altera, and IMS. Collectively, the category delivered $69 million of operating profit. Now turning to guidance. Historically, sequential growth in Q3 has been up high single digits. However, we have seen three quarters of revenue growth above our expectations, which we attribute, at least in part, to customers hedging against tariff uncertainty. As such, while we believe the underlying fundamentals of our core markets support growth, we feel it prudent to continue to plan for a below-seasonal second half of 2025. As such, for Q3, we are forecasting a revenue range of $12.6 billion-$13.6 billion, down 2% to up 6% sequentially. Within Intel products, we expect more strength in CCG. We expect Intel Foundry revenue down slightly quarter over quarter due to capacity constraints in Intel 7, which we expect to persist through the second half of the year and reduced expectations for external advanced packaging revenue. For all other, we expect revenue for the sum of those parts to be roughly flat sequentially. At the midpoint of $13.1 billion, we expect a gross margin of approximately 36% on an increased mix of outsourced products, the early ramp of Panther Lake, and increased costs associated with tariffs. We forecast a tax rate of 12% and break-even EPS, all on a non-GAAP basis. We're forecasting 2025 OpEx of $17 billion, with a 2026 OpEx target of $16 billion. We expect non-controlled income, or NCI, to be approximately $250 million-$300 million in both Q3 and Q4 on a GAAP basis. NCI is still expected to grow meaningfully in fiscal year 2026. In Q2, we took tangible steps to increase focus on our core business while leveraging non-core assets to shore up the balance sheet. We raised approximately $900 million through the Mobileye offering, and we are on track to complete the stake sale of Altera in Q3. Our guidance includes Altera for the full quarter, but we will deconsolidate at deal close. Once the deconsolidation is complete, we will recognize our remaining Altera investment within equity investments on the balance sheet. On the income statement, we will recognize our proportional share of Altera's net income on a one-quarter lag through gains and losses on equity investments net, which is excluded from our non-GAAP results. As a result, it is likely our Q3 non-GAAP results will reflect only a portion of the financial results for Altera. Moving to CapEx, we anticipate 2025 gross capital investment will be approximately $18 billion and forecast $8 billion-$11 billion for net CapEx. Better utilization of our construction in progress will allow us to deploy more overall CapEx in 2025 than in 2024, and we expect the improved utilization to continue in 2026, resulting in lower gross and net CapEx next year. Beginning the process of delivering our balance sheet in 2025 remains a top priority for us. I'll wrap up by saying Q2 operationally was the third consecutive solid quarter reflecting our commitment to maintain a high say-do ratio, closely manage what's in our control, and react quickly as the environment evolves. I have confidence that the strategic priorities we've established are the right ones, and I'm optimistic about our ability to execute on them while acknowledging there are no quick fixes. With that, I'll turn over to John to start the Q&A. Thank you, Dave. We will now transition to the Q&A portion of our call. As a reminder, we ask each of you to ask one question and a brief follow-up question where applicable. With that, Jonathan, can we take the first question, please? Certainly. And our first question for today comes from the line of Ross Seymour from Deutsche Bank. Your question, please. Hi, guys. Thanks for letting me ask a question. Lip-Bu, the first one's for you, and thank you for walking through the strategic details that you're putting into place. It seems like fixing the foundry side is based on trust, as you said before, and that trust seems to have its origin in fixing the x86 side of the business. So I guess my question is, how fast can you fix that? I know you are having to sign off on every tape-out, but is the trust that 18A can ramp dependent upon Nova Lake and Diamond Rapids? Are we talking 2027, 2028? What are the sort of steps we need to see to build that trust in your x86 business so that the foundry business can ramp? Ross, thank you so much for a good question. First of all, we focus on the 18A. So far, the last two months, I have twice a week review with the team, and we make steady progress on our technology towards the yield, performance target, and reliability. I think, as you mentioned, 18A is the foundation for at least three generations of our Intel client and server business products, and we are committed to ramp that. So far, it gave me the confidence we're engaging with external ecosystem partners to help us to look at the yield and how can we improve. In the past, we didn't engage that. I really see that the feedback from the partners that, hey, the culture, the intensity for our team is really focused on the yield performance, and they really like the attitude on that. So far, I think it gave me a lot of confidence that we can launch our Panther Lake SKU by the end of the year. Also, I think the external customer encouraged the secure enclave with the US government, and then with the sufficient internal volume, and then showed the good progress, then we can have a better attraction to our external customer. I think this is a process to kind of build the trust with the customer. They can count on us on the reliability, the yield, and we can deliver on time, on scale, to really support them. Then they're going to just put the resources on their revenue based on our foundry. There's a lot of responsibility for us to deliver with high quality. That's something that I feel very committed, and we like what I see. It gave me a lot more confidence. Ross, do you have a follow-up question, please? Yeah, I do. One, potentially a little nearer term for Dave on the gross margin side. You mentioned that the gross margin was guided down a bit sequentially for a couple of different reasons. Can you dive a little deeper and a little more deeply into those? And perhaps more importantly, just what do you see as the tailwinds and headwinds to gross margin as we look, say, into next year? I know you're not going to guide it specifically, but just some of the puts and takes would be great. Thank you. Yeah. Okay. Thanks, Ross. Yeah. Let's just delve into the gross margins for the third quarter. I'd say the predominant driver of the lower gross margins in the third quarter is Lunar Lake. We expect a pretty significant ramp in Lunar Lake in the third quarter. I've made this comment, I think, multiple times on calls, but it's got the memory in the package. We kind of pass it on at the same cost we bought it, and that really has a negative impact on the way the gross margins look optically. As we mix higher to Lunar Lake, that's obviously going to be a headwind to us in terms of gross margins, as expected, but perhaps having a little bit more of a significant transition from 2Q to 3Q. We thought we'd have probably more volume in 2Q. The second big driver of gross margins is the ramp that Lip-Bu just talked about of Panther Lake. Obviously, we're in the early stages of the maturity of Panther Lake, so the cost per wafer is going to be higher. That is going to drive some headwinds. Obviously, as Lip-Bu said, yields improve. More importantly, volumes increase. That reduces the cost. That will transition to a tailwind ultimately. I think next year, the big benefit for us is this significant ramp in Panther Lake, given that we're bringing a fair amount of wafers back inside. That drives a lower cost, and we get the better cost structure of Panther Lake showing up with the higher volumes. That's clearly going to be beneficial to us in terms of gross margin. That said, a lot of this will be determined on mix, and we'll have to see how things play out through next year in terms of the mix. The last thing I'd say, and maybe this is maybe even a little bit more longer term than you asked the question, Ross, is the way we think about foundry. As we ramp more leading-edge nodes, that is going to be a benefit to us in terms of gross margins. We think foundry gross margins will expand next year, and that will be a continuing story out for several years. The other side of things is the product side. I think there are three levers to products. One is pricing. As Lip-Bu said, he's really focused on bringing out products that customers really value. As that becomes a reality, it'll show up in the pricing. That will help us on gross margins. The second is the cost structure. Lip-Bu's also really focusing on cleaner designs, simpler designs, driving more efficient use of silicon, and so forth. As we get better cost structure as well over time, and there are products on the roadmap that already have it, even as POR, we'll see improvement in gross margins. Then in the near term, while all this is going on, I'm looking at all the other extraneous things that drive cost of sales, how many samples we do, how we run the fabs, and so forth, and driving improvements there to position us for better gross margins. Ross, thanks for the question. Jonathan, can we have the next question, please? Certainly. Our next question comes from the line of Timothy Arcur from UBS. Your question, please. Thanks a lot. Lip-Bu, I wanted to ask about the foundry strategy. You did add a bunch of risk factors and language on 14A that kind of seems to leave the door open to kind of walking away from its development. I know you did talk about some of that, but if I'm an outside customer and I'm looking at your roadmap and I see this hedging on 14A, why would I engage? I guess, how do you sort of marry the hedging on 14A development with trying to build an external foundry business? I guess I kind of read it as maybe a hard pivot away from foundry and doing what's right for the product business. Can you sort of talk about that? Yeah, very good question. I think on the 14A, first of all, I think the team is laser-focused on building up the basic building blocks: technology, definition, transistor, architecture, process flow, design enablement, PDK, and foundation IP, and the test chip to verify and improve the performance and the defect density. Saying that clearly, we learned quite a lot on the mistake we made on the 18A, and now we're applying to the 14A, so I think we learned a lot. Secondly, we also reach out to the outside partners to help us with showing them the data and how can we improve the yield per month so that we can drive that. Gives me a lot of confidence we can get there. Even more important, we're engaging with customers. They're going to enable us, and then with clear milestones to execute in terms of process development and with PDK, with all the different IP that we need to really put it together. I think that gave me a lot more confidence that this time we have customers engaging early enough in the inceptions, and also we learned from our mistakes, and we can learn quicker and then get a better result. All in all, I think I give a lot more confidence. The team is laser-focused, and the feedback from the partners and the outside is that, "Wow, Lip-Bu, the culture is changing, and you guys are really focused on the yield rather than just performance." I think that part will be able to enable us. Plus, the other part is we really engage with all the external EDA and IP providers, make sure that we have the whole. Program together to do the pattern matching for the customer. The good news is customers are excited. The 14A is a process node, but clearly, I want to make sure that until I see the internal customer, external customer volume commitment, before I put CapEx into the operation. That is something that had to meet my requirement in terms of performance and yield. It's a lot of responsibility to be serving our customers, make sure that we can deliver the result, consistent, reliable result to them so that their revenue can depend on us. Tim, do you have a quick follow-up question? I do. Yeah. I guess I just kind of wonder how an external customer would continue to be engaged. The question really is for Dave. Dave, you talked about CapEx coming down next year. What is maintenance CapEx? How much can you cut CapEx next year? Could you take $5 billion out of gross CapEx next year if you can give some sense on that? Thanks. Yeah. Okay. Good question. Let me unpack it a little bit. I would say why CapEx can come down next year is we bought a lot over the last few years, quite honestly, and we have to digest that. That enables us to deploy more capital than we have to spend, which I guess is a good thing at this point. That's what's driving the fundamental view that we should be down in CapEx. It's not really moving it to maintenance CapEx, I would say. To kind of ballpark a number, I'd say probably half our CapEx is our normalized CapEx at this $18 billion level for this year is probably what you consider sustaining or maintenance CapEx. Thank you. Jonathan, can we have the next question, please? Certainly. Our next question comes from the line of Joseph Moore from Morgan Stanley. Your question, please. Great. Thank you. You mentioned again the Intel 7 being in short supply through the end of the calendar year. Can you talk about what's driving that? Are you going to be able to drive more volume to the Intel 4 products? Do you have to add wafer starts in Intel 7? Just kind of curious what's going on with that. Yeah. I mean, Raptor Lake is doing really well. That's the biggest driver of it. That's why back to my comments around Lunar Lake ramping next quarter. What we're really seeing a lot of strength in is Raptor Lake right now. I think the price points of Raptor Lake are, I think, where a lot of consumers and enterprises are buying PCs. That's what's kind of pulling it in. I do suspect that we'll see mixes change. You mentioned Intel 4, Meteor Lake, and of course, we are ramping and we're in the process of ramping Granite Rapids, which will drive more volume of Intel 4. We're already building out. The capacity and wafer routes in that area. Joe do you have a follow-up question? Yeah, I do. Coming back to the CapEx, I mean, you still have the large amount of construction in progress that has not yet been productively employed. Are you going to be able to get full value out of that? I know there was a shelfware strategy. Is it going to continue to persist that there is a large amount of that, or will you start depreciating that at some point? Yeah. There was a big chunk of it that was Arizona, actually. We actually flipped that at the beginning of this quarter. That is obviously already ramping on 18A. We actually saw it come in. I think it was north of 50 at the end of 2Q, $50 billion. I think we are at this point now down into the kind of mid to high 30s. We have made a significant move in the right direction. Construction parts or assets under construction is a mix of equipment and buildings. The other thing that we are doing is trying to use more of that. That will also bring the number down. We should have a steady improvement in that number through the rest of this year. The goal is to drive it down further next year. That said, we are going to want to continue to have optionality on fab white space. While we are slowing down Ohio, we are not stopping Ohio. We are going to continue to make investments. There will be assets under construction or construction in progress on our balance sheet to make sure we have flexibility as the demand drivers change. Thanks, Joe. Jonathan, can we have the next question? Certainly. Our next question comes from the line of Benjamin Rice from ULIS. Hey, guys. Thanks for the question. Wanted to ask about servers. I may have missed it, but what is the trend you are expecting into the third quarter? What are your thoughts about share losses there and when perhaps those dissipate a bit into the following year? Let me see. Oh, okay. I will take we are not giving out the guidance by business unit. We are roughly up a little bit. We will have to see how things play out between servers and CPUs. As far as share goes, obviously, we are not where we want to be in terms of a competitive portfolio. That is what Lip-Bu is really focused on improving. That said, Granite Rapids is a better part. Diamond Rapids, the next part, will be a better part. We think we continually improve our relative competitive position. To really be where we want to be still takes some work. I think the great thing about it is we actually have held share relatively well despite our position in the market in terms of performance. I think it is a good testament to. The x86 ecosystem and the strength of that. And our particular capabilities in the x86 system in terms of the ecosystem that we provide to our customers. Ben, do you have a follow-up? Yeah. I was wondering if Lip-Bu would mind expanding on his commentary around the AI strategy. Obviously, you're going to be updating that at some point if you don't mind clarifying when that will be. But are you inferring that you have a GPU-centric strategy or something else? And how should we be thinking about how you're going to attack that market? Thanks. Yeah. Very good question. I think we're going to unfold our AI strategy in the months to come. But let me just share with you. I think we're going to look at it from where are we going to target and focus. First of all, it's the inference side and also the agentic AI. That is really taking off. We want to provide that interception on that. We're going to take a different approach. We're going to look at the whole system, software to the silicon, and then drive the performance. The agentic AI is very important, is the accuracy and speed. I think with all this AI, compute is going to be even more intensive. The workload is a little bit different. We want to look at how can we intercept using our franchise of x86 and then with the accelerator and then somehow drive that whole become the compute platform of the future. Those are the things that were in the drawing board. We are working on it. We will share with you when we are ready. So far, the engagement with customers, they love what we are. Basically, we had to put the team. We're delighted. We add on a few team members to come on board. Also, we're going to focus on adding more software talents in a way that we can really drive some of this opportunity and be a player in this opportunity. Ben, thanks for the question. Jonathan, can we have the next question, please? Certainly. Our next question comes from the line of William Stein from Truist Securities. It's your question, please. Great. Thank you for taking my question. Lip-Bu, I'd also like to lean into this AI topic a little bit because I think you might not have used the words full stack, but that's certainly what it sounds like. When I think about the opportunity that Intel has, I guess I've thought of it as, do you want to be sort of like NVIDIA? But NVIDIA already has a very established position. You have cloud service providers doing ASICs, and you have AMD trying to do the same thing. It sounds almost like you're aiming to be the third or arguably the fourth supplier in a market where there's really only. Two successful in so far, NVIDIA and some of its customers. I wonder to what degree you have considered or are still considering another approach, like doing ASICs, to establish a better position in this market. I hope that question makes sense. Any clarification and education you could provide us would help a lot, I think. Thank you. Yeah. Very good question. Thank you. First of all, I think you are correct in what I described about the system software is a full-stack solution we try to provide. Clearly, we are behind. We had tried to find the area that we can really wedge in and drive a different solution and service. I think, meanwhile, I want to play into our strength in the 86 so that we can really play in that whole orchestrating what is the workload and how do we optimize that. The other part is also important to look at some of the new architecture. That's why I am embracing some of the startup and some of the incubating idea so that we can bring that in. Back to another question that you have is the ASIC. We are also very open working with the system company providing the AI platform that it can be a purpose-built and so that really drives their performance. Absolutely, we're going to drive that opportunity. Will it be a follow-up question? Yeah. I'd like to maybe just ask about the write-downs in the quarter. It sounds like that was equipment, but I wonder if there was any inventory in that as well and maybe any clarification on what you're writing down to the degree you think it would help us. Thank you. Okay. Yeah. We did have inventory write-downs, but we weren't isolating that. That's just part of the normal cost of sales roll-up. This particular write-down that we're isolating mostly was around impairments of equipment. There was another couple of hundred million dollars that was kind of an adjustment in terms of how we take some certain extraneous costs originally through inventory and now moving it more to a period cost. The equipment, it was kind of a bunch of different things. I would say I'll give you one of the bigger ones that was an example. We had some tools that we had bought. They were sitting in assets under construction. We had tools in the line that were older tools. We took the opportunity since we had an extra excess amount is we took the newer tools, put them in line, took the older tools out. They had a higher netbook value than the value we can get in the open marketplace if we sell them. We wrote them down to that value. They'll be held in assets held for sale. It was things of that nature. Like I said, mostly older tools that. We just could not find a purpose for. Thanks. Jonathan, can we have the next question? Certainly. Our next question comes from the line of Stacy Rasgon from Bernstein Research. Your question, please. Hi, guys. Thanks for taking my questions. For the first one, I wanted to touch on 18A and 14A. You said 18A would be supplying the next three generations of Intel products. I guess that is 2026, 2027, and 2028. I guess that would suggest 14A, if it comes out, would be 2029 at the earliest. Number one, is that timing correct? And then just within that, given the plans, at least the contingency plans to maybe not do 14A, I mean, I guess the suggestion is if 14A dies, does the foundry strategy die with it? Can you run a sustainable business just on internal volume with 18A and increasing outsource if 14A does not do what it needs to do? Stacey, that is a good question. First of all, I think, as I mentioned earlier, 18A is important to us for the three generations of internal product. When we are ready, then we can go outside with more confidence to get a customer to support us. On the 14A, same as A14 from TSMC, the timing is all in the 2028, 2029. There is no difference, no change. We are laser-focused on the process technology with the two engaging customers and with clear milestones to deliver. We are going to learn a lot. We are not going to put any CapEx until we see the yield performance and also our internal customer and external customer feedback and the volume commitment, then we will put the CapEx in. The perception will be very clear. We are committed to the foundry business. Meanwhile, we are going to be very disciplined in the CapEx deployment, make sure that we see the volume, see the customer commitment, then we deploy. Maybe I will just add one more thing. If I understood the last question, can you still do 18A, I think, is what you said? We actually will not get to peak volumes on 18A until probably the beginning of the next decade. This is going to be a node that we use for a very long time. We are expecting a really good ROI on it. We largely are, let us see, calculating that based on the internal uses for it, given that most of that is coming internally in the near term. I would say I would not write off 18A as potentially getting external customers at some point. Clearly, we probably will not get a lot in wave one as it seems. There will be multiple waves. 18A will find different use cases over time. There will be more opportunities for us to attract external customers after we do so much improvement in terms of performance and yield on our own products. Stacy, do you have a quick follow-up? I do. Thanks. I want to ask about the CapEx. So you talked about sustaining CapEx at like 50% of the current level, which would be like $9 billion, I guess. Should I be thinking about that as a plausible scenario for next year? I mean, if I take the current run rate for this year, the gross CapEx in the first half and $18 billion for the year, it suggests a quarterly run rate of, I do not know, $3.6 billion would be something like $14 billion-$14.5 billion for the year. I guess I am trying to figure out what is a plausible number for where you might land next year, given what you see. Is $9 billion actually on the table, or is it closer to $14 billion? Or what do you guys actually have in mind? Yeah. Fair question, Stacey. I was giving a ballpark, what would be just we were not moving forward with something. Clearly, we are going to need our assets under construction will not be enough to support all our CapEx investments, even with maintenance CapEx next year. We have not quite figured out exactly yet what the plan will look like for next year. We do not lock in our CapEx until early in the year. That would be called sometime in the January timeframe of 2026 that we will lock in 2026's CapEx. I think it is meaningfully higher than $9 billion. Certainly, we think it is going to be less than $18 billion. Thanks, Stacy. Jonathan, can we have the next question, please? Certainly, our next question comes from the line of Vivek Arya from Bank of America Securities. Your question, please. Thanks. For my first question, I wanted to discuss competition in the server CPU market. I see in your 10Q, you mentioned server ASPs are down 8% from last year because of a competitive environment. I thought that rising cores would mean greater ASPs. If you could address that. Then kind of more medium to longer-term, Lip-Bu, how impactful is competition from Arm, who is claiming to take over half the server market? Yeah. Good question. I think let me just look at the server market. Clearly, we still have about 55% market share. Clearly, we have some mistakes we make on the high-end performing server area. One thing is this called synchronized multi-threading. I think it used to be an Intel strength, but somehow we overlook it. Now we are double down, make sure that we will have that performance gap we can narrow. Meanwhile, we are also engaging with some of the big hyperscale and also high-end enterprise. We learn what are the workloads they require. We laser-focus on getting the product roadmap clear and simplify and make it easier to work with us. I think we take all the steps. We listen to customers. One thing that I think we change, we listen to customers very closely and then engage with them early in the product development and definition stage. They love it. I think we have a chance to regain back and then with the new products so that we can really drive the success here. Vivek, do you have a quick follow-up? Yes. Thank you. Maybe one for Dave on gross margins. Dave, let's say if your sales grow mid-single digit next year, hypothetically, what will gross margins do when you look at all the puts and takes around the mix of 18A and what you need to outsource? I know you're not giving specific output, but let's say your top-line growth. Is there a simple formula to look at the gross margins versus the 36% level that you are at right now? Thank you. Obviously, the devil's in the details on this. I think a good rule of thumb is that we get somewhere in the 40%-60% fall-through. Next year, hopefully closer to the higher end of that if things work out in our favor. Thank you. Jonathan, we have time for one last question, please. Certainly. Our final question for today comes from the line of Aaron Rakers from Wells Fargo. Your question, please. Yeah. Thanks for taking the question. I want to go back to the server discussion as well. I know in the past, you guys have talked about the progression of 18A and Clearwater Forest, which I can appreciate is a lower volume SKU. I'm curious, as you think about stabilizing your market share and maybe being able to recapture share, do you think that that's a function of Diamond Rapids? If so, can we at all think about the timing of Diamond Rapids as 2026, second half of 2026? Any clarity on that would be helpful. Yeah. I think it's a good question. I think clearly, we are looking at review our roadmap. You mentioned about Clearwater Forest, then the Diamond Rapids. Clearly, I think the timeframe is a plus and minus six months. I think overall, we are pretty much focused on that. The next generation will be Coral Rapids. Clearly, we're going to review the whole coral market. That will be in 2028, 2029. We make sure that we have robust products to come out. I think it's going to be fine-tune and discuss with the customer, get the validation from the customer. So far, I think we are. We're going to also have a new leader and need some changes I'm making. Clearly, I think we're going to drive that whole data center. It's a very important business for us. We're going to become competitive again. Aaron, do you have a quick follow-up? Yeah, I do. Thanks, John. Real quickly, just Dave, I want to go back to Skip or the Arizona and the Ireland fabs. Just remind us again how we should be modeling that. I think in the past, you talked about a $500 million headwind this year and then that going to like $1.3 billion-$1.5 billion next year and significantly higher in 2027. Any kind of updates? Should we still think about that? Is that increasing? Any color? Yeah. Those are roughly the right numbers to forecast. Obviously, as we get out into the 2027-2028 timeframe, we're kind of hitting the normalized run rates of these skips. It will be higher than the $1.2 billion-$1.3 billion. We'll update you as we progress. Thank you all for joining us today. I must say I have been pleased with the teams and the progress we have made transitioning to a financially disciplined foundry, resetting how we engage with our customers and our partners, and simplifying our operations. I look forward to discussing our continued progress with you next quarter. Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.