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. Good afternoon to everyone joining us today. By now, you should have received a copy of the Q2 earnings release and presentation. Both are available on our investor relations website, intc.com. For those joining us online today, this presentation is also available on our webcast window. I am joined today by our CEO, Lip-Bu Tan, and our CFO, David Zinsner. Lip-Bu will open up with comments on second quarter results and update the progress we're making on strategic 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 presentation does contain forward-looking statements based on the environment as we currently see it. As such, they are subject to various risks and uncertainties. It also contains a reference to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release, most recent annual report on Form 10-K, and other filings with the SEC provide more information on specific risk factors that could cause the actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures, including reconciliation where appropriate to our corresponding GAAP financial measures. With that, let me turn it over to Lip-Bu. Thank you, John. Good afternoon, everyone. Q2 was another quarter of solid execution. Revenue, gross margin, earnings per share were above our guidance. This marks the seventh consecutive quarter of exceeding our financial expectations. Our core message is simple. Strong demand for our products continue to outpace our growing supply. Our design manufacturing execution is improving. Operating discipline we put in place 15 months ago is beginning to show tangible results. Today, we are seeing the strongest revenue growth in more than 15 years. Our cultural transformation continues. Our organization is already operating with greater efficiency, moving faster, making better decisions, and staying closer to the customers. Our recent announcement to deepen our collaboration with Google Cloud will help to accelerate the transformation as we fully embrace an AI-first mentality through our operations. We also continue to strengthen our leadership team with world-class talent. The surging demand and rapid build-out of compute infrastructure across the world creates a meaningful opportunity for us in our product business as well as our foundry business. Industry is facing one of the most severe supply constraints in its history across leading-edge logic, silicon wafers, memory, and substrates. These shortages will persist for the foreseeable future. Intel is well-positioned to benefit from this strong, sustained demand with three strategically important assets, o ur x86 CPU franchise, our advanced packaging technology, and our vast wafer foundry network. As AI expands from training to inference and increasingly to agentic and multi-agent systems, general purpose server CPU density continue to increase, and our core server CPU franchise is growing faster than ever. Demand signals from our customers are driving increased confidence, and as Dave will discuss in more detail, we are substantially increasing our investments to support this improving demand outlook. Let me talk first about Intel Foundry. My confidence in our foundry process roadmap has grown significantly since joining over a year ago. I am more confident than ever of the strategic significant and unique value proposition of Intel Foundry. During Q2, our factories across Intel 7, Intel 3, and Intel 18A exceeded internal volume targets, driven by improving yields, better cycle times, and increasing wafer starts. 18A output increased meaningfully in the quarter. Yields continue to track ahead of expectations. We are now ramping multiple new products on 18A while supporting growing demand for our lead products, including Panther Lake and Wildcat Lake. I keep raising the bar on the internal targets, and the team continues to meet the challenge. The successful volume ramp of 18A for our internal products provide important validations as our Intel Foundry engages with external customers. We also began risk production of 18A-P, providing additional performance and power advantages while maintaining IP and design compatibility with Intel 18A, positioning 18A-P as a competitive node for external customers. Looking beyond 18A, I'm encouraged by our progress on Intel 14A. Defect density and transistor performance are all outpacing 18A development. PDK 0.5 is now complete, and PDK 0.9 is on track for October. We continue to build out and validate the IP portfolio for 14A as we position the 14A family for broad-based adoptions across a wide range of customers. I'm pleased to see the increasing momentum on customer engagements for Intel 14A, and I'm increasingly confident that the 14A will be highly competitive process offering across key vectors of performance, power, density, cost, and schedule. With encouraging external customer progress and increased demand for our internal products, we remain on track for 14A risk production for our internal products in the second half of 2027, and we make the decision in Q2 to fully commit to high volume ramp in 2028. Lastly, on advanced packaging, customer interest for EMIB-T continue to be very high. Technology is compelling, providing capabilities for advanced AI silicon solutions, which are not possible with today's mainstream offerings. We continue to have a growing EMIB-T backlog. Yield and reliability are hitting targets, and we're focused on ramping the technology into high volume and high quality to support customer ramps in 2027. Turning to Intel products, we recently renamed our PC business to our Client Computing and Physical AI Group, or CCPG. We did this to recognize the growing opportunity for AI at the edge. I'm excited to have a new strengthened leadership driving this effort. In our core PC client segment, Intel 18A is now in volume production across multiple commercial and consumer products. Our factory output continues to increase sequentially every month. The successful high volume ramp of 18A for our internal products provides important validations as Intel Foundry engages with external customers. We still have work to do to establish a strong footprint in the edge and physical AI ecosystem but see this opportunity as important future growth driver. Our data center AI group delivered a solid quarter. Demand accelerated across cloud and enterprise as customers increasingly recognize the critical role that CPUs in general, and x86 CPUs in particular, play in the AI infrastructure. Q2 year-over-year server growth was the strongest on record, Xeon 6 continue to be one of the fastest ramping products in Intel history, reflecting improving execution and strong customer demand. We are also strengthening our outlook with the additional strategic customer wins and long-term agreements in Q2. Our top priority is to ramp capacity and improve factory output as quickly as possible to support customer demand, even as we work to improve our competitive roadmap. We also extended our heterogeneous AI strategy through a multi-year collaboration with SambaNova. We are pleased with their growing momentum as we work with them to drive performance and power improvements with disaggregated inference. Lastly, we continue to make steady progress in our newly announced design services business, with revenue growing nearly 3x year-over-year. We see tremendous opportunities to leverage our strong x86-based general purpose computing franchise to build more purpose-built computing products for the AI era. Our unique assets in end-to-end design, our IP portfolio, combined with access to our leading-edge wafer and packaging capabilities, position us well to win this fast-growing space. We are already making great strides in expanding our purpose-built portfolio from networking to compute, and eventually accelerators. Our recently announced collaboration with Fortinet for their security processor is a strong step forward in our ASIC strategy in the quarter. As we look ahead, I'm excited to see new Intel take shape. We are operating with greater speed, accountability, and customer focus. While there's still significant work ahead, our priorities are clear. Leverage on our x86 computing franchise to strengthen our product leadership and establish Intel Foundry as a world-class wafer and packaging foundry business. Intel is uniquely positioned to benefit from the overwhelming demand for compute as the entire industry continue a rapid and sustained build-out of compute infrastructure. We are the only company that can design, manufacturing, build the entire range of computing solutions from general purpose, traditional CPUs and GPUs, to more purpose-built ASICs and CPUs optimized for agentic AI. As we increasingly move from compute dominant by system on chip towards system in package, our advanced packaging and wafer foundry capabilities become increasingly vital assets. Our strategy is clear and p ace of execution is accelerating. Opportunities in front of us are substantial. Our strategy is showing early results, I'm confident that Intel is well-positioned to help define the next era of computing. I want to thank our employees around the world for their focus, discipline, hard work every day, and also thanks our many customers, partners, and suppliers for their continued trust in Intel. With that, let me turn the call over to Dave to walk through our financial results in more detail. Thank you, Lip-Bu. We delivered another strong quarter, driven by robust demand and disciplined execution that resulted in upside to our supply. Second quarter revenue was $16.1 billion, $1.8 billion above the midpoint of our guide. Collectively, our AI-driven businesses grew greater than 70% year-over-year, including record data center growth, and contributed approximately 70% of revenue. It's important to note that despite exceeding our expectations for wafer outs in the quarter, strengthening demand continues to outstrip our growing supply. Q2 non-GAAP gross margin was 41.8%, approximately 280 basis points better than guidance. The upside was driven by higher revenue, better yields, and higher ASPs due to mix and pricing actions. We delivered second quarter non-GAAP earnings per share of $0.42 versus our guidance of $0.20 on higher revenue, stronger gross margins, and solid operating leverage. Q2 operating cash flow was $7 billion. We exited the quarter in a strong liquidity position, including approximately $30 billion in cash and short-term investments. Our Q2 results reflect the ongoing progress in our operational transformation. We're moving faster, holding ourselves more accountable, and staying closer to our customers. Moving to segment results. CCPG revenue was $8.9 billion, up 15% sequentially and better than our expectations. The client TAM continued to hold up well despite broad component constraints and price inflation. Our AI PC revenue grew 26% sequentially and now represents two-thirds of our client revenue mix. In addition, we saw solid performance in our edge deployments, now representing roughly 10% of CCPG revenue. Operating profit for CCPG was $2.3 billion, 26% of revenue and down approximately $173 million quarter-over-quarter due to inventory charges taken to optimize our factory network through overall customer demand across client and server. Our client group has now brought 18A to full scale with 400+ designs for Series 3 across consumer and commercial. During a period of inflationary pressures, CCPG brought Core Series 3 to market at the ideal time on its [A] stepping to provide cost-optimized mainstream compute capabilities. Our integrated Arc graphics solution continues to see strong market adoption with 40+ Arc integrated graphics designs across creator, workstation, commercial, and gaming-targeted designs. Building on our success in gaming notebooks in Q2, CCPG also introduced Intel Arc G-Series processors, a new family of products designed for next-generation handheld gaming systems, an additional vector for growth. On the commercial side, activations for our market-leading vPro Manageability software have surged 1,500% over the last four quarters, underpinning that manageability and enhanced security are critical must-haves in the agentic workplace. We expect enterprise adoption of AI to be a long-term tailwind for CCPG. Our AI-driven market prospects don't stop there, as the edge and physical AI opportunity is likely to at least match the client TAM over time. CCPG showcased this growing opportunity with 130 Series 3 design wins for edge AI applications, including brain and control deployments for robotics. DCAI revenue was $6.3 billion, an increase of 24% sequentially and 59% year-over-year, meaningfully ahead of expectations. The result was driven by strong demand across hyperscale and enterprise. We also continue to see strong momentum in our purpose-built silicon product line, with revenue up roughly 20% sequentially and nearly tripling year-over-year. Operating profit for DCAI was $2.5 billion, 40% of revenue and up approximately $1 billion quarter-over-quarter on higher revenue, improved product margins, and lower operating expenses. Within the quarter, DCAI launched Xeon 6+, codenamed Clearwater Forest, our first server-class product on 18A. The team announced rack scale and disaggregated inference innovations with partners SambaNova and Foxconn. In addition, DCAI further enhanced our connectivity offerings by introducing new controller and adapter products supporting data center, enterprise, and telco applications, which scale from 10 GbE- 200 GbE. Turning to Intel Foundry, revenue of $5.8 billion was up 6% sequentially on higher fab volumes driven by strong growth in Intel 18A, with output approximately 25% above target and up more than 50% quarter-over-quarter. External foundry revenue was $293 million in the quarter. Intel Foundry operating loss in Q2 was $2.1 billion and $348 million better quarter-over-quarter as higher yields improved cycle times and increased factory scale across Intel 4, Intel 3, and 18A drove improved wafer costs. Progress on 18A has been very good. Intel Foundry has driven down the cost of our primary Panther Lake SKU by roughly 50% year-to-date and is on track for an additional 20% this year, with further meaningful reductions planned in 2027. Within the quarter, in addition to delivering output above our expectation, Intel Foundry also entered risk production for 18A-P and met critical milestones towards delivering the PDK 0.9 for Intel 14A in October. We stepped up investments in Q2 for Intel 14A to prepare for risk production in 2027 and committed high volume ramps in 2028. Now turning to guidance. Looking ahead, customers continue to signal a strong and sustainable spending environment driven by the unprecedented demand for AI compute. Industry-wide supply constraints across wafers, memory, and substrates remain the dominant challenge our customers are facing to support the AI infrastructure build-out. Our wafer output across our major nodes exceeded expectations from 90 days ago, and Q3 quarter-to-date 18A yields are trending ahead of targets set in March. Even with this strong execution and the positive trends as we enter the quarter, supply remains very tight, and the near-term linearity of our supply growth is more skewed towards the end of Q3 and into Q4, especially for servers. From an end-market perspective, we expect PC consumption to be sub-seasonal in the second half of the year and down low double-digits percent for all of 2026, impacted by rising memory prices and constraints. This is in line with industry peers and third-party estimates. At the same time, improving supply, a strengthening product portfolio, and encouraging tailwinds for edge deployments provide us with some positive offsets. Our outlook for server CPU demand has improved again since our last earnings report, and we're forecasting strong double-digit unit growth for the industry this year and next, with momentum extending into 2028. Taken together, we're guiding Q3 revenue to a range of $15.8 billion-$16.8 billion. At the midpoint of $16.3 billion, we forecast gross margin of 42%, a tax rate of 11%, and EPS of $0.38, all on a non-GAAP basis. We continue to tightly manage non-GAAP operating expenses to roughly $16.5 billion for the year, and we expect non-controlling interest, or NCI, to net to approximately $250 million in each of Q3 and Q4 of this year and be approximately $1.1 billion for 2027 and 2028 on a GAAP basis. Turning to CapEx. Due to strong customer demand signals, we're raising our outlook for 2026 and now expect our CapEx to be more than $20 billion, which is up significantly versus our expectations entering the year. We're also aggressively locking in tool purchase orders from our vendors, accelerating our clean room build-outs, and actively securing supply of substrates and memory. As a result, we're forecasting 2027 capital expenditures to be significantly above the 2026 levels, with the vast majority spent across our U.S. network. In fact, as we look back from 2021 through 2026, our total capital spending in tools and space in the U.S. is approaching $100 billion, significantly higher than any other semiconductor company over that timeframe. We remain committed to tightly matching our expenditures with customer demand and remain financially disciplined as we capture the growth ahead. In closing, Q2 was another strong quarter, financially and operationally. The client TAM is unfolding as expected, and server CPU demand continues to far outpace available supply. Emerging markets in physical AI, purpose-built silicon, advanced packaging, and external wafers are each multibillion-dollar annual revenue opportunities for us in the not-too-distant future. I'm confident in our ability to leverage our broad IP portfolio to solve our customers' most pressing needs and drive long-term value for our shareholders. With that, I'll turn it over to John to start the Q&A. 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. With that, Jonathan, can we take the first question? Certainly. Our first question for today comes from the line of Ben Reitzes from Melius Research. Your question please. Hey, guys. Thanks a lot. Quarter, I wanted to ask about the CapEx increase by about $3 billion this year and significantly next. What does that imply for your foundry customers? Does it mean that you've received some hard orders for Intel 14A or 18A-P? Then what does it mean for packaging, if you could delineate between the two? Thanks. Okay, let me just write that down. Okay, let me take the second one first. The CapEx is fairly broad-based. It's going to include advanced packaging, as Lip-Bu talked about. We're pretty excited about our prospects on EMIB-T, we will be investing in that. That said, the cost of a fab for the front end is much more expensive than a packaging facility, so it will be skewed towards the front end. Nevertheless, both of them will be important to us. As it relates to customers, I would just say that this increased investment is a signal of our confidence in customers across all of our business units. We feel very confident, particularly in places where we've gotten long-term agreements, that we now have the signal to be able to forecast out what the outlook looks like for the next few years in terms of demand, we're putting forth the capacity in anticipation of that across all of our businesses. That said, as I said in the prepared remarks, we remain very disciplined around spending, Lip-Bu, I think, has beaten that into us, that we will put CapEx in place when we feel very confident we can generate a very good return on it. These fabs that we're building, obviously, initially, from a cash flow perspective, are net cash out. That's why you see the CapEx going up next year. Over time, they generate significant return, and particularly now as we migrate towards a model where we keep these processes on longer. The returns are quite significant. In fact, we're seeing that in Intel 7 today, given the length of time we had that process in place. Ben, do you have a quick follow-up? Yeah. Hi. Thanks. Your competitor today talked about raising the CPU TAM by 2030 to $220 billion with a CAGR, I believe, of 45% or something really great. Can you comment on that? Are you seeing the same thing, and what do you think of either that number or the growth rate and your ability to fulfill it? Thanks. Yeah, without putting a number out there, we obviously recognize that this is a strong market. It's going to grow significantly. Lip-Bu's talked in the past about the ratio of CPU to GPU going up, and we now believe we're almost in parity at this point and could eventually even skew more to CPUs on a unit basis. I think this market's great. We think we have a strong position in the market, an opportunity to capture a significant share of that market. It's going to be a big number. Whether anybody can actually predict exactly the number and pinpoint the number, I'm not sure they can. From all the inputs we're getting from our customers in terms of the level of spend and also the long-term agreements we've put in place and the visibility we've gotten, we feel like the growth is going to be significant. Thanks, Ben. Jonathan, can we have the next question, please? Certainly, Our next question comes from the line of Joe Moore from Morgan Stanley. Great. Thank you. I guess following up on the CPU comment. What do you think happens to your market share in the server space? You have fabs now, which would seem to be an advantage. Do you think that helps you gain share this year? Then as you think about the next five years, your competition versus both AMD and also versus Arm, just how are you guys thinking about the prospects for regaining lost share? Yeah, maybe I can start first, Then Dave can chip in. I think clearly it's a good question. I think I mentioned earlier the demand is quite strong in terms of agentic AI and inference, the ratio parity CPU and GPU. I think the demand is strong, and I think the challenge right now is more how to grow our supply and to meet the customer requirement. Saying that, clearly, on the server side, data center side, I think we have a strong roadmap. We have Clearwater Forest, Diamond Rapids, and also Coral Rapids with the SMT involved. I think we continue working on improving the competitiveness against our competitor. I think clearly it's very important to drive the improvement in the single thread and also multithreading. Multithreading will be coming in the Coral Rapids. I think all the above, we have been really driving that. I think regarding your second question in terms of Arm, clearly Arm is a great partner for us and we have a strong relationship there. Rene and Marshall are good friends of mine, and we really focus on not just the Arm-based CPU and also on the ASIC foundry side. They can be a great partner and customer, especially in the IP front. In all, I think we compete quite well. We have a strong product roadmap. Some areas we are still behind, but we are catching up very fast and we try to leapfrog some of the CPU architecture, and we are putting major effort into it. Time will tell. Joe, do you have a quick follow-up question? Thank you. Just separately on the CapEx, is there still a sort of net versus gross aspect to that, or are you more clear on that? How do you think about how you're apportioning that between internal and foundry? Is there a point where you'll be able to delineate that for us, how much is for external customers? There is a gross to net. At this point, most of the gross to net is AMIC or the investment tax credit. It's running in the kind of low single-digit billions right now, although, as we progress, I think we'll start to see that become bigger in terms of chunkiness. At the end of the day, it's a timing thing, but at the end of the day, we're getting $0.35 on the dollar back from the investment tax credit on everything we invest in the U.S. As I said in my prepared remarks, the lion's share of our capital spend is devoted to the U.S. It should be pretty significant, but like I said, there'll be a delay factor because we've got to build the factory, then we can start claiming tax credits on the factory, and then we have to get it, once we're putting the tools in, it's got to be all the way to production ready before we can claim any sort of credits on the tools. Then, of course, you have to file it with the IRS. There's a bit of a delay from the time you spend to the time you get it back. Yes, there is a gross to net. I think from an investment perspective, I'm not sure we look at it exactly that way, we really look at how many wafer starts we want in a given node, and we invest to the wafer starts we're looking for on the front end. We have a point of view based on all the demand drivers within the business of what that number looks like, and that's what we're putting in the purchase recs with our suppliers to be able to meet those expectations. Of course, we remain nimble as we get more information and we progress. On the packaging side, we are already getting significant backlogs, so we already know we need to ramp that up, and that's partly our own internal manufacturing facilities. We also need to procure substrates from vendors, and there's some requirements there in terms of putting money up in advance of getting the substrates. We're making those investments probably more quickly right now to get ourselves ready for that. Thank you, Joe. Jonathan, can we have the next question, please? Certainly. Our next question comes from the line of Stacy Rasgon from Bernstein Research. Your question. Hi, guys. Thanks for taking my questions. I wanted to ask about client. I think everybody had an inkling the data center was going to be pretty strong. I was surprised at the client strength, and I know you talked about demand holding up pretty well. I know you're ramping pants on some of the new products, I guess, was it all pricing that drove that revenue strength, or was there something else going on? I guess if you could maybe comment on what your expectations are for client in the second half relative to an end market that sounds like it's going to be worse than typical as we move into Q3 and Q4. Client obviously exceeded expectations. I would say it was largely ASP, of which some of that was mix related, some of that was our own like-for-like changes in ASPs where we thought we had seen some inflation on our cost and needed to pass that on to the end customer. When you look at it year-over-year, it's definitely down that market. It had a really good 2025 because of the Windows refresh. It was coming off a little bit as it relates to that. Then of course, memory in terms of cost and even availability, I think has caused that market to be a little softer. We've kind of skewed the mix to the higher end, and that helped a lot in terms of ASPs and helped it perform. I'd say as we look into next quarter, probably on a revenue basis, it's going to be kind of flattish for us. Overall, CCPG is likely to be up a bit, but I think it will be driven by good growth on the edge and client will be flattish. Underlying that, the market is softer. I think that market is struggling with the memory dynamics in the marketplace. We think it'll be down in the quarter, but because they have been living relatively tight with inventory on CPUs, we likely would see some build in CPUs for Q3. Then Q4, I think we'll start to experience that in our own business in V-Soft. The good news for us is we need it because we need the CPUs for the data center side. We can't fulfill the demand, as Lip-Bu was mentioning. We'll pivot as much of the production as possible over to CPUs and data centers to try to do our best to catch up to what is a pretty significant difference between our ability to supply and the demand out there. Stacy, do you have a quick follow-up? I do. Thank you. You talked about the inventory charges in client. I guess, what were those and how big were they? If I look at that, you're guiding gross margins sort of flattish in the next quarter. If I take out the charges, does that imply that the gross margin guide is actually down sequentially? Oh, okay. Let me unpack it. Just, sorry, Stacy, you're talking about inventory on our balance sheet for client, or you're talking about? No, yeah. You talked about inventory charges, the margins in the client. Oh, yeah. [crosstalk] [audio distortion] Yeah. Sorry. Even on revenue growing. Yeah. Sorry. Yeah. Didn't follow that. Yeah. Okay. Yeah, we had some products where they weren't fully completed from a match set perspective, and it just made better economic sense for us to try to pivot more to some of our other products and not complete them given the challenges around match set. Given it was somewhat stranded inventory, we wrote that down. You're right, we are guiding flat quarter-to-quarter. Obviously, we get a lift from not expecting to have that write-down in the second quarter. The offset of that is, even though Panther Lake and Granite are doing better in terms of their cost quarter-to-quarter, they're also becoming a really significant part of the mix, and they're still below the corporate average because they're still relatively early in their life cycle. That's weighing the margins down a little bit on the offset to the lift we get in terms of the reserves and why we think things will be flat. Eventually, both of those things turn into a tailwind. As yields improve on 18A further, we do expect margins to improve on Panther Lake, and they will be above the corporate average, and that will help start lifting the margins there. Obviously, we're keenly focused on improving gross margins over time. I would say, while there's a lot of puts and takes in gross margins, our number one goal this year, which everyone in finance here can attest to, because I was a dog with a bone on this, was to get gross margins comfortably into the 40%s in every quarter. I think the team did a really good job getting there, at least for the first two quarters, and our outlook for Q3 would suggest the same. Our goal is to be solidly in that, and then we can pivot from there and look to improve the gross margins off of that base. Thanks, Stacy. Jonathan, can we have the next question, please? Certainly. Our next question comes from the line of Timothy Arcuri from UBS. Your question, please. Thanks a lot. Dave, you made a comment that there's a lot of capacity coming online toward the end of this quarter. I guess that implies a pretty big step-up in revenue for Q4. If I assume that you're still undershipping the market, I think you implied you're undershipping at least last quarter by more than $1 billion. If in September you're undershipping by a similar amount, it would seem to suggest that Q4 is going to be up pretty big. Is that the right way to think about it? Can you just provide some puts and takes around that? Obviously, we only guide one quarter out, which would be my standard response. That said, yes, of course, if we are able to start to see inventory improve or supply improve towards the end of the third quarter and into the fourth quarter, we would expect a lift from that. I would point out that while things will improve, we will not catch up. We will be behind in the fourth quarter. I think the team internally, it's tight with wafers internally. I wouldn't dismiss that, but they have done a very good job trying to meet demand and upside us, upside Lip-Bu and I a bit in terms of what they've been able to accomplish. Our supply is a combination of the wafers that we manufacture internally, plus advanced packaging, like substrates. We've got T-glass, we have memory. Procuring all of that is also a bit of a choke point for us. In fact, I'd say in some of those areas are probably our most challenged parts of our supply chain. We're working to improve that. While front-end wafers can be a little bit more linear in terms of our improvement, some of those are a bit chunkier. We start to see some of the logjam break towards the end of the third quarter, which is why we're more flattish this quarter, but see upside in the fourth quarter. Tim, do you have a follow-up question? I do, yeah. Dave, the year-over-year drop-through on gross margin was pretty good in March and June. Based on the guidance, it falls back to the low 50%s, which is sort of within your 40%-60% that you've talked about for a drop-through. Is that still the right way to think about it? I'm just trying to see if you can give us some puts and takes into next year. Thanks. Yeah. Longer term, I think we'd expect that to be somewhat the fall-through, somewhere in the 40%-60% range. Every quarter's got unique dynamics to them that affect whether you're at the low end of that range, or at the high end of the range, or at the midpoint. I think it's a relatively good rule of thumb for us. Thank you, Tim. Jonathan, can we have the next question? Certainly. Our next question comes from the line of Vivek Arya from Bank of America Securities. Your question, please. Thanks for taking my question. Lip-Bu, you mentioned increased confidence in engaging with external foundry customers. I'm curious, when will that confidence be backed by actual customer announcements? Related to that, I think you are planning to raise CapEx. How much should we be expecting a CapEx increase for next year, and how much of that CapEx increase is for external customers versus just expanding capacity for your internal needs? Vivek, thank you so much for the question. I think I will address the confidence that I have. Then I think Dave will talk about the CapEx increase. First of all, I think for the 18A, I think we have this 18A-P is in the risk production now. That will be ready before the end of this year. Clearly, we see a 5% enhanced performance. Then 18A. The 18A yield and the production, I think we're starting to see strong. Then in term of Panther Lake, we can see that in the ramping and the volume. Let's focus on the 14A. 14A, our PDK 0.5 complete and PDK 0.9, for 14A, is on track for October. That's a very important milestone. I see the yield for 256 SRAM and the defect density, the performance, ahead of the schedule that I put a very tough schedule for my team. They all met. I see that. Risk production for 14A will be second half of 2027. Then the commit volume production in 2028. I think all in all, the engagement, the customer, the feedback have been very positive. Tremendous demand for our own products and also external foundry customer engagement that give me the confidence. The moment they're starting to see the PDK 0.9, the yield, they're starting to get excited about what kind of product they want to run that and how much capacity we can provide them. Those are very positive sign that they are really serious about going forward. That's why, as I mentioned earlier, I don't put CapEx unless I see the yield performance, the IP is ready to serve the customer, and also customer engagement, the level of engagement I see. Dave and I, we're starting to put CapEx to work. Dave? Yeah. Maybe it might make sense to start with 2026 and just unpack CapEx just so it's clear. We invested a lot in space over the last few years, so we are in a very good place in terms of space. There is still obviously a little investment to facilitize some of the factories, but it's relatively modest. Really, where all the CapEx or most of the CapEx dollars are going to, at this point, is tooling. We'll increase tooling in 2026 by 40% relative to 2025. We're investing a significant amount in tooling, and it's where you might expect. It's Intel 3, it's 18A, it'll be 18A-P. I purposely didn't mention a number for 2027, because we're still working out the exact details of what number we'll land at. Typically in this industry, you release that number really at the very beginning of the year. I did want to give investors at least a line of sight to expect that the number will be up. You'll just have to bear with me. I think we need another quarter or two to really solidify the number. Then, where it's going to, as I said, it's going to both. We're investing for all of our business units, both internally and externally, and we take a holistic view of what our wafer demand will look like from all of those customers, and we build capacity that is aligned with that view. Vivek, do you have a quick follow-up? Yes. Thank you, John. The follow-up question, Dave, is on the balance sheet. As you are planning these investments for the back half of the year and into next year, how are you thinking about the balance sheet? Do you think that the success you are seeing in your product business on the CPU side, do you think that is enough to fund a lot of these investments, or will something else be required? Thank you. Yeah. It's a good question, Vivek. Obviously, we feel like we're in a really good place from a balance sheet perspective. We have over $30 billion of cash. We have a $10 billion revolver. We've got $40 billion of liquidity. That enabled us to de-lever, which we felt was important to keep us solidly in investment-grade territory, which we wanted to do. Obviously, the fact that revenue and profitability and EBITDA are all expanding helps a lot in terms of the cash flow that throws off to the business. Additionally, we have, I don't know, roughly call it $10 billion of what I call non-core assets, that can still be monetized on the balance sheet. Although we're not anxious in any stretch to do anything there, that's available to us in the event that we need it. We have seen, by the way, our customers willing to invest with us, and we've had prepays from customers that has enabled us to unlock capacity that's helped us. That said, if we're super successful, which we're driving to, we may need to tap the capital markets to drive some more investment, and we'll stay tuned. If we need to do that, we'll certainly keep the shareholders apprised. Thank you, Vivek. Jonathan, can we have the next question, please? Certainly. Our next question comes from the line of CJ Muse from Cantor Fitzgerald. Your question, please. Yeah, good afternoon. Thanks for taking the question. I guess maybe a follow-up to a prior question. Dave, I know you don't want to guide out more than a quarter, but curious how we should be thinking about shape of the server, kind of revenue recovery here as you bring on capacity, both this year and next. As part of that, how should we be thinking both from a unit and an ASP perspective, as we go through the second half of 2026 and into 2027? Yeah, I think, obviously, we're driving. Well, maybe step back and say all of our server wafers are procured internally for the most part. Some of the ASIC stuff isn't. For the most part, it's all procured. We are investing heavily in expanding the wafer starts in our key nodes. In particular, the most important node for us on servers is Intel 3, because that's our node to produce Granite Rapids and we're seeing tremendous demand there. In fact, as strong as demand is across all of our products within data center, Granite Rapids is extremely tight, because the reception there has been fantastic. We are building capacity there over time. It will be a little bit chunky, but I think in general, we have a pretty good ramp of Intel 3 planned for the rest of this year and next year. The challenge, as I said, is it's not just the front end that we have to expand capacity. We also have to expand capacity on the back end. That then gets into areas that are tight, like substrates, and so we're working to expand that. I think they did a good job in the first half of the year getting more capacity, but more work to be done to drive that to the levels that we would need. I think when we're talking about the market in general, we're talking about it from a units perspective. We think the growth rate on a units basis looks quite good. Obviously, the units are getting more weighted average core counts. Generally, this market is priced on an ASP per core basis, so as you get more cores, you easily get more ASP uplift. That will definitely be a component of the revenue growth, in this business and gives us some real confidence that this is going to be well north of a double-digit CAGR for us in terms of growth rate over the next few years. CJ, do you have a follow-up question? I do, John. Thanks. I guess, going back to CapEx, I know you don't want to guide today for next year, I'm curious if there's a framework in your mind as you balance meeting customer needs as well as your desired free cash flow goals. Is there anything we should interpret around that to help us, as we build our model to think what the appropriate CapEx is within that? No, if you've got the signed contracts with customers, you're just going to build it. No, we're going to be more thoughtful around it. I would say, just if you look at the straight business and look at what we think we can do from a cash flow, from operations perspective, just the base business, look at what CapEx, even if we step up CapEx investment, and the offsets that we get from AMIC. Our cash flow actually looks pretty good. We are likely to have to make investments in the back end as well, particularly with third parties. That could be a drag to cash flow, next year, and make getting it to a positive number a little bit more challenged. That said, all of the investment we're making has tremendous ROI. I think, as long as we feel confident in the growth rate, confident in what we think we can do in terms of pricing and cost structure for those products, and we know that when we make investments in these nodes, the lifetime of these nodes is fairly significant and almost always drives a good ROIC, we'll make the investment. We're just going to be very careful around making bets ahead of customer commitments. I think that's the most significant change with Lip-Bu is, until we really know that we've got the customers, we don't want to put significant amount of capital. You can read that now inversely, given our confidence around next year, that we must have pretty significant confidence in our customers, or we wouldn't be putting the POs in place today. CJ, thank you very much. Jonathan, we've got time for one last question. 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 guess the first question's on the ASIC business. I guess based on what was disclosed last quarter, it's about a $1.2 billion run rate business now growing well for the company. How do we think about the diversity of that business and just, you've announced Fortinet and that, I'm just curious of how you're thinking about the growth profile of that business and, maybe, also with that, the margin profile of ASICs as they expand. Let me start first. I think first of all, this is a massive opportunity. I think potentially it's over $100 billion TAM market, and we have unique opportunity to offer, beside our advanced design capability using our CPU, XPU, and also we have a strong IP portfolio, and we also have the advanced packaging that are very unique in terms of radical integration and also the layer that needed, so they can really drive the leadership and a lot of new technology, AI, and really need this packaging technology, plus our advanced silicon process technology. That combined give a lot of opportunity for a lot of purpose-built silicon that a lot of company needed. I think one example is recently we announced with the security ASIC business with Fortinet, and clearly that we really drive the next generation security processor with a higher performance. Of course, we all know about the Intel IPU they're providing to some of the hyperscale, and that is tremendous opportunity. I think I mentioned it's a 3x increasing in term of year-over-year growth. I think it's a great opportunity for that. The other part, Dave, do you want to chip in? What was the question? Growth rates. Growth rates. Growth rates. Of ASICs. Of ASICs. I would say that today we're probably running at about a $2 billion run rate, or at least approaching a $2 billion run rate for that business. We think in the not too distant future we'll be at a $4 billion run rate for that business. I think that probably gives you a good sense. We think that, Lip-Bu mentioned the $100 billion TAM, we think we deserve a good chunk of that given our IP portfolio and what we bring to bear. Stay tuned. Aaron, do you have a quick follow-up question? Yeah, I do. Thanks, John. There's a lot of things going on in memory and just memory hierarchy and architecture shifts and stuff, and there's been some recent news about Intel's own development work. I think there's a technology called Z-Angle Memory. There's a Cross-Batch Memory. I'm curious, as you strategically look at the role that memory plays in these architectures in scale and compute, does Intel serve a bigger role in that? Is there internal developments and even opportunities in memory over time? Yeah, good question. I think a couple of things. First of all, the memory become the big supply constraint challenge, and we collaborating with the three big memory vendors. That's very important to serve our customer, is our number one priority. The next thing, as you recall, Intel have a rich history in the memory, and then recently we hired Seok-Hee Lee to join us. He used to be the CEO of SK hynix. Clearly memory, it become the bottleneck, a lot of AI infrastructure and pinpoint for customer. We also looking at how other area that we can integrate, compute, and the memory, and also how the stacking, and then how can we use the memory more utilization, more efficiently. I think there's a lot of area we are working on. Stay tuned, and we will work on that, and we'll keep you guys posted. With that, I think my closing remark. With that, I want to thank everyone for joining us today. We make good progress this quarter on our journey to transform Intel, the new Intel, but we still have a lot to do ahead of us, and looking forward to see many of you throughout the quarter and provide additional update in October. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day