INTC - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Q3 2017 Intel Corporation earnings conference call. I would now it to turn the call over to Mark Henninger, head of Investor Relations. Please go ahead.

Mark H. Henninger

Thank you, operator, and welcome, everyone, to Intel's third quarter 2017 earnings conference call. By now you should have received a copy of our earnings release and the CFO earnings presentation, which replaces the CFO commentary that we provided in the past.

both available received website, our not intc.com. you've documents, on they're investor If presentation in also for CFO is The earnings available us those online. the joining window webcast our our I'm and Brian today Officer. Krzanich, joined Bob by Swan, Chief Financial CEO, from In followed of by a them, both brief Q&A. moment, hear we'll remarks the

our when have hand and discussion Please full measures. does as that will that, the cause release GAAP we see we factors press on be release, Before quarter today's it, let we refer include and based measures on statements results. and risk let differ With me remind GAAP me to available forward-looking begin, to the Today, such, our CFO risks The actual over materially. currently provided uncertainties. and describing reminder on earnings intc.com, to consolidated that commentary as we information and financial specific more non-GAAP include everyone speaking contains reconciliations. Brian. this the financial it non-GAAP both to for brief non-GAAP results environment A the could that

Brian M. Krzanich

Thanks, Mark.

The our million than $XXX outlook. third $XX.X income with expectations more Operating was $X.X outlook. than better of billion million our is which better quarter than our billion, exceeded $XXX revenue

be XX%, reaching quarter was remarkable and income transaction. year. all businesses focus faster results proving allowing it per more simultaneously that XX% adjusting Bob Revenue delivering all-time I for had XX% to that our Our and to earnings data-centric is reaching records. a in shaping X% this data-centric McAfee The we both in or Add grew revenue, and grew even discipline fiscal on X% segments. year talked forecasted Intel our after us up is a of year, remarkable key growth over company. share is grew becoming what a than have Operating grew innovation while about X% together, the

the of and driving to Our strategy the data industries. technologies revolution is force be across

data-centric Computing milestones property. a We've over PC-centric data-centric customers. declining businesses conditions engine. company's CCG are success. central that with problems that Individually, We're plus source results profit, to value the our continued our and market they're collection start businesses product I'll [Client progress Collectively, our PC business few that to we way a record achieved progress. a Group], our client to and great produced both the customers' these At of months, important unmatched. Our which or individual a improve, remains in businesses intellectual that growth our Core TAM. made PC solving no and provide great going cash last to PC iX despite time, of built share We've business It's exceptional flow, a could. great is the capabilities scale, same mix. and illustrate iX few Core in

The an Coffee Lake. investment excited better of family the of off. rate in than our six-core beat processor with year. into our thoughtful both in first performance of XXXX. CPU. system high modem Our total We to it's the with top availability revenue Generation ramp shipped declining the part paying year. XX-nanometer innovation and track our desktop and second Lake with over and the our the on by first date, And Coffee XX% focus about on annual We're even results, strategy combined designed a is especially launch produce the market, segmentation an latest gaming to our processor, Core to Xth the up of includes XXXX, initial named code modem first industry, will first XX% on by competition auto titles. in low-volume followed game our ship in be was to the half volume up We're half That last of best end

Internet XX% of grew now. service our all QX deployments combined had We revenue revenue end Group] across the the was our we've less the Xeon service segments. Center QX up the comm through and revenue for than [Data and outgrew ramp strong XXX workloads three strength single-digit on enterprise that saw DCG track remains of year. DCG months, and are begin business, in and is provider still customers we to scalable see moderated production comm In retail, growth, beginning continue Cloud businesses, data-centric to across X% more cloud. OEM provider moving systems XXXX. high will with for In video nearly and cloud our and, in XX%, market to on sequentially, growth of than shipments, decline the Things our Moving segments while revenue industrial,

build to winning ahead Early of the schedule. designs the We competitors automakers. at from quarter, market, months we infotainment a our in momentum closed transaction continue also the in vehicle full Mobileye leading four

architectural they a wins this features XX far all product open also and car with self-driving on control. Level ahead the year. breadth, like So emergency other and auto real-world more higher technologies levels processed Intel self-driving across pace newest with and Chrysler. designs for XX Most automakers, provide of fleet the minivans, partnership adaptive [Advanced designs already that including But recently, braking, U.S. last autonomous X technology Mobileye the year, the Mobileye BMW cars and keeping, implementations, have technology With highway Driver general and include miles leadership. winning autonomous connectivity. our for with designs typical functionality lane of vehicles, support strategic million won feature Intel-based marquee Chrysler announced closed than automated These any XX driving. ADAS Assistance next-step and Fiat several cruise sensor processing, to Intel industry Hybrid driving, We're of of recorded roads. also the and autonomy, for Waymo well flexibility miles Pacifica unmatched like inside X Systems] Waymo's we provide compute, has

in of the our And combination. a collision-free we the just can safer, deliver illustrates future. driving benefits progress of in a months Our autonomous few together, short promise

on Let's FPGAs. and memory now move to

grew ramp goal. to quarter XD were its for where rate memory as margin Dalian of year XX half XX% yield accounted last bits XX% Our business and both our more than supply a factory, significantly, the total more our NAND. of in beat and XX, improved over operating Fab than continued Fab

Our automotive about design memory this approach, agreements. having mitigate will long-term signed agreements, leadership is leadership we've has in flow technology two innovation and vision memory and last segments, was And is up we're center, XX-layer interest resulted capacity. but shipped our year, designs in our these in segments and customer like by FPGA of that an X step pipeline. Strength stereo also autonomous We weakness a first in business, in revenue where SSDs the supply continued Optane our impact already in Bob Level more important share strong growth finally, impact. system. ramping technology That partially center embedded, data was data will industry's and with strong short-term the such the cash have win an XX% DENSO's the ramping offset XXXX over infrastructure. Audi and AX comms

to between that Project use using in AI design more a accelerated last made months. broadening technologies of the Stratix the FPGAs Alibaba And in of our companies, Cloud. We've over progress of code as that's named deep Brainwave. tremendous advanced few is computing Alibaba Intel learning engagement acceleration power service platform and would the part highest business third revenue central in our This announced artificial the than success In intelligence. three in than our Microsoft XX% Our up FPGAs more XX XX-nanometer it is QX, value years. level for quarter, to the win was its

vision In processing addition package. to the to wins, neural our launched Myriad FPGAs compute with and world's unit dedicated low-power, a Movidius the edge a deliver engine intelligence to the autonomous driving first in artificial we X, high-performance capabilities

Intel achieved follow test We XX-qubit delivered to partner, And chip forms research as milestones, that up research of a for year. a pursue quantum chip scientists the exciting emerging with of QuTech. the new we'll our We superconducting by end computing test XX-qubit also compute.

us, brain's machine processor, Later first more the of to processor this mechanics and ship kind. We also that faster we available Loihi, industry's we'll for the things the I a Nervana that last commercially also collaboration working chip hardware Facebook learning accomplishments as announced market. their Together, several these generation self-learning insights bring me. in unveiled with basic the sharing makes close network reinforce and neural its new mimics quarter, this efficient. AI of test week is technical

is the out of vehicles AI the Intel core to the from low power First, in where to leader center critical. inference the autonomous devices is especially edge data

very Wrapping I'm to for TAM, with aggressively had require And But Paul and Intel our in other In for solutions $XXX In some and one-size-fits-all. We our industry progress part in takes of computing to and tailored competition made the all we're are or like and We're moment our and prospects. and years workload, company, our I'd quarter room that share. CEO for our our it's on than best market important of our quarter new an any an growing you competing Second, enormous our our history, about in things of And had would to the innovation impact new of out would remember segments, competitors. his lots come. friend, will be proud we the January. a He cases, Paul user, artificial his third CEO position the resurgent company, our my results commitments the this of. brings ahead of opportunity a billion in pipeline up, the investments us momentum, largest and legacy. a facing well segment excited rather to be And the environment, will now third, many grow him. our both proud we're take of miss former lead demonstrate. to to are segments, Otellini. family competitor. as and we intelligence forms

year. year to the history we're for raising Our on I'd a expectations for And full-year third consecutive our by This $XXX in our hand company's in like is by million, And great the and operating that deliver over the for this it Bob. to accelerating. solidly us transformation news, with million track increase profit best second row. $XXX to puts revenue year

Robert H. Swan

good the our an and spending set better, was revenue and was excellent quarter, out our beginning the This the Intel. lower. afternoon. expectations of is gross Brian, our at stronger, for were Thanks, quarter we margins Versus

of in Mobileye up in Operating from of Revenue $XX.X was up through record XX% another billion, closed for over income the including track up excluding year XXXX. and the on price the and McAfee. the a transaction position purchase assets, proceeds a From year. sale ASML funded we capital of partial allocation reducing year perspective, year, non-core achieved significant over we're $X.XX, portion record in was said, our exit was over and billion, we quarter the X% X% McAfee, EPS year Brian year $X.X and As earnings.

signed Additionally, our returned billion a data-centric flow $X transform talked Day providing significantly from we than long-term generated operations, and cash in we flow our free we about company supply prepayments from $X.X our memory billion XXXX, business. for strategy through improving Analyst in February, more $X.X to NAND agreements, At to company. PC-centric shareholders. cash to billion We a in

QX great of our capitalize momentum create the the positioned results year XX% and of demonstrated grew PC trends, segment, to revenue, data-centric and our outside continued in going well those collection growth businesses, from industry company's is engine for Intel's customers, in XXXX. of over on Our represents approximately transformation. XX% our This now year up value represent businesses forward. XX%

operating revenue in continues margin CCG PC flat the extremely quarter a generated businesses by well declining improved in over execute The team X and environment. TAM PC-centric to points. Our

performance-leading on and cash the focus IP, flows. products scale, of funds provides generates Our strategy smart company's This working. segmentation is and and a profits a significant portion business

year. Moving earnings, significant generated in year quarter, the EPS XX% expansion on to we up

$XXX Our platform in by growth spending, businesses, income. EPS growth strong products improvement our lower in execution, adjacent million operating and and driven was solid from resulting

at the growth we Additionally, commitment a and our resulting beginning key of to monetize Channel We continuing reduce positions, latest a to the Program] at ICAP Alliance of XX% areas to year of invest in gain XXXX share. continued in to by while the made some revenue spending of portfolio [Intel per $X.XX capabilities.

our great key generating making significant At over third higher same revenue intelligence, year are We from Moore's and driving. Total including discipline quarter, and we're with spending time, year executing in investments driving in the Law growth. was leverage operational with forward, progress. autonomous X% priorities, down the continued artificial

our significant rationalize and percent spending we R&D G&A was were our X points a Our our and down functions. as of flat revenue SG&A leverage programs sales in marketing and as costs generate

changes by collectively just impact full resulted $XXX direct of have the flexibility X.X more and XX%, to to CCG million QX reducing to two better spending growth a spending. DCG and customers. in changes our provide year-over-year In last corresponding into reduction we reduction a approximately addition, expect our operating revenue a prior in on we've approximately slightly X in by over co-marketing with point, made of points and programs no point quarter, changes at year. points during These efficiency over On will changes than level. These increased our to basis, from down one impact income. continue approximately be The a guidance these full-year in

saw our holiday income Core improvement the mix, Data and profit is QX continued PC from slide operating X billion, and changes $X.X had flat ahead growing We revenue touch operating adjacency up Group margin growth, was season, on Revenue unit year, QX year by inventory unit over of to Center the Flat revenue supply partially and points. X%, business had billion of X. spending. the grew XX%. with our in quarter. briefly chain up strong of by operating XX%, me X%, down X% client was year, X% over of programs. Computing on The X%. income at costs, another lower XX-nanometer Let ASPs grew quarter driven This year we typical Client segment had build co-marketing healthy was operating significant operating of $X.X our performance another margins The offset worldwide segment up believe volume by and billion levels. Group and $X.X outstanding

shipments. As Brian X%, adjacencies both had XX% efficiency XX%. launched operating begin up We products and OEM QX, provider our production grew had months from cloud segments, leadership than were and mentioned Revenue for which leverage the XXX and and service are drove Purley volume was Overall less in scale in three more business. revenue. of strong earlier, in X%, income than growth growth spending comms we've ASPs and the nearly we strong DCG unit up systems

single-digit growing margin are meet We XX%. larger our XX% growth high and component percent to DCG NSG, expect our business PSG overall IoT, and of year. The year segments low becoming business, of expectations full-year in a the operating over

We retail Things extremely the over we Operating of continued revenue with year, August, in income. achieved of The million, year operating million in over in continued revenue Internet transaction video Mobileye early and closed by was $XX million, the our in months in down momentum exceeded Our four and $XX from profit driven and in segment. XX% record $XXX automotive strength well third in up sooner expected. than Mobileye our expectations, million business industrial executed year year, business. quarter $XXX team investments and the XX%

segment correspond segment. included Going in IoTG we as in forward, from Mobileye will this the results cost the be acquisition. Other spending for All segment realize our Increases this will acquisition reductions in synergies in with

strong supply. up XX% segment year. $XXX $XX revenue of Our This $XX SSD improvement center outpacing year an memory loss million, demand an demand million, solutions over data of operating of versus and had million signals last record from business had year, with

XX% the of in products, million, revenue year. We're integration in million, strength fab memory cost synergies to be year center, $XXX in a XXXX, make driven making great $XXX military. and to the business over good had unit by we Yields well profit Group whole of of business. memory progress expectations. was profitable, improve, estimates. Solutions automotive, continues realizing be ahead with this progress. profitable Programmable The The of Operating are continue Our prior to over business to year expect and core ahead costs our continues NAND in XX% data as up year, and advanced Dalian both up

the cash Moving to had slide pieces basically X, year. $XX.X but our XX moving September the unchanged position is of during from of billion at we've lots beginning the of year,

shareholders $X.X $X.X dividends billion, through First, we've of and in and $X.X billion we in repurchases returned $X.X billion of billion of free respectively to share quarter. $X.X including the billion have generated cash and flow year-to-date, billion the form $X.X

year, from shares. Earlier the billion $XXX Mobileye promissory sale in assets the of ASML the sale a And year, quarter stake during $XX.X McAfee of received McAfee. in and including purchase we earlier, Second, closed in McAfee in the third we as $X.X cash from XX% sale the the price for of the repaid million. the million of funded billion in XX% we the of over non-core and and issued mentioned quarter, $XXX of notes dividend

share. higher higher revenue in is the primarily momentum driven is by expectations equity investments. range the The our improvement fourth forecasting at we and business over the expectations gains of revenue up driven And year stronger on and Third, our we beginning quarter to XX, cash driven we're operating revenue lower $XXX operating is raising as were the billion, increases supply $X.XX guidance $X excluding X% by associated outlook in outlook look of in lower on in $XX.X The driven NSG to by million working we these free million customer partially $XXX year. prepayments by earnings, momentum. Based the flow flow on where modem by billion agreements, cash capital $XX.X billion, the per CapEx, growth revenue with expect more billion to higher guidance additional by $X.XX free at versus billion, generate to EPS of full-year factors, $X.X was and to and of of and by by are guidance $XX to income year with revenue offset McAfee. memory. XXXX, primarily coupled increase of EPS on sale The midpoint our The we spending. to improvement the increased slide margin PC continued

a over revenue, billion to flat gross X approximately margins with year points. percentage as be and spending, We of expect down $X.X year operating income of

by we have EPS higher shaping billion, the we raised nine EPS $X.X market. margin expect to and of revenue January, At and outlook We win are record by same our $X.X and months Intel. revenue. feel $X.XX, Since income about time, are We billion, our great our XXXX be in by three-year to year $X.XX. is a expanded operating by where an driven expansion investing compete transformation. we our up operating for into

continue continues to turn to Mark. market digits and me our let that, to over company Our and are a the connected down very as PC-centric well smart it team double in back transform With businesses devices. data-centric up the power we cloud operate collectively, to

Mark H. Henninger

Okay. Thank you, Bob. and Brian

Moving our is on Q&A, participant now each please to to one. just as the ask go one you question ask our first follow-up, one have practice, ahead and introduce normal would Operator, questioner. if we and

Operator

Our first Deutsche from comes Bank. question with Ross Seymore

Your open. line is now

Ross C. Seymore

be advantage these start going we importantly, financial be fits size of the Thanks competitive letting able Stratix of could But longer-term for some Hey, off it's Nervana whether versus a more a having, side that or give talk how BK, that that a in space. to AI is rattled to for guys. little be one question. when about of Intel you on environment not see an mentioned a you number early You products? it you, there? the will does a me bit externally And benefits in new you have bit investors as advancements Intel then to ask side. one perhaps, little Can the movers the all. of the

Brian M. Krzanich

Hi, Ross.

this. about talk let's down. this can kind break We So of

of the artificial and in grow in already that. lead continuing as I AI space. of to that intelligence, seeing benefits really is Remember, are we're So, which in application inference, said, actual first, we the we

a if smallest it look AI, the growing. data it's workload fastest look a center, take general, the you at segment you but at to the think learning, in I if machine

it going and portion become you're continue to of bigger our to a So see business. bigger

You're seeing the Xeon, already occurring. we about the numbers Brainwave our FPGAs; the around in effects Xeon Microsoft talked launch Scalable, that's

the see, those seeing we things data end, of as like also to going well center, speak. now those outside the real-time lower more traditional now And you're you're products. Movidius P&Ls products those Mobileye, So as hit our and at call our I'll

XXXX see to start you'll back from Nervana, really the like products towards a end other perspective. probably more P&L of The

take silicon our at be – look it If Nervana, get will a we silicon. you test actually out. It as handed first out

same say, move and go is I It beyond, products, next rates far which second is big to of begin be to chip We of learning. really and different the I'll to it. how But impact. It traditional, machine learning. we've and yearly learn quite beyond than to part year have a is see products as how start learn program grow, first at like people people are people CPUs, so very use that to which you'll and hundreds beyond neuromorphic, believe, won't substantiations especially out that use through learn more late out of next a put type a considerably. the for begin we as times as well get Those The with to and a Loihi, and expect things. on figuring year GPUs be these. And will visual to so you and cadence around to generation then with how faster really our program we lets neuromorphic,

seeing hit So really and think really they XXXX start and beyond late P&Ls. to already products newer those before it

Ross C. Seymore

had quarter. and the on that leverage it's detail. congrats then question Bob, follow-up the and the in was I on the Great, And for thanks great actually for operating side, OpEx

absolute think investors to next you of up that the think that into indeed revenue you of or year. it how flat couple think the we on like cutting then Conceptually, leverage, should years? leverage. that looks you as to relatively for delivered, cadence seems and OpEx over couple the the about in we guide down XX% quarter Is the are the about balance past level ways that next revenue you get growth it that and going Intel keeping years, operating mainly OpEx is over looking the mark focused more OpEx? in the go driving year can X% As the in delivering the have about be just But do growth, to you're

Robert H. Swan

great Ross, question.

growth; and We that and those capital function a it's we it's levels. whether of or you mentioned, spending two, of that marketing, started and every from XX% quarter. the had great allocated saying get the lower out third half progress we in R&D, our that to to it's XXXX over a one, spending delivering the of it level XX%, And into was expectations, a have so that as redeploy ecosystem. we're would be at first ahead dollars in the guidance or this which will levels things Reflected sure not little two that came G&A, we stronger XX%. of half are to making spending our to year year which well are get are second dollar growth whether sales towards been lower highlighted: much those down whether the we function of First, the continuing to you roughly the biggest look it at closer and we is revenue, spend, and to of a opportunities,

bigger half half versus first spend on billion be to million $XXX the roughly levels half. So will second business that our be $X.X second first a half down the in will roughly

great go levels stronger growth, of of and making getting trade-offs So to combination we're spending our as making forward. we the real benefit we those on expect on continue the two and progress

Ross C. Seymore

you. Great, thank

Operator

Rasgon Stacy from is question next Bernstein. with Our

Your line now is open.

Stacy Aaron Rasgon

for Thanks my guys. taking questions. Hi,

high I and almost to three First, trend, it to drivers. look in entirely and which much words, biggest not the be seen from bit your increases classify if prior I any little versus barely I same data year guess over whether the digits full on in pretty wondering to where quarters, memory. your us coming X% was definition. meantime, would ramp high from not the not about center, really could and mix We're decade, year X% just a I single guess In a we've as guess qualify up ramps. I I server for seeing you is, what give meaningful the We're marching ask Purley more continues your PC platform the for year from actually Revenue from we're view but the a wanted expectations and as seeing revenue Purley not we're refresh ASP why for upside. would it's for introductions, yet upside single as by your year, this own digit. doing or seeing upside in,

Brian M. Krzanich

can Bob jump and start Stacy. in, I'll

what Purley with in because is started. the I has starts that just ramp a tell First, the got you've would cloud you It big service couple there, really questions providers.

You saw ago. it Google a about weeks talk couple

because a or more. we into cloud the go service on service cloud You talk to to Tier Those come it eventually at earlier through the it year design-ins this then have about will about wins talked week. X I starting comms so into really are take just – just Those design well. and saw providers, and customers. beginning. out, Microsoft XXX we're the or early. remember providers enterprise to ramps, as going are This ramps These is

say but of high it's would simple and I'm lie. meet certainly not math just look, think I it going digits, think a that – it necessarily it a where digits, we're is not judgment. this make The your early digit single if range it's right I to product look we ramp to number. targeting minima So of doesn't single of to the The single mathematically, X% make part it's be predicted is you a get ramp high but to high question, I'll to, from the within second

Stacy Aaron Rasgon

you. Thank

Robert H. Swan

faster a part growth the PC versus in DCG that. year of a I'll data digits. is line high beginning PSG expectations and relative will for faster. the question. at of IoT the outlook billion. growing of January, be Memory our first center, the I is full-year faster. the part in bit, add significant just second Overall, in maybe back year and with Obviously, think, single first to your to is PSG growing the be half on revenue little up half the $X.X

So other real businesses. good IoT, line strength and memory, on with in on clients, on the

out in started real DCG Brian's X% other in We year comp up were follow last offer X% at to two at the just maybe off thing X% in commentary The growth on We're at we tough on One, QX quarter. double-digit QX. a third growth, QX. I'd in of things.

would for and with perspective, the the have year. of hit operating in And year, of a third quarter on line we a we're told slow metric operating line on, guide quarter that say to the course well from well. through fact that And the the right I operating despite on at as margins XX% to we're track grow continued our and margins top XX% significantly for margins So you DCG we beginning that with relatively secondly year, start, gave in the the importantly, important quarter. above to as early be the

the us and expectations So we year. our line the nine the building as year, to year months DCG and in exit with start momentum through great for

Mark H. Henninger

Stacy? you follow-up, Did have a

Stacy Aaron Rasgon

do, I I margins ask you. really quick. thank wanted to gross about

up year, given gross year we particular, like the think So us year. guess I this and next color in shift. into drivers puts XXXX, we've year? that revenue trajectory the year bps margins down year how what some as margins about give year XX we the over should of And on could exiting go was you seen Gross are takes excluding into X% on McAfee. was over hoping I

Robert H. Swan

we in we're line months, XX%, our high another the part, And first that for in line the guide the outlook, is throughout your outlook of much historical margins. end QX XX% On the with for with and first year full-year our so nine laid out is which range. in gross pretty

good we pretty about So we where are. feel

good costs contributor And those, associated but a businesses growth weigh that are much the The comps, on For to – going scale in you XX-nanometer earnings, consistent: fabs; easier been Unit margin. come half half to gross with slightly the in the comps. ASPs the first three on modem lower. trends they fairly weigh big underneath memory tougher offsetting One, on. the better have our a have in volume really high our that leverage on adjacent through better, covers, we have and continues the cost second with are modestly ramp better things dynamics going on of down. improved

as in by samples that the a change third, gross income no I on Stacy, offset into prepared the has on modest engineering impact higher margin And impact quarter. go have levels. but we fourth the we spending lower co-marketing operating remarks, mentioned but that Secondly,

QX fairly So January, four dynamics, have one and outlook. delivered we'll talk you mix the between is to trends and the XXXX take change in those businesses. solid into the primarily dynamics, higher-growth but more about those those QX QX last attributable And they've QX all trends solid consistent account for the of and been much quarters. Those adjacency

Mark H. Henninger

Stacy. Thanks for the question,

Stacy Aaron Rasgon

Got it. Thank you, guys.

Operator

you. Thank

with Curtis Blayne next question is Our Barclays. from

now Your line open. is

Blayne Curtis

the to full-year, from. for thanks actually question. just came above cuts go back wanted your a going curious those you the made. I margin any you're and forecast so taking know DCG, here? to next my some comments from for why down reason year, not as up where And go up just but ton. I It's to then look there forward, you spending is would of Hey, was op Bob, In

Robert H. Swan

were modestly continuing top stronger. we're with margins gross much and the half to lower, be or should about margins about say to costs. first improvements – the line. less The operating honest cuts, delivering, It's to performance more unit it's grow you. ASP lower that get continuing Fundamentally, second for half compensated I

invest expand getting in continue us to combination but of really those the three while leverage artificial also Xeon obviously and margins in So intelligence. good are allow operating we to

that's dynamics. what's the to second So half first driven half

the it's As for of year, we'd the and saying I played indicated, that during were started that's be course highly year we we XX% year. how out confident the above the out

Blayne Curtis

to go today? inference, on said today I was be – it Great. think the just cloud was couple years? curious. I in And to wanted on is spend, much could inference AI how when you of I Out and workloads look was just the wondering question at And driving that could Brian. server you units, back where comment if small. I then you future a

Brian M. Krzanich

separate Sure, we don't out inference.

the of simply fastest past the is one fact in So what workloads that one growing. smallest we and said in publicly AI of the is

much growing it, at hard. We here's of of what there's a reasons it's what and saying that. The out and mixture into? comms honest what you out somebody How what be to Anybody really when goes exactly a is is Part you. by going haven't rack, – builds for – it out workload what we who by that of of number is tells AI? used what cloud variety sometimes workload. and broken just beyond its enterprise, here's just is, don't being wrong, here's is And break with

for is have, workloads know of interest. biggest rare AI that and of the fast-growing it's that it's very X because AI for a except just percent hard to of type interactions rack precision also us cases. rare small, that into with the purely units But we we by but one it's areas of say So went our

Blayne Curtis

Okay.

Operator

Thank you.

Suisse. next is with Our Credit John question from Pitzer

QX full sequentially. $XXX what operating the the is in calendar something reaffirmed ask William how third afternoon, had just - little LLC dynamic? off you profits specific the good In actually norm think million op Bob, Credit that and should or Were Thanks me understand guys. for letting any help operating revenue basing is, above drove a the (USA) know Can just million I Yeah, we you've Pitzer maybe us the strong just $XXX year. quarter, ask question. QX line And Congratulations profit grew of, on open. DCG the question a one-times? that can Blayne's up is about new there that now margin I given differently. you there Securities sequentially? XXX% I strong bit sequentially for margin in Your results. drove start leverage about margin John by But the operating business was roughly, op level Suisse

Robert H. Swan

John, surprises sequential us. one stronger, We it's would real drive anticipated No for income. the operating ASPs, i.e., a one-timers. ASPs We anticipated In being growing no and incremental throughout year. little bit that higher sense,

benefits just different the The of is of is P&Ls. the some for all And the lower. actually G&A company a G&A overall lower benefiting spending

that's driving what's improvement really been sequentially. the So

of same implications play our And we from relative will not center role in terms then to tell QX. the full-year redefined guide, in business. of a there Brian, great helpful. QX as of in can to be the you is more a business Securities to going We've follow-up As be going high lots part data Brian, forward, the got specifics you important bottom (USA) of source And of a around player Pitzer Maybe to talk forward. CCG share for over player, is important your market. been your be very continued a ability grow. to in growth, years, for comments, to January. more invest we That's room your share easy expect prepared with of mentioned to Suisse compares about of markets. couple not the relatively advantages, free five had we've But the or stable growth to to in strategy part And over my LLC business a sort flow, a because It's big grown four in this in XX% in that line William it John both top XX% but that's remarkably still I profitability, quarters. know the The growth and been company. Credit we'll for that last scale we the last cash that's - PC

trajectory, or it I you market, gaming over about bigger about So I'm on this corporate bigger the quarters, on can you part how flat upgrade next and thinking the it? a business the time? this think a this refresh sort consumer of eight business four of are refresh kind or guys thinking guess you importantly, the Do you of becoming which and cycle modem business about the business keep PCs, growth is as how call are to cycle, still cycle think curious, over

Brian M. Krzanich

Sure.

you've it quite So captured well.

down. talk we talk about about has it from a how decline just business this. unit a done. it Let's about has We the from our talk unit standpoint, then can standpoint From and can certainly slowed

seeing we units grown on we've in low ago, single from year and that high significantly. digits two single slowed unit to go were like you seeing times basis, out back a remind level. taken year the still timeframe or profitability something of the year of low decline into the probably a And that teens declines a unit at today, digits people, over are business business, XX% of we're this that we yet always a annual If that but I

both I leadership the that the talks in now think have that Greg So, about Bryant, with strategy that products first Shenoy delivered and and really and the execution to Navin just at just with great company. team, segmentation

a if at of view kind John, our it we view, So stabilizing you long-term about see where that take is, pattern is. the

are low very the down are when the little be when to opportunity. which also the and those single units and over when come quarters slightly, growing, we we'll But there units there they're think But we I up in here probably down performance it see at be will quarters slightly. are are will look more long going other us haul, allow be focused, that that digits. segments a

shifting the we you trend continue certainly be (USA) future, ability continue. comments, that How a business good this don't introduced. very to William like through just see up they Securities Credit So pushing old, think light, actually, year - about long? that penetration? them, are on I'm not Ultrabook about that to the Core continuing LLC and level sustainability over trend see you We those iX. Pitzer talked record that the we and Those products product the increased think growth and John business modem think and X-in-X prepared Suisse prognosticator, gaming, near-term going then, to said Brian, as for are thin devices, but are some from that What's was the XX% it iX, is pushing Core And we uplift, which your grow the They're to the it new will side, I segmentation, ASP profitability. your a year. Core for of to what's to desire iX, driving the much. the

Brian M. Krzanich

is Yeah. I critical. cadence modem. business. really to gotten yearly of a out believe where a cadence a now. really on technology a modem which together big team yearly now we world-class. you hurdle put the are I'm believe We, reliably a that modems, there we're world-class excited We can That's We get about is think, on world-class that to

talked continue and increase that or efficiency about organization, we've past, the the that's We of to profitability continued. in the which always

grow - to that (USA) and continue continue we drive Suisse technology both to can John LLC the business. Securities you. William Credit we Thank So think Pitzer

Operator

next from Romit Shah with Our Nomura. question is

is line Your now open.

Romit Jitendra Shah

Bob, on which EPS, a compelling. see definitely EPS $X.XX optimistic some Intel us great look you; thank of are who I Yes, more of makes growth. think the to path side

some has this value flow. even equity who free gains, at look think flow the cash for it I been looks tracking of example, pushback investors free with year, cash down. And the though is among like

should year know this growth about well? I be cash So EPS maybe that investment people and next how relative free growth even year, to but an is as thinking flow XXXX

Robert H. Swan

gains, higher about current of was First, primarily our flow in is billion reflected thinking will our that in much being we kind ICAP billion where than $X things; earnings more XXXX, operating cash to solid people $X.X we're forecast because function that earnings guidance, saying started growth what free real ought be as growth, better improvement operating the one, earnings but to a And than year. growth. to opposed growth the of really three be

from $XX.X in year this third, $XX reduced for the And long-term our we year. billion Secondly, CapEx that to outlook we signed the year. the agreements billion

in business is in sense to from free with which reducing partners, we're that our the to for has customers for match memory makes demand of the conjunction clients and benefits cash of of capital makes do the on effect strategic memory really and our intensity net the sense in the capital impact flow deployed trying One us. what the

will looking growth. just closer time cash deployed to free grow with into over those which our reduce turn continue gap opportunities memory, capital our been the in flow to between we're number associated performance to And our memory. earnings cash flow and net but really look opportunities. and our The EPS has we'll growth, closer biggest one, particular, free for capital So for performance in higher

Romit Jitendra Shah

Brian, forward? those how along can levels update on give just CapEx you at an And about and lines, thinking going I us guess you're these

Brian M. Krzanich

Sure.

prepping on say our we we year. by and in statements our anything QX release, about in being talked lowered you we into and We're – and have just as that XXXX. showed now. view close I in think about million don't right pretty it focused range. this the think I else CapEx the actually for for to this thinking it's We've about execution $XXX CapEx about for

So on any have I timeframe CapEx we for right to discussion XXXX. get don't now until to the January other want

Romit Jitendra Shah

Fair you. thank enough,

Operator

question is Harlan Sur JPMorgan. from next Our with

is open. line Your now

Harlan Sur

congrats trend year, for ASP was execution. it on the over up taking and mix. by my in can The question skewed but be year great Thank you DCG X%

in broad-based provider, sub-segments, did at enterprise sense as the higher So as all if Skylake, get we we look for service of ASPs move silo at comm, just trying four a look just ramp cloud, if adjacencies, the those buckets you how those value sub-segments? capture to a I'm was.

Robert H. Swan

I really I incremental the would would segment, by of biggest of ASP performance. all you just, specifics ASPs without improvement say driver is just giving the

the for So in expect of performance share that but with there Xeon that we the mentioned, in that's and early That as Xeon higher product. biggest higher-performance Brian clients the higher transition still And to But We're of growing ASPs. Scalable, as are we single high ASP. contributor a will implications positive would our transition is in continue days, benefits high-performance dynamic. biggest which mix equal ASP as to to is else performance. Broadwell, all Haswell products we to Scalable deliver the we're – yes, still transitioning

Harlan Sur

the with Can closely I Great, technology guys thanks to for migrations, the the starting be there? aligned talked us give you team update server manufacturing accelerating more insights with an roadmaps about the And node. there. has the just cadence of believe XX-nanometer

Brian M. Krzanich

first. that are part the focus it be towards not right of going products early going absolutely XX-nanometer, data coming more Yes, we first, to you're It's move – though. think to so of center much of our

got at affect move. really start hopper make They it year, a made cycles. And the you of early these last the decision not the already design you You've X-nanometers, make though. it back you'll were like you'll XX-nanometers effect in when we at to that on the look even products to if and end that, so XX-nanometer, see see

Mark H. Henninger

question. we have operator, Thanks, And, more think I time for one Harlan.

Operator

Genuity. comes Ramsay with question last Matt from our And Canaccord

Your line open. is now

Matthew D. Ramsay

a I Good bit much. to very Bob, little you afternoon. wanted ask leverage. Thank about G&A

both the the in Is about co-marketing programs and PC the in script there way here to changes like the Q&A some forward in business. center data going talked you of in the the some the any and and You could OpEx, run maybe those bound opportunities you. us has size the of been Thank of restructure forward? overall are potentially what to of contributions going there kind further for and their those rate and to what

Robert H. Swan

more trying be to also our that Inside The and particular, operating conjunction was strategy the $XXX what change. third no by trying Yes, in That's Intel is dollars roughly revenue, to our what accomplish, in impact just demand. essence contra-revenue, $XXX programs the fourth but to more roughly lower modestly million to million quarter we're about spending into that the tailored expect flexible excited the of to and align essence on million of more customer lower really intent of the with brand, efficient in co-marketing on program $XXX to that spending retain in drive we so value the in be shifted quarter. the we're we from customers, do we're income but go spending. quantification And as higher pretty

operating dollars with dollars those So way again, drives in in and of in more the are marketing but doesn't income. tailoring with impact how OEMs, the our the that spend our to our geography programs change P&L conjunction really reflected efficient effective

Matthew D. Ramsay

about pulled you term. wins of some I And and about of year, Mobileye you've in conversations in assets ADAS for as talk programs mentioned your XX has for autonomous Brian, Thank that's space. autonomous bold wins seen Mobileye ADAS maybe could a making you ADAS versus computing your are commitments so in the the longer-term how you, Thank quite then driving then of autonomous. have all that XX space, you of and follow-up, you. that's some towards last how automotive competitors helpful. really made Maybe announcements think acquisition these long being And into the versus far

Brian M. Krzanich

Sure, that's question. great a

there's on see which of out many and that statement you're one that's mentioned look take continue individually I'd picture, out these just The experimental you're tell together into far can something this on in there truly of into is picture these a Level deliver. X. out But the what asking, the customer of package those at pretty world-class up going a even work I we If whole is And X we've So into that is there. X, lot there. with and a you those XX, all – businesses work Level Level bigger been nobody put they're solution, I you said that walk great. are that putting together else able a to when complete you

general, you're to autonomous with X, right, of architecture. go or of spectrum. OEMs, architectures So on seeing it's we we Level bring those And Level driving across that in whether when about bots, we're is products, even somebody Level different a and thinking depending X customers we X, X, kind different what talk about us suite Level in what differently

of control the skills software. more but closed system. want Some up. I to are I thinking by be a Level want X, my think I much have will

a we there. set bring have solutions to So we of them

Some in of on. them do want automotive how FPGAs We to modems. the earlier the more it to is modem. down our they their we're shipped, our what onto for silicon release, have But we mentioned first software bring and bring able

really these edge. modems out automotive bring and a that data all to all to the able data not centers, Most build the we're data centers, centers, at way the data goes compute center are with XG. and companies of So but through architecture just car data centralized way having

and and mapping, construction the be to mapping, maps' like manipulate want back to to going to those You're from things and able transfer data change cars high-precision the cars to that.

have in a and you that within to building with of and bit most different. on XXX-car software said, fleet. of says can bring these the solves work talent another efficient And levels. And we're car we're go now your changing, problem you building have to much able architecture, time. to each much And best you take together. and FPGAs, as all and solution what there sensor power, these that's in only lowest [Shashua] have is. meeting. to it's Amnon you IP has versus would work do we do bring own the development the phases do? the one and They This the X, this is that And you put uniquely car Mobileye What discussions, how all way? do multiple want we're show thing all and drive how you and products to the why X, we X compute. we also that can company? part let's us So to do And have work cost-effective, one How out to that's want bring to then a thing out all over or to you that through a like in driven It's don't is solution. vision of and really go foils get We the What say not fit out them the your one a just to say for through infrastructure. Xeons as they're again fusion there. and

And resonating – this various is package. OEMs. every it's week, is various there that quite every as talking in about with car walk of Amnon to the unique almost complete out. them well I'm package all week. is We're all we we out other So that a have in and modes

Matthew D. Ramsay

Brian. Thanks,

Mark H. Henninger

and the up and Operator, ahead all you Matt, thank for joining call. please today. wrap us Thanks, go

Operator

conference. you thank today's gentlemen, participating and in Ladies for

have You may great a all day. disconnect. Everyone

Mark H. Henninger	Intel Corp.
Brian M. Krzanich	Intel Corp.
Robert H. Swan	Intel Corp.
Ross C. Seymore	Deutsche Bank Securities, Inc.
Stacy Aaron Rasgon	Sanford C. Bernstein & Co. LLC
Blayne Curtis	Barclays Capital, Inc.
John William Pitzer	Credit Suisse Securities (NYSE:USA) LLC
Romit Jitendra Shah	Nomura Instinet
Harlan Sur	JPMorgan Securities LLC
Matthew D. Ramsay	Canaccord Genuity, Inc.

Intel (INTC) 26 Oct 172017 Q3 Earnings call transcript