INTC - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2019 Intel Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Trey Campbell, Head of Investor Relations. sir. ahead go Please

Trey Campbell

and By to received now earnings earnings of operator, earnings a third conference our presentation. the and call. you release welcome you, Intel's everyone quarter copy Thank should have

documents, both earnings for The also those received not us is you've they're on website presentation webcast our the in online. available available joining intc.com. investor window If

them hear Swan; Davis. In George joined I'm brief from our remarks and today Q&A. by our CFO, followed both of moment, CEO, we'll by Bob a

me that everyone let contains discussion differ to environment could based our we statements information for begin, and as it materially. press forward-looking we Before risks more that to cause on remind as actual today's the Please include such on refer the results does release factors uncertainties. specific currently and see risk

brief presentation earnings describing quarter that financial financial and Today, have we GAAP the full the both consolidated be our non-GAAP on this results. measures measures. reconciliations. GAAP provided and non-GAAP and speaking release earnings to available non-GAAP will intc.com include when reminder, A we The

With Bob. it me hand over to that, let

Bob Swan

was $X.X XXXX respectively. achieved QX, in on in our in record while continued EPS, strategic our both businesses $X.XX making quarter guidance and best generated $X.XX, progress $XX.X our ,Trey. Thanks billion company's history. revenue our exceeding and overall non-GAAP billion a in and by We the revenue We've data centric priorities.

ambitions Simply been put, our have greater. never

reshaping expanding large of in and share market growth data, growing are We exponential computing. billion by is opportunity a $XXX fueled which the

returns. accelerating deploying May three a start Day to our growth, capital and execution, priorities; with want improving I and Analyst for attractive of our recap

belief. growth. starts First, with core It the

demand data Cloud moving to with key of growth for networks and are the more are point diversifying, is inflection creating a the edge. performance transforming, are We semiconductors. computing exponential workloads at massive

help us advantage and the a to journey industry leadership that reposition we take of inflections product positions the We've uniquely in the technology these the customers we're trends future. company's to and been on required win have to this investing our capitalize the to Today on portfolio multi-year catalyst. IP of

The opportunity is massive.

in years. by generate $XX $X four means doesn't expect As billion But happen we to in days. we operational in it. XX and that delivering in EPS Achieving three this and just told you priorities revenue our saying on financial goal every to May,

over for as Growth since our proud quarters competitive processor we're power are our customers workload units in platforms Scalable delivered workloads. and Xeon business the on winning starts core million a It's data-centric Xeon rely optimized with launched now XX been first marketplace. to highly have to nine their

platform, AWS, for customers Scalable instances In Customers including XXXX the Xeon second-generation and selected Scalable based third our BP quarter, workloads. Darmstadt their deploying highest leading processors Xeon performance on with demanding most Cascade Google, our TU cloud Lake. ramped and series Alibaba the

One key acceleration built-in workload for the AI. reason are customers choosing platform's Xeon is Scalable

With the CPUs. combination to AI deep up and of competitors' we're advantages seeing boost versus influence AVX-XXX Intel in technologies, of Xx learning

momentum We our Intel building technology, cloud memory also for Optane. see enterprise breakthrough and

Oracle Oracle. and performance world's collaboration performance most at infrastructure incorporating announced next database is platform, of memory quarter we the Optane, Exadata persistent banks, high high its powers with Intel This generation a leading which of strategic telecoms, capabilities DC the into retailers.

already And launch expected Ice shipping have all year. Client XX designs to of OEM that Lake in we're customers total Computing, PC major this a our excited out XX with

the Intel industry first Intel in processors W- bringing time. platforms generation recently workstations announced deep lead the high-end powered X-series We for and the AI acceleration desktops. mainstream high-end boost learning next These into Xeon PCs of and for

the Athena enthusiasts reasons that also embarked PC program We've deliver for value raise on multi-year that ecosystem performance to and keep to and Project bar give course on a products laptop innovation. Intel. creators Available choosing called more soon, charts the a these

two-in-one, are Amazing the the the Elite Dragonfly, XPS that Athena Project HP available. meet XX, already and devices Dell spec like

server but and PC franchises Our are vital, even greater. our are ambitions

We're AI world. the and extending enabled leadership power, to XG and our increasing product

We is driving AI portfolio. our have edge double-digit networking and product businesses, IoT growth, dollar delivering multi-billion across significant and revenue

We XX% could began in one silicon investing workload XX we so in IT, $X more revenue on growing convergence years market, SOC than network capabilities, of software, Intel's XXXX achieved and ago and expected this number that Today, year. network, billion with we at share drive silicon. the

XXXX. the for and our as segment in-network for enabled that edge in deployments XXXX positioned connected on-premise wireless and to opportunities inflection to to XG expect edge share XG market endpoints. equipment significant And by and well also growth smart next extend grow ready market We're we're IoT stations XX% from and base new

Winning approaching the revenues leadership blending share combined and right per a means the of killer to and with Mobileye have vision Inference the capabilities these annual are differentiating emerging watt $X compute the acceleration, Computer and propelled our apps here IOTG businesses performance billion. AI edge. that

edge quickly, are businesses growing curve only we're River. of The at up in year-to-date excluding and the investing XX% opportunity, the bend lead. to Wind the We're also

Finally, case. to we're Artificial use AI we everything that's enterprise Intelligence. will and According AI in by AI XX% is infusing of applications build. why becoming a IDC, XXXX, pervasive use

future. about just isn't this the But

driven more to products Intel in Edge, than the expect to We from the than more revenue billion XXXX, Inside now. meaningful spanning generate are driving XX% Center Data AI up data-centric $X.X year-over-year. in AI revenue With we

but on we our multiple We're to fronts. improve our need also growth, execution confident in

response supply, increased our stronger-than-expected output demand. in First, we've to

growth. investment, year, this We've levels of capacity XX% our ramping increased our that two CapEx capacity XX-nanometer also our XX-nanometer expand the production. while invested record years last we've customers' support to and With

further XXXX, will the to been PC our first-half, mid-to-high second-half we client to up single-digits supply our expect increase and client sufficient. double-digits by expect but compared hasn't supply growth PC be that We in

forecasted made buffers stronger expecting in customers PC they're and inventory market letting back we We us. has which the more our demand than expectations has forecasts. We're surpassed our think difficult. from exceeded down, and QX, third-party now is building

supply we continue be but hard in working to to expect balance, fourth are challenged the demand quarter. to We regain

process manufacturing node also improving. Our execution is

production XX-nanometer will both improving soon products. center and and and start We expectations Oregon Yields client data for production of Fabs volume have XX-nanometer in ahead and in Arizona. on are Israel

network product and In And Ice the has our XXth we processors to also SoC, we'll XX-nanometer continue including shipped discrete storage in Accelerator, products XG QX, a for expand with AI FPGAs. and Core are server begun Intel leading Xeon first The XXXX, base our exciting Agilex era Inference Lake new portfolio new way. Gen XX-nanometer and GPU. our XX-nanometer station an CPUs

on first our power for achieved GPU important DGX we've quarter discrete an exit milestone. This

process are to back pace two-and-a-half May and of Investor two moving accelerating the node we introductions As we discussed at the a to cadence. Meeting, year

balance and schedule, power process working are technology engineering and complexity design Our design process ease to performance, teams closely cost. and

track of after our We X-nanometer XX-nanometer. a based the products, in are to on two first years discrete launch data center launch focused XXXX GPU

engineering path also are the down well X-nanometer. on We

Last, priorities. a capital our few thoughts on deployment

$XX We buyback are our future confident an and in billion our share approved has authorization. additional Board

sheet an invest free cash to generate have in to excellent R&D strong We continue and flow balance CapEx grow. and

XX flow At We've same to also returned making XXX% the we're free time shareholders years. over the trade-offs. cash last

total billion spending R&D period. increased we reduced While over same by $X points XXXX, than a since spending our we've more have the by nine

clear bets our established storage. Mobileye, and criteria and have XG big like memory for we Additionally,

both, shareholders. our and larger Our take And customers' generate success can't our do swift we ambitions returns in for are if we'll to play attractive a role action.

totaling quarter, making And up delivered progress IQ shipped nearly major are wins record acquisition. we in XX last We year, the Mobileye third design great with million now lifetime over than XX% the devices We've year. over our XX million and this six units. period revenue secured more same new

increased Micron. modem and investment announced IMFT but We've XG the our to XG, exit of we've sale the fab our in also smartphone

options in to those of continue improve investments, a and quarter to profitability NAND variety fourth evaluating and the returns. path to XD and to steps close reduced that can we while the memory improve expect accelerate We profitability partnership CapEx take

We our that commitment. increasing we buyback are and confident with our business multi-year are in plan consistent

months. repurchase to over We shares XX XX the billion expect months next approximately to XX

and generate of We will from investors. by we XXXX fund non-core to cash XXX% the approximately free returning asset proceeds from flow and/or dispositions partnerships buyback

In a the Thanks allocating are execution energies growth, on summary, our capital accelerating for to our our quarter. wisely. improving focused great team and our

call I'll results for George our And and hand over to QX business more details on outlook. the now,

George Davis

good everyone. and achieved quarter. year-on-year, all-time We flat Mobileye, and a had billion record of revenue than compare. year-on-year representing approximately $X.X $X.X very QX, DCG, just the was down billion our PC-centric $XX.X under Bob, individually of an We all Thanks afternoon revenue total saw outstanding billion, X% guide. revenue XX% in NSG with of data-centric IOTG, an higher revenue record record high. on revenue tough a and

leverage. revenues higher Gross modestly in as for DCG through XX%, than our was approximately was NAND of associated mix guide revenue of offset quarter on strength by the revenue flow spending point and factory. operating expected grant below more QX was ahead NAND one-time an with and than of expected of margin impacts NSG XX.X%, the absence expectations our effects strong including higher one margin

the EPS $XX.X results tax to our offset top flow QX and was like shareholders. well $XX.X Year-to-date, one-time we cash $X.XX demonstrate increased of performance, NSG discipline, have expense lower strong factors by returned The business. generated as in share above $X.XX rate non-operational guide. as free line billion items our buybacks billion

our points server our changes versus we down last XX% ramp client platform businesses by and of spending degradation, was more declines and cost products. and margin in in reserves, higher year as were Operating in modem than client the strength pricing NAND four lower XX-nanometer volume offset ASP as quarter approximately

lower to or and tax of as lower X% up IMFT operating count, a venture joint one-time was by $X.XX EPS the related impairments margin offset share year-over-year absence rate. was the lower

XX%, rate tax XX% below in down QX guide. approximately versus point and non-GAAP our Our year one was last

tax as U.S. as XXXX on the a XXXX As filed to benefit tax for our we expected return our tax year. non-U.S. better reported than recently related sales well

performance. segment to move Let's

the Our the as tax had at $X.X from filed record Data billion, well Group revenue as return up prior year. XXXX X% on year our tax for recently XXXX U.S. Center

Let's performance. move segment to

X% Scalable Group beat prior $X.X year-over-year second-gen strong our expectations year These on with products. Our of Data Xeon our sequentially. results up billion, Center up and had revenue X% at up platform the record XX% highest ASPs from performance adoption

cloud were DCG two-thirds comms, tough represent units DCG platform X% segments, driven and of year-over-year connectivity now revenue our over growth by revenue. solutions. total growth achieved down the while XX% compare, Against DCG adjacencies

up revenue as X% platform quarter three after exited growth historic to cycle. providers absorption cloud a passivity year-over-year. service Cloud a XXXX refresh was Returning

while solutions. of and expectations and on provider’s gains of share adoption demand Enterprise mix strong revenue revenue continued in better China service on communication IA-based increased government XX% came and ahead growing X%

QX pull-ins in from benefited $XXX revenue in segment the service provider QX. demand estimate communications government million trade-related and approximately that We from enterprise and of

DCG performance, XX achieved quarterly line As operating points top and of sequentially. record a result XX% of margin up income was the strong operating

XX% expanding a businesses margin year-over-year, other to reserves Our operating up IOTG's data-centric were lower income mix revenue the edge. underscoring to from and benefits lower first up opportunity down at QX year-over-year marked Intel's X% was IOTG X% $X due shift products. year-over-year, quarter, inventory billion and

revenue ADAS were on Mobileye up and respectively launches. and program XX%, and penetration XX% operating year-over-year new continued income

of year-over-year XX% and on operating revenue wireless, growth, partially pricing by $XXX segment up continued growth, by discussed with in These pricing continued X% declines. in grew year-over-year along XX% million. return approximately loss declines to bit to NSG's on one-time product impacts earlier contributed Cloud operating income down was softness NSG partially mix. strength PSG the on revenue And offset Enterprise. offset

X% DCG benefited volumes satisfy internal versus strength, were ASP inventory volume. was to lower demand. down down XXXX, unit as drawing QX platform PC billion, XX% we offset from partially down where revenue $X.X year-over-year

of our QX, demand end We Bob discussed as value continue particularly to to at supply constrained in despite capacity higher continues additions expected be earlier. the outpace than the supply the PC market that strength

strong we grew in connectivity and by billion flat cash Adjacencies demand was lower have $XX.X revenue XX% in the Operating billion as flow solutions. $XX.X XG year-over-year, by spending modem modems margin and lower exit. generated by driven XX% invested CapEx. year-on-year was Year-to-date, driven operating offset smartphone for

to flow buybacks. cash free through dividends of and XXX% shareholders returned also We

the of price per average we During shares share. an buybacks XX at quarter ramped million purchasing $XX.XX

moving the outlook. Now to full-year

outlook As QX billion. strong a $X.X operating revenue billion to into XXXX $XX QX, for our result by of and performance momentum we our increasing are

flat full for We down expect from prior year guidance. be flat data-centric slightly to versus to expect be and up to both business PC-centric the our revenue slightly improving our to businesses

be at approximately Full point Operating margin for the year guide. to year expected for X.X is from prior up approximately margin expectations gross are XX.X%, XX%. our unchanged

the ramp points We expect to sold continue QX two previously prior as will expectations. down through to have we margin to inventory reserved gross XX-nanometer with be X.X and sequentially consistent

year approximately full million spending down year-on-year. for Expectations are unchanged, $XXX

$X.XX on strong now non-GAAP top our expected for the a and guide line $X.XX, tight up is year July from performance to be expense EPS As result, the control.

CapEx billion billion result by investments. to we are gross X-nanometer by $X $XX to are We $X.X And free XX-nanometer increased our raising raising $XX guide a billion, and billion. as cash of flow

adjusting billion, flat sequential businesses Let's expect related and be up After turn in on QX. year-over-year X% cloud $XX.X DCG, trade for to of to the Data-centric recovery to we X% of sequentially. up QX growth. are revenue year-over-year pull-ins expected X% and impact NAND pricing continued

business flat slightly to down PC-centric expected be is to Our year-over-year.

we and sequentially EPS very delivering summary, lower and higher rate strong operating QX on a gross over very expect the and margin operating with record the be year. non-operational Company's rate. $X.XX, below benefits of tax down expected of XX.X%. tax are In lower focused the We be approximately margin, will performance on pleased we XX.X% quarter a is a to line

turn that, Trey. back With over let me it to

Trey Campbell

Thank George. right. All you,

now is on to and first Moving we introduce would one go practice, participant the to ask just please our ask Q&A, Operator, ahead our question. normal each caller. as

Operator

Certainly.

line question Muse Evercore. of first from from comes Our the CJ

please. question Your

CJ Muse

afternoon on looks square to just you're Yeah. I it's for and – the it question. like thank data DCG, year-on-year. numbers, side, question you center a taking the up Good guess suggesting X% maybe it's up the

up strength side the very year-on-year you you I of and guys, that, XX% of picture a can more then service comm the guess now than and So, bigger XX% representing to for source the mix. speak of accuracy large provider clearly

you years? one, Thank if about of next of thinking can drivers curious to most important two, kind you. So, business how and over speak the you're that the three growth

Bob Swan

Thanks, CJ. Yeah.

get First, bit and our a didn't would little X% X%, growth. yeah, specifically, but I you're say we X% a centric I lower – we of would gave – to center X% DC to it's guide data than DCG

the in you're ballpark. So,

this comms programmability where On at the to to extremely now a comm network the service, NFV environment software of important for business the for opportunity and migrate defined IA an has seen us years the networks, an networking aspect number of architecture. the been we've with

doing remember up also a mid-to-high and quarter been time. for So, quarter, of this been us year's number XX% growth third significant in we've of of a over itself, was it's source in And the for XXs. but last the the years, was growth in

as our see continue So, you're is we we've going design XG to on make – a go going growth see real to data really source achieved in has big network XG this been edge and great been to What opportunity moving going been network. forward forward. in us CJ. we've next and growth wins for a XG business we Thanks to cloudification More we we progress. continue progress a a in and yeah, year from big cloud an characterize the invested as of in it year us over we so good what that real we be and world see opportunity next see expect into where XG, and of for the we out more to that's past, the that compute centers

Operator

Thank you.

Our next Credit the John line from of Pitzer comes question Suisse. from

Your question please.

John Pitzer

afternoon with results. Bob. I the Yeah. stick DCG Hi. solid guys. want Good Congratulations on to

the mix I also impressive comms you're It's tends where look the ASPs If next chips. be in especially believe lower to ASPs. you their seeing business, generation ramping year-over-year, toward as X% your the were quarter, shifted up competitor that which happening

your ASP unusual competition we this your innings lift how cycle you can do of the in in, much and what's understand, So, of comments, trying as are Scalable to give to I action upgrade you market? referred the Xeon an anticipate you, pricing in that in guess any what mind, prepared heats I'm power up

Bob Swan

was that one your Boy, question, John?

John Pitzer

Multi – parts. multiple

Bob Swan

Yeah.

Okay.

quarter, SKU. say into particularly I'd well we're the is in higher Lake but family. transition were yeah, a and So In first Lake into within by now product performance the cloud the highest-end really that's the obviously ASPs the really Cascade – customers in driven our high Cascade move the Skylake,

to Lake within Lake performance from transition So, we're Cascade highest and the high our ASP. Cascade SKU, a real seeing highest, that's performance Skylake

I stay where mix So, QX, that don't is. in dynamic that it to expect

go that looking think Lake. competitive at next year. into And QX get say of got in Skylake I lineup would great year, we've more a of half got we we'll to terms We Lake; we're next dynamics, as just of Cascade to balance I a Cooper of first products.

about realize about excited coming will server we've capture be essence think. we're to and also environment talked Ice we second on we a of equation, – the a little margins I – before, XXXX's and we out Lake back it Analyst QX think on at our we tried year, in call half Day, more the but both in demand next flagged that As really competitive on demand or the how that bit

So to comms The good, even good tendency momentum real good second you're a quarter, half, little though high performance with a driving ASPs bit have high be to ASPs half right. lower. SKUs first

that's... think I

John Pitzer

Perfect. you. Thank

Bob Swan

Thanks John.

Operator

you. Thank

Our next question the of Stanley. line from Joe Morgan from Moore comes

Your please. question,

Joe Moore

where Thank the you context you guess, Great. said I in the bit you. do about shortages like better, realize demand it’s a are your And you you in that have how anymore? don't I business tensions is a few talk be shortages talk points think we'll better And, bit wonder position you I little when brought intensifying. the and just if more. you those and seems yet much Can up. little in a but capacity XX-nanometer it a of could to

Bob Swan

Joe. Yeah. Thanks, Thanks.

First, try kind of into I'd context. it just put to

about I growth explosive anticipate we last business that three the years billion years, capacity tails to we've so our three last that and have on $XX by ago, working place in reality been customers so of we kind deal didn't grown years, months their and ensure revenue three the the XX didn't Over practical to is with of guess, off a we for course in it, XX%, for the last constraint over be the our the growth. we've wouldn't the

also the I in XXXX. while over added From billion more for wafer ramp XX% I think, XXXX XX. prepared last have $XX spent you my capacity to two both, comments as we we CapEx XX, to years, said, to know, In we've capacity start begin

will be half Our volume first half to second up double-digits. unit

progress making our throughout just So in the good had billion higher is be supply/demand second fact year, profile we're because course the higher is of we anticipated. And revenue matter would back half, a were the but in that's the expectations the there, of we're we equilibrium. our demand resulted than $X.X in not the

So customers' have to fourth meet XXXX. our more the work in demands going we and do into to quarter

be. As a But in growth their constraint with we higher which want not still we quarter, absolutely to going fourth be in customers' fourth see constraining the the we be will to demand, our we're where growth, is do quarter.

our into go we mid-to-high have XX have the PC we and more we capacity that we our buffers, for inventory to XX for single-digit But to XX% particularly we're unit when customers be got client and will so just expectations another to expect expect able grow don't that as and volume market XXXX, next year to growth need both are, it. add But a we'll there we that fast. do

able to and challenging to we little be expect things. a be will QX So rectify XXXX,

Joe Moore

you. Thank

Bob Swan

Thanks, Joe.

Operator

you. Thank

of comes Montreal. line Srivastava question BMO from of next from Our Bank the Ambrish

please. question, Your

Ambrish Srivastava

to much. that very just two, that my understanding year. about the laws were you causing I that Thank cadence is to out. two-and-a-half it -- to Bob, physics the because to were wanted they the Is stretch of it triarchy talked back simply go Hi. you bringing that cadence and

-- you. process is have the to there you folk X-nanometer. the and So solved the what engineers Thank it and limited just that And then revisit would problems or out again?

Bob Swan

focus to one, lessons it's coming question. Last in those we're XX. and detail, kind a capturing think the But in back Day, we our out right learned -- is and Yeah bit our now energy scaling challenges a learned good next had this both, we of we tried how through our Analyst the with around quite first two of about XX of go lessons generations. as

week-on-week products as the very six feel And, have put said, coming we achieving, pipeline that we months. in about place, we good capacity almost we're and last improvement over yields down the we the the the

for So really XX, feel we good.

the rules design for Second, less in terms aggressive of in density. when we we X-nanometer, were put

and from a with benefit or Our XX that too into we the is challenging. a getting those and tried just from your to learning aggressive to learning kind the environment that targets, X.X XX are from really we were going of that factor when, we was putting invention -- -- can't hurdles is, nodes the ended at dynamics just point, of meet to up hindsight, fab scale much hit kind those revolutionary of to increasingly

learnings out XX. lots of So of

Our complexity EUV. transition into the last XX X, incorporated design that we design for and that working we've less rules the been the to there's years of with couple

Litho expect EUV two years We've the product we And our challenge. that and first quarter. we indicated scale working now had been will that EUV X. as we this be has a with use years for been to from we've few

beyond. will on from quarter So and product cadence of we'll X-nanometer that X our get fourth expectation a back out and our two-year come is XXXX, first

we learnings few to back incorporated, today, reiterated and a cadence of out be back to we've lots of we forward two least that nodes. XX-nanometer May at said to going we two-and-a-half So the year and expect next in for

Ambrish Srivastava

Thank you.

Bob Swan

a Thanks lot.

Operator

you. Thank

the New Ferragu from Pierre of line Our comes next Research. question Street from

please. question Your

Pierre Ferragu

Hey, ask question, my one have Difficulty] [Technical question. thank you you for taking maybe I'll but

George Davis

are you breaking Pierre, up

Pierre Ferragu

better Okay, is it now? Okay.

in you when summer? competition spoke have what with the how you footprint were And the with and evolution competitive if question months? much landscapes we really over you last look is three of lose line you [Technical think be may in what can in that my your center the question then at that you had Are things in And with the your your perception on Difficulty] you what's my so mind? is, your in landscape So the expecting to mind data

George Davis

kind let that Pierre, of reframe me maybe.

jump we about it you're about competition level maybe I talking the center on on some think year-over-year how could I'll QX and PC, of PC think or data now causing maybe both the in the because concern. -- the I'll be I that to compare is and feel and

basically reminder we have down you inventory the compares a had went of like little QX than looks QX year-over-year more a we can drawn -- of channel Just in when demand. on that last on do so year, which PC into and bit

over Really of we as we seen competitive the XX the haven't last days, look any dynamics. difference view in our

We end It's reasons are think -- the the volume for to clearly because again those being next we're a impacted us opportunity is capacity significantly an compete for units we on issue volume to year. of into build which of gives it XXXX market the value supply one capacity continuing us. why building

to don't you comment the on I Bob, know DCG want if side?

Bob Swan

try not if I'll you know, the exactly I'm got Yeah, because terms sure question… of that's competitiveness the in I question. But,

George Davis

yeah. was, That

Bob Swan

and our raised And just world. world competitive year margins. our outlook increased $X.X that we billion more full a operating in by it's Look

yeah, to So performance. I expected. our only that's think, really changed months, months, relative months in nothing's really three And changed the thing what last we is -- our nine the six competitively

do that the our year to success. we role going play role that next we is know our in dramatically But customers' into expand

technologies, packaging build. product, software that the we're the we the and capabilities the expanding process architectures, the So

I'd terms not environment yeah, can we're feel we about But competitive increased deliver complacent where feel by XXXX. good customers. performance as an to of -- continue our just we that better are. we go better say into So any really and we means And product we in for

Pierre Ferragu

you. Thank

Operator

Thank you.

Our question Bernstein next from from the Research. line Stacy comes of Rasgon

Your question please.

Stacy Rasgon

cloud my tell for was Thanks each DCG, of businesses guys. of you quarter, within the much by comm wondering could China? your in us enterprise driven if taking in was I how Hi, question. and those

you $XXX given expectations and across enterprise relative in million or comm pull you mentioned, to million? your was cloud enterprise And that and more forward that than beef that $XXX less mentioned -- enterprise the

George Davis

$XXX our a and area line -- the you up say expectations year-over-year come definitely expectations expected think you've enterprise the We that's right. above had in to million bit, I more government our on number. that out growth numbers was comms and-- once got the it and Stacy, was little I XXX take Yeah, with was it and would

Stacy Rasgon

more than by million? So, $XXX

George Davis

yeah big that that number was that a -- -- us to expectations. for relative Yeah was was fairly our

Stacy Rasgon

enterprise of was much how then? China So,

Rob Swan

of roughly one-third the Look center, comms got the is roughly you cloud two-thirds in for Yeah. is think I business and data and enterprise government. terms makeup and of

So, and that share that earlier in grow as the as continued we've gained to question cloud mentioned you the our dramatically know to in think I I has over Joe's as years changed presence comms.

And of was more than saw I than Board. anticipated kind state strength across in The we're half we two-third/one-third DCG quarter. now acceleration would and So, a the had a We just enterprise the July. across and we strength back expected. say was in first higher the Board half government in was the in much we second to but acceleration,

the billion can EMG $XXX $X.X pull what But in related of project they tendency if as particularly as that is a what of the in kind what on million roughly -- trying our our particularly we particular, of we has count and performances we was And at growth guess that determine we over we're were look to China. related forward. on enterprise stronger to things government, Thanks best Stacy. to versus

Stacy Rasgon

Thank you.

Operator

Thank you.

comes from Arcuri the question from next line UBS. Timothy Our

question Your please.

Timothy Arcuri

for like XXXX. is XX-nanometer, for it like the next GPGPU X-nanometer sounds sounds still year it sounds second track like Bob much. on Ice for and on the it still so track is Thanks half of Lake

X-nanometer. the time about You about for did talk first

even that of bit partner Thanks. maybe consider or foundry for sort of to So, sacred your off can think piece or a you would that CPU that like of table significant the If really of competitive make how would eliminate talk make chiplet anything or I'm now? little after is you a if disadvantage, about strategy. a go sort you a is versus what outsource? And into

Rob Swan

forward Yeah Yeah timeframe. year cadence and comment. Day cadence our two said I at to X we at ramp mean year half to going for first to the to and two Analyst a about two be more relative expectations at process XX nothing new what the

the So, and the XX products in intently now for focused you X on mentioned quarter. fourth

So, forward. going to process we're recapture investing leadership

be At that we them evaluate. time, products about will that we we're do the always we it's extremely something same open-minded going was how is and build -- to ensure the where building best

with other and our support evaluate demands, expectation going do source I that best we you have over we're players, to growing of of think the know meet and/or products diversity they've our a capacity peak something better to can they the of portfolio. the to to is years foundry that's for kind do growth set opportunity the been always in our to extent our demand position that the going we as at look us customers' how our for

Timothy Arcuri

Bob. Thanks

Operator

Thank you.

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

Your please. question,

Ross Seymore

guys. XXXX. your directional some to on thought A into ask wanted as what quarter margin. Hi, gross commentary year Today, gave on on for you for third call, the look you I ago out-year Bob XXXX. we

puts with about But margin? gross the you hoping ramping have parts and some of moving You quarter exit lot I maybe takes admittedly. yields this a how X-nanometer year at you're moving feeling that two fourth least next XX-nanometer, nodes year's lots competition was of on could parts give versus rate

George Davis

in to Hey, we George. about talking for about to a there we Maybe are my with proxies that I'll the than XXXX. Actually, outlook And want now into take was where was for But, and you respect XXXX, and XXXX going Ross. XX% point on think call, is to good that There headwinds to last as look at, we'll the those that numbers. is change about no XX% – closer tailwinds if those characterization question QX were that. number. be This is think well we and think material XXXX. we to XX% should – my

So will we're to tailwinds modem the next going mix obviously year. be lower in have

and headwinds of and is supply that going ramping impacts of of deep and Memory to down also as up XX-nanometer we're competitive are mindful be very is situation. better volumes headwind margins, is we it we starting little demand little obviously come ASPs. a to a on be can get a The ASP bit – that out period, on think

the no So, look comments. those look at my we'll to all are at continue the we – from those at, as but change things previous those material that today are

Ross Seymore

you. thank Well,

Bob Swan

the the going our I of we're the our would modem – will the NSG all – in be year I'd moving profitability characterize kind lower In to and guess be mix going complexity as I where things better. just, be will four dialing and better all flagged is really on. probably next One, that George volume echo. parts into

be a contributor as is drag margin, mix we on have to it mix a has – So, into been will big XXXX's going go gross and XXXX. a

had secondly, the of a pre-PRQ first on half products. to on XX-nanometer of lot we And of XXXX, the cost related sales –

not itself. that So will repeat

favorable things are two good things. those So

no have a been of dramatically lot long. is Yields George The of won't no different in that been is thing just these I depreciation us terms transition going and lower, third there flagged this be for levels node its be transition we've tools because simplified. There's because be little mature. next XX-nanometer, we'll fully on profitability. so depreciated, just year will to be extremely for better because we're a But

node the XX be will better. for a transition bit So, little

versus will continue is mix of the the at expectation will time same Our wait. XX yields bit little of XX-nanometer a improve, be XX a to but

- into So, we exit in to compete we We're no a tried as can account and against to will next play. work into quest to going we this success. we dynamics the competitive and role us. transition position our going play our take in customers' role bigger year year the And also we've our protect expand best

So dialed we XXXX pretty things lots we lots of in complexity ago parts, of well. are four and but year the – and moving a those

as dial XXXX to in got well. we've Now,

Ross Seymore

detail. Thanks for the all

Trey Campbell

Operator, two have we'll more time I calls. think for

Operator

Certainly.

the from of of comes question Bank next Our line Vivek from Arya America.

Your question please.

Vivek Arya

higher for or will level capacity What that of shortages. I similar Thanks question. capital next you are year. will planning this understand What XX? a proportion my capacity some intensity And mentioned we mix will taking you're wanted year? to XX? for how require as still you saw Bob, facing be be

Bob Swan

to to kind our that, same growth and is we constraint not on by level expect this year Yeah. what is that foremost. did be year, intention the next customer's increase year. XX% which And I next of mean, capacity I our we is first a indicated given

again. do that to We expect

that mid just kind output. believe unit to decent center we data want unit in output So, get for been mid-single-digit to of -- client to pretty we've shape, we but high-single-digit

demand we can also So But one, deal these expect cetera. can we to meet customer rebuild buffer be. we we et can profiles what -- peaks, inventory, so, levels of so with

and we place months So, the depleted try has course over that give trying the of so. customer us nine the to in inventory been demand that we're last will or think put the the buffer meet to capacity

and that George any in capital, wasn't kind now. that are January, May of we'll say, give function view from on a detail would obviously we where changes just growth. more capital multi-year probably be of a kind out you of of terms back of dramatic laid and In I But come but will

George Davis

to everybody -- in to XXXX just that XX-nanometer continue is capital we major add the adding well. began to X-nanometer in made we as from would thing to and a over our one our capital moving I expand XX-nanometer, to both spending at add in move that some capacity remind capacity XX-nanometer shift area and memory

the focused us are the to place word in we So, very allow will on shortage capacity discussions. quarterly of that take our out getting

Vivek Arya

Very good. Thank you.

Operator

you. Thank

for comes from Harlan of today Sur JPMorgan. Our final question from line then the

please. question Your

Harlan Sur

period or wanted in next your Do spending growth, job few and similar of of we passed growth first Good cloud discussions you and is It's workload a digestion guys reacceleration that XXXX. at customers. is XXXX half sustainable get the compute fact setup Last look sense afternoon back that mean in your for paused customers cloud the like your as DCG it this sustainability and off profile in had strong at of half XXXX. spending had themselves complex a what five a more Workload great of next into so, quarter getting DCG was by strong year. strong spending by on get same just to was to a on views growth second quarterly and are the the pace. kicked things I four if with continues strong in I kind time quarters? enterprise execution.

Bob Swan

Yeah.

So, need macro And of that to all. subsided is process haven't the the this relevant. trends more to the store creation think trends, for at move see compute we I data the -- data insatiable that make that and -- appetite

big for trends providers with long as macro And been long digestion Those cycles have for experience very continue, to -- expect our -- had they point, attractive very go relatively then the the a and to we -- cloud those while. your but buying through periods. the been

come a digestions. they experience started What gang we in But third it's where was the did particularly them through coming -- for to more. the been quarters a last to the And started third little year quarter, back three what we to to went was see gang-buster begin really year. quarter market -- to see compute into bit performance high begin purchase into

to QX. now little been end to is So follow demand demand, how three think strong. given several market their capacity. have for be yes they cycle relatively out up add bit till will to continue quarters they to -- of seems up about -- long their need going that the We a of function And to be But a lasts variables. end therefore,

Harlan Sur

Thank you.

Trey Campbell

Bob hand to Harlan. we're over the closing Thanks going for call back some And comments. to

Bob Swan

for Look it's the thanks our feel a about for we're raising We great at record Yeah. -- quarter joining where full the for about thanks quarter, -- had us. year. looking -- we outlook

confidence, we big we're XX-nanometer we And see, now. ramping on the X-nanometer. area for of The is our really a continuing market deliver multitude customers. ever are as trends We're increased to they've products, as have focused in see, been. we

on. the seven we nine you're and months higher seeing putting -- And in flow. we're back reduce that first year as we're both of the getting our as five two-and-a-half what the buyback cadence well as focused in And year money for future. a to And to is to with mentioned, the your two where we're share confident work

you we May and shared Because the the between how plan values of disconnect think with there intrinsic we in is we're back trading.

taking balance our that. with of sheet So, advantage we're

for to we'll So for you. us. soon. joining you questions. Thanks And talk thanks your thanks -- for Thank

Trey Campbell

please today. go and thank call you you and Bob Thanks wrap-up Operator, could George. for the ahead And joining call? everyone the

Operator

participation thank Certainly, the gentlemen, conclude in today's you, This And you. thank conference. does for ladies and your program.

may You Good disconnect. now day.

Intel (INTC) 24 Oct 192019 Q3 Earnings call transcript