Intel at Bank of America Conference: Strategic Shifts and AI Focus

On Tuesday, 03 June 2025, Intel Corporation (NASDAQ:INTC) presented a strategic overview at the Bank of America Global Technology Conference 2025. The discussion highlighted Intel’s efforts to regain market share and adapt to evolving industry dynamics. The company is focusing on AI opportunities and manufacturing flexibility, despite challenges in the competitive landscape.

Key Takeaways

• Intel aims to reclaim market share in data centers and sees AI as a key growth area.
• The company is prioritizing profitability, targeting a gross margin exceeding 50%.
• Manufacturing flexibility is crucial, with a mix of internal and external foundries.
• Intel is addressing tariff impacts with strategic scenario planning.
• The company is enhancing its enterprise PC offerings, focusing on technologies like VPro.

Operational Updates

During the conference, Michelle Johnston Porthouse from Intel outlined several strategic shifts under the leadership of CEO Lip Bu. These include:

• Reinvigorating Intel’s product roadmap and enhancing AI capabilities.
• Utilizing both organic and inorganic strategies to strengthen AI offerings.
• Improving the balance sheet by reducing capital and operational expenditures.
• Focusing on customer needs and product quality to choose optimal manufacturing nodes.

Manufacturing and Product Strategy

Intel’s manufacturing strategy emphasizes flexibility and cost efficiency:

• Intel is leveraging internal and external foundries, including TSMC and Samsung, to optimize product delivery.
• The current internal/external manufacturing mix is 70/30, with potential adjustments based on market needs.
• Intel’s next-generation Nova Lake will utilize both TSMC and Intel Foundry.

Financial Goals and Discipline

Financial discipline is a core focus for Intel:

• The company aims to achieve gross margins of 50% or higher, requiring disciplined product lifecycle management.
• Intel is optimizing capital deployment and lowering spending on assets under construction.
• Product approvals are contingent on potential gross margin returns.

Competitive Landscape

Intel is navigating a competitive environment with strategic adaptations:

• The company is defending its position in the enterprise PC market through VPro technology upgrades.
• Intel is addressing competitor ASP growth by emphasizing newer node products.
• Incentive payments to PC OEMs have been halted due to robust demand.

Future Outlook

Intel remains optimistic about the future, driven by:

• The Windows 11 refresh and AI growth at the edge.
• Opportunities in local AI across various industries.
• Continued focus on strategic adaptation to market dynamics.

For more detailed insights, readers are encouraged to refer to the full conference call transcript.

Full transcript - Bank of America Global Technology Conference 2025:

Jay Karya, Analyst, BofA: Jay Karya from BofA’s semiconductor and semi cap equipment research team, and I’m really delighted to have the team from Intel join us today. Michelle Johnston Porthouse, or MJ, as most people refer to her as. Really happy that, you could join us Thanks for having me. This time. And, what I’ll do is I’ll start with the safe harbor statement that Intel has given me, then we’ll go through my questions.

But please feel free to raise your hand if you would like to ask a question, and I’ll be sure to get you in. So the exciting statement before we begin, please note that today’s discussion might contain forward looking statements that are subject to various risks and uncertainties and may reference non GAAP financial measures. Please refer to Intel’s most recent earnings release, annual report on Form 10 ks and other filings with the SEC for more information on the risk factors that could cause actual results to differ materially and additional information on our non GAAP financial measures, including reconciliations where appropriate to the corresponding GAAP financial measures.

Michelle Johnston Porthouse, Intel: That was the highlight of

Jay Karya, Analyst, BofA: your With that out of the way, really appreciate you joining us. Maybe let’s start with the State of the Union, right? Give us a sense for how the demand environment has shaped up. I know a lot of macro crosscurrents this year, but how has the demand environment shaped up so far versus what you guys have thought at the start of the year?

Michelle Johnston Porthouse, Intel: Yeah, it’s a little bit different. Mean we haven’t talked much beyond Q2, but you know there’s a lot of uncertainty in the marketplace, I think especially around tariffs. And you know we certainly saw in Q1 customers buying ahead, trying to prepare for what tariffs were going to mean. You know, I think as I look at Q2 things are a bit more stable but I think everybody is kind of waiting for what’s going to happen with February, what does it mean. But overall I would say actually a pretty resilient market considering kind of the macroeconomics and you know I do see positivity from customers where they see buying cycles, they see enterprise buying, small and medium business, probably the consumer segments that are the most price inelastic and the most sensitive, but I remain optimistic for the second half.

Jay Karya, Analyst, BofA: Okay, you mentioned section two thirty two, I know, that’s a

Michelle Johnston Porthouse, Intel: Everybody’s million dollar question.

Jay Karya, Analyst, BofA: That’s right. How is Intel thinking about the impact?

Michelle Johnston Porthouse, Intel: Yeah, well first off we have to understand what the impact is, but maybe the way we’re dealing with it. I mean, obviously no one knows what it’s going to be but we have a whole team that’s doing a variety of scenario planning within Intel. And we’re doing scenario planning with all of our customers as well. It’s like how are they thinking about it, where do they want to build, Where are their kind of core focus areas as they react to whatever the tariffs will be? I think the other thing that’s really important is we have a pretty broad network of manufacturing capabilities so if you think about Intel ten, Intel seven, Intel four we can manufacture those in multiple sites both in The United States and outside The United States.

We use TSMC so we can shift volume if need be there as well and we have 18A’s in The United States, our new process node, but we have EUV capability outside The United States, so we would have optionality there if we needed it as well. I mean I don’t think in any one scenario planning they picked all the right lotto numbers. I guarantee nobody’s going to get it perfectly right, but I think we have enough scenario planning that we can pull pieces out. I think what’s probably most important to me is really understanding what customers want. Where do they want to build?

Where do they have optionality by SKU? And we understand all of that. So the second we understand those and we already know what our customers want to do, we really quickly can pivot from a build forecast perspective. Your guess is as good as mine and what will actually get published is the rules, but we’re trying to prepare for it as best as we can.

Jay Karya, Analyst, BofA: Got it. We’ll go through some of the details of Q1 earnings and what Intel saw, but big change. Lip Bu joined as CEO. So what have you seen so far in terms of the changes in the organization from whether it’s an operational or financial or kind of a strategic perspective?

Michelle Johnston Porthouse, Intel: Yeah, I think we’re all thrilled to have Lip Bu on board. Know, we were talking a little bit about this. Obviously, an industry icon that’s done, you know, a lot of great work over the last couple decades. And, know Lipu has really come in and talked to us about four key areas. You heard some of those in the earnings call which is really around reinvigorating the roadmap, making Intel relevant in this AI growth vector, bringing customers to Foundry and fixing our balance sheet.

And so when you think about reinvigorating the roadmap, he’s flattened the organization, he’s brought engineering to him, he’s doing deep dives, the number of customer meetings that he has had in his first eight weeks is astonishing to me. He came in with a very strong point of view, but you know, really matching that customer point of view to what he’s hearing from the engineering teams. He and Sochan has spent an enormous amount of time really mapping out what the AI strategy is going to be, where we’re going to win, how do we use the IP portfolio that we have inside, and who do we need to partner with to bring that to market, and you’ll hear more about that externally I would assume from Sachin and Lipu over the coming couple months. And then a lot around foundry, like where are we on 18A, what is 18AP, what type of whale or large customer do we need to have with 14A to make that capital investment make sense. And really had a lot of conversations with customers that have decided not to use Intel Foundry and really trying to understand that.

And the best part about those three segments is he’s very transparent with all of us about exactly what he hears. So employees know where we’re winning, where we’re not, where we’re falling short. And Lip Bu is absolutely a person that wants to hear the bad news first. So he’s not looking for the glass half full, he wants to know where does he need to get in, where does he need fixing, and then number four is really how do we address the balance sheet? Where are we, how do we bring our capex and our opex spending down, how do we get more in alignment with what we see as best known methods within the industry, and really drive those through for operational efficiency.

You know, he’s done a lot in his first eight weeks. He’s hyper focused, think he knows exactly where the problems are, which is very good to see. But he’s willing to listen, he’s willing to learn, and he’s willing to roll up his sleeves, and so, you know I think employees are very optimistic about the fact that he can help us. There’s no one at Intel that thinks that we have it all right, we absolutely know where our shortcomings are, but I think sometimes it’s easy to see the shortcomings and not always easy to figure out how to fix them. So I think he’s giving us some clarity for how to have those conversations and how to move the organization forward.

It’s been very good. It’s been a busy eight weeks.

Jay Karya, Analyst, BofA: I can imagine. Is it fair to think that the focus has shifted from market share to first fixing the balance sheet and the profitability? Is that a fair representation? Or it’s not as mutually exclusive as I’m making sure?

Michelle Johnston Porthouse, Intel: I don’t think it’s quite as mutually exclusive. I mean, I think he knows that we need volume and revenue to you know, obviously to continue on the journey, but I do think in 2025 we try to be a bit more pragmatic about you know, do we have to do all the deals that we’re doing, obviously if you looked at our customer deal pipeline in Q1 it was significantly lower than it has been in past quarters and so I think he’s trying to look at it and say, hey where do we have products that hunt and we should get paid for those and then where maybe do we have some shortcomings where we have to use ASP to drive market segment share, but he’s laser focused on the fact that we need to get our gross margins back up above 50%. And so we need to be building products that allow us to do that because they fit the right competitive landscape and requirements of our customers, but we also have the right cost structure in place and it really requires us to do both. So I think it’s going to constantly be a little bit of a tug of war in the short term because it takes a while to make product changes.

Jay Karya, Analyst, BofA: Right. You know, as someone who is responsible for ensuring the success on the product side, are you happy with where the manufacturing side is right now? And how much flexibility, MJ, do you have in saying, look, if internal manufacturing is, whatever, 70%, right? What if we make it 50% or 60%? So how much flexibility do you have in sourcing versus outsourcing to make your business a success?

Michelle Johnston Porthouse, Intel: Yeah, it’s a very popular question today. Here’s how I look at it. At the end of the day, customers want great products. So I don’t do anyone any good by building the wrong product on the wrong node. And so, I try to be very pragmatic and say, how do I deliver a world class product?

I do it by SKU. I look at the SKU, the market need, the cost structure, what’s it going to take to win, and I pick the node that way. And we’ve done that consistently in our client product group and I’m going to apply that across all the products. And so obviously I’m very happy with the foundry and where and how far they’ve come along with AT and A and I’m obviously using that as a happy customer for Panther Lake but one thing that I constantly have a conversation about internally is sometimes an Intel Foundry is going to make sense for my products and sometimes it’s not. By the way, even when we think about it from a balance sheet perspective, I can’t deploy the amount of capital that would be necessary to build on my products either.

And so how do I use both Intel Foundry, we use Samsung as well, and TSMC in ways that really allow me to optimize. And so, I’ve been very public that come our next generation of product NovaLake, I’m using both TSMC and Intel Foundry. And I’m doing that because I think it allows me to deliver a more competitive product for our customers, and at the end of the day, the best product wins. Yes, of course I want it to be on an Intel Foundry, but if it doesn’t deliver the best product, I’m not going to build it there.

Jay Karya, Analyst, BofA: Isn’t there a cost to engaging with two foundries?

Michelle Johnston Porthouse, Intel: There is a cost to engaging with two foundries, but if you do it in the right way, the cost is pretty minimal. And what I mean by that is, if you do it by package type, etc, and you’re using more and more of the industry available IPs, I don’t have to redesign them. And there’s a cost to doing that, but a lot of times I can get my partners, my manufacturing partners to bear the brunt of some of that cost as well, so they’re willing to take some of that on. But at the end of the day, that cost is worth it if you have the right product mix portfolio. What I’ve heard from customers time and time again is I want the products to solve my customers needs.

We’ll leave it to you to figure out how to put that package combination in place and I think it’s really important because at the end of the day, you know, as investors, customers buy the best product over and over again. We’ve certainly seen that in AI categories and there’s certainly markets where continuity is probably more important sometimes than the best product but that only lasts for so long. So you may be able to have one generation of product where you may not be unequivocally the best, but you don’t get a rest on those laurels. At the end of the day, we have on the product side a lot of flexibility to do that. So we’ve been very forthcoming that our mix moving forward is seventythirty.

And we think that that’s the right mix based on being able to deliver the best products to the customers, but we would be open to that changing if it needed to, to make sure that we could deliver a world class roadmap.

Jay Karya, Analyst, BofA: And then on the competitive landscape, even though Intel has access to TSMC and obviously your internal manufacturing, what has enabled your competitor to take the lead in average selling prices? Because one difference that was clear from the respective q one earnings call was that you saw mix kind of downshift. They are not noticing that. So their ASPs have gotten better. So even though both have access to the same foundry, conceptually, what is helping them gain the upper hand on ASPs, at least in the near term?

Michelle Johnston Porthouse, Intel: You’re really talking about ASP growth.

Jay Karya, Analyst, BofA: That’s right.

Michelle Johnston Porthouse, Intel: Yeah, so if you look at our primary competitor, they have generally historically sold N-two through N-four products. And so really what you saw isn’t them selling a lot more of the N node, but more N-two and N-three products and so really it’s a slight mix shift and for each of those process node mix shifts it’s about you get more ASP because it’s a better product. So I think it’s less about the way that they’ve used the manufacturing capabilities that are in the marketplace and more about how the mix overall has changed, and I do think it is credibility to the fact that their product roadmap has gotten much stronger and so as your product roadmap gets stronger you have an easier time selling into those you know, I guess you could say more current products and when you’re selling N-four and you move to N-two you get a pretty significant ASP uplift and we’ve continued to see that in competitors. We do too get ASP uplift but in Q1 particularly we did see people buy older node products because they wanted to balance their portfolio mix for tariffs. And really what that means is, if you have an older mix of product inventory, you can hit more ASP price points, particularly in the client space because your overall cost structure is lower.

Depending on the size of tariff, you can still fit in that $6.99 to $7.99 price point where the majority of client volume is. Whereas like a $12.99 product for an OEM with tariffs would jump to $17.99 and that market TAM is very small at $17.99 so there’s a much larger risk in carrying that inventory. Remember the OEMs don’t have a lot of cash on their balance sheet, they don’t make large margins per unit. So it’s much easier for them when they’re thinking about making sure that they have the right inventory for it to be lower cost inventory. And so that both advantaged our competitor and maybe a little bit of a disadvantage from an ASP perspective for Intel but I’m happy to sell those products because I think great gross margins on them as well.

And we continue to see that in Q2 where demand for those products remains quite strong, in fact, supply constrained.

Jay Karya, Analyst, BofA: Got it. And then one other thing we noticed was that this year Intel did not make the incentive payments, right, to your PC OEMs, which I think we have seen in prior years. So what made you kind of go away from that?

Michelle Johnston Porthouse, Intel: Well, think most of us are more in the mindset of you want the business to land in the quarter for which it needs to land. We do have a more competitive client roadmap than we have had historically and we should get paid for that. As well as particularly in Q1, you just saw strong demand because we did see pull ins and so you don’t want to go pay people to pull in product if they’re naturally going to do it anyways. But I think Lip Bu, Dave and I have maybe a little bit different philosophy of we really want to land the business that’s in the business within the quarter and when it makes sense to do a customer incentive, I’m not saying we won’t do it, but I think we just want to be very balanced and pragmatic about the way that we go about that, and as our roadmap gets more competitive we should have to spend less dollars in that regard.

Jay Karya, Analyst, BofA: I see. Have you seen any change in the competitive situation on enterprise PCs? You know, in that, again, the competitors claim is that, look, we are, you know, gaining share. We have, you know, all these skills at Dell and and whatnot. So have you, and this has been an area of real strength and dominance, right?

Michelle Johnston Porthouse, Intel: And I believe that enterprise will remain a real strength. This is one of the categories where when you’re a CIO and you’re thinking about managing a fleet of iPads or notebooks or whatever you deploy as your edge unit, ubiquity in those units is extremely important. Things like VPro technology manageability and security are extremely important and we’ve done a lot of upgrades for enterprise particularly around VPRO this year, and so there are a lot more competitive enterprise SKUs and I think the question that we need to watch and we need to be laser focused on is how much sell in do you have. It’s one thing for an OEM to offer the SKU, it’s another thing to actually gain traction. And what I hear from CIOs is that they love working with Intel, we deploy engineering talent the second they have a problem, We understand how to manage their fleet and we’re very good at working with them to deploy real time updates to their fleet and we know what it means to manage a fleet and so it is one thing to build an enterprise product, it is another thing to manage an enterprise portfolio and we have seen that to be a core strength and you can be assured I know that’s a core strength and an area we’ll continue to invest and an area where I absolutely want to protect market segment share because it is sticky share.

There’s some share where you know, you can lose and bounce right back just because you have the next best product. This is a place where you don’t bounce back really quickly from and so I’m going to do everything we can to protect share in this space. And I actually think most of the OEMs are on board in wanting to deploy Intel into enterprise because they see good traction and stickiness for themselves as well.

Jay Karya, Analyst, BofA: You mentioned Panther Lake is up and running, you’re happy with that So if that progress is going by your expectations, why go back to TSMC for Nova Lake?

Michelle Johnston Porthouse, Intel: Yeah, so maybe just baseline everybody on Panther Lake, so Panther Lake is a product that’s going to launch in the second half of this year, and it is all built on Intel 18A. Really, Panther Lake is an all mobile stack. When you get to the next generation Nova Lake it is both a mobile stack and a desktop stack. And so, one of the things about the desktop market, which is a place that we have lost market segment share, it is a very elastic market. The best product at the time of graphics card launch is really how you kind of take advantage of that TAM.

And so being able to land on a node that is already ramped, is at very high performance plus yield is very important. So you can imagine, I’m looking at how much yield and product can I get in a very short amount of time? And so when you look at that you might actually pick maybe not the latest dot of a node at TSM C but you know you can get a lot of wafers and a lot of product in a really short amount of time and so you put that skew on TSM C. And so when I say I’m pragmatic I literally look at it by skew and where it makes the most sense. And so I like personally a portfolio where I use both boundaries because at times I want to be cost, at times I want to be about volume, and at times I want to be about performance and depending on which is most important for the customer in the segment, that’s what I pick.

It isn’t anything about Intel doing something wrong, it’s more about optimizing the mix to be able to deliver best on behalf of my customers, and hit a particular market window with a particular amount of volume.

Jay Karya, Analyst, BofA: Right, makes sense. On the server CPU side, when do you think investors should say, alright, this is the Intel product that’s going to help start taking the market share in the other direction?

Michelle Johnston Porthouse, Intel: Yeah, so when we look at the data center market, what we’ve said is in 2025 we want to stem the share loss, we want to get to the bottom and then start to move up. So obviously customers are deploying Granite Rapids right now, which is a good step function, then we’ve got Clearwater Forest and Diamond Rapids which is our E core and P core product lines coming in ’26 and so I think we’ll stem the tide and then we’ll start to see market segment share start to build back up with those next two generations of products. But it’s a journey. It’s not like this large stump function where you’re going to see 10 points a share added where, you know, because these are more inelastic markets and it takes time for customers to ramp and in some of these cases you have to move an entire data center to your product where it may have been deployed all on a competitor and you have to make like a lock you know step shift with some of these customers and so it takes time. The journey back in data center is a little longer than it would be in client as an example.

But I feel good about the products we have, I feel good about execution on Granite Rapids and now we need to repeat that on Clearwater Forest and Diamond Rapids. We have good feedback from customers on both of the products and so it comes to execution. You know I think it’s not a surprise, our execution on the client side has been more consistent than it has been on the data center side and so I’m really trying to bring a lot of the best known methods and things that we’ve deployed on the client side to data center but we’ve just got to continue to build products that our customers want to bet on because obviously not just for us but for our customers data center is a high growth category, high margin category and you can’t afford to miss the market window and so we need to be the trusted partner for them in that. I think we’re doing a better and better job, it’s a journey back to the intel I think that all of you would expect.

Jay Karya, Analyst, BofA: And in terms of the wallet share shift that we have seen in the last few years towards AI, right, in a way from traditional compute. Yeah. Are we on the other side of that? Like, we at a point where that trend has stabilized? Or I guess the roundabout way that I’m trying to ask this question is that if Intel’s AI product takes some time, right, to become competitive, does that influence how quickly you can rebound on the server CPU side?

Is there a correlation?

Michelle Johnston Porthouse, Intel: Is there a correlation? We’re actually doing quite well on server head nodes for AI, so our market segment share there is actually quite good. So the more AI grows I think that’s positive for us. Oh I think we’re just at the beginning of explosion, I mean this is a trillion dollar market that’s going to continue for a while, I think the million dollar question for us is, you know, when are we going to have rack scale architecture products that we can deploy in meaningful you know, size so that, you know, have billions of dollars of revenue. I think it’s in the next few years, I mean, I think that’s really for Lip Bu and Sachin to come talk about, but I do think they have ways over the next, each year, of coming to market with new products that will help us learn and continue to be there.

But there’s no one at Intel that’s going to tell you that we’re late here. But I’m optimistic that we have the right pieces. We have the right APs in CPU, we have the right APs in graphics, and interconnectivity, we know how to do rack scale, but we also need an infusion of talent, this is a huge focus for Lip Bu, of bringing in some new talent to help us here, and I think we also have to look at delivering products in these categories that fit in some seams in the marketplace, maybe non traditional places where we can differentiate ourselves against you know, the market leader Nvidia and so that will be a big focus for us as well. The one thing I can tell you, and I’m sure as you’ve had your meetings throughout the day, people want alternatives. People want choice.

They want open. Those are all things that Intel brings, now we have to bring them in a meaningful way. And I can tell you all that work has been happening, I’ve seen product roadmap plans, and so I think there’s a meaningful opportunity there that we can go and deliver, but at the end of the day we have to prove it to customers and we need partners that want to deploy with us in mass scale because that’s what it takes. But I’m optimistic we can get there.

Jay Karya, Analyst, BofA: And you expect it to be more organic or inorganic?

Michelle Johnston Porthouse, Intel: It probably depends on the segment. So it’s probably a little bit of both. Like if you’re thinking about training it’s very different than if you’re thinking about inference as an example. And I don’t think we can do it all by ourselves, like I think we have to use industry partners, etc. I’ll let Sachin and Lip Bu talk a bit more about that, but I can tell you in the first eight weeks that he has spent a lot of time here, spent a lot of time with industry partners about how to do this and it’s the number one request of every one of our customers, right?

Like get in the AI space, I need alternatives, I need partners and you’re missing. And so it’s a good opportunity for us and we certainly have all the pieces of the toolkit, we just need to put the Rubik’s cube back together.

Jay Karya, Analyst, BofA: How do you see competition from ARM? Because outside of the Apple ecosystem, they don’t show up in very big numbers and, you know, Mercury. Right? Then we hear of these large hyperscalers talk about, oh, half of my instances are based on this ARM product or somebody else saying, oh, all my incremental instances. So what do you actually see, MJ, from from your customer discussion?

How important is ARM to them? And let’s say if it is more important than you think, then what is Intel’s strategy to deal with it?

Michelle Johnston Porthouse, Intel: Yeah. I think the answers are very different depending on your client or data center. I think in client, there was this large push for diversification over the last eighteen months. You saw obviously one of our competitors come to market with an ARM based solution but I think what we found is no matter how much money you throw at it I actually think to fix the ARM ecosystem pieces in client it’s really about volume. So it’s about shipping billions of units and getting this software ecosystem that x86 has built over the last couple decades.

It’s really getting that to port to the ARM ecosystem and that is not something that’s going to happen overnight. It’s going to take a lot of time. Data center is very different. In data center we do see large deployments of ARM, particularly at a lot of the CSPs. My understanding is that their deployment of ARM is more their internal workloads.

So the workloads where they can do the software work and they can deploy that. What I’m not saying is when you think about somebody who’s going from on prem and moving a workload to the cloud, if that’s a customized workload for them, I am not seeing a lot of that being deployed on an ARM based workload, I’m seeing it being deployed on an x86 based workload. And so this is where our open x86 architecture and building chiplets, and you know, I think albeit we could have done this earlier, but the fact that now if they want to go build a custom CPU for their data center and they can do it on x86, that will be easier for them to port the software ecosystem outside of their custom workloads there and so I think you’ll see a deployment of both. But I’m optimistic that by opening up x86 and making it available, if it’s easier for the software ecosystem to port, I think we put to bed that we can’t match them in the performance per watt, I think we’ve taken that off the table. So the fact that there are no intrinsic things that would stop somebody from deploying, now I think we need to go enable a few of them to build a custom x86 chiplet with their own configuration and deploy it and see how it works.

But know, Arm is a formidable competitor in data center and they’re a formidable competitor, A, they have a product but they were also much better at listening to the customers needs and building a customized, allowing them to build a customized product. So I now have that, albeit I might be a bit late to the market, but I still think I have the software ecosystem in favor, and so now I need to get some of those large CSPs to be building some custom chips with an x86 core instead of an ARM core.

Jay Karya, Analyst, BofA: Interesting.

Michelle Johnston Porthouse, Intel: And we do see interest. I don’t have any design wins to report, but we do see any new design wins to report, but I do see some strong interest in really understanding. I don’t think there’s a customer in the marketplace that would tell you that the value of the OpenX86 software ecosystem is very very strong. I think you’ll hear that from every competitor that we have, and so we just haven’t necessarily utilized that strength as well as we should, and now we are, and so now it’s on us as a product team to go and get some design wins and show the world what it can do.

Jay Karya, Analyst, BofA: You mentioned the move towards 50% as kind of an intermediate type target. What needs to happen? Is it a product issue? Is it a pricing issue? What is the timeframe over which you think Intel can get to those kind of gross margins levels?

Michelle Johnston Porthouse, Intel: Yeah, we haven’t actually forecasted a gross margin, but we all know we should be at 50% or above, and we’ve been there before. So I think our future products can all get there, I think really what it comes down to is you have to have a lot of discipline in your product life cycle planning to build products from day one that hit that and so there’s a lot of things that I talked about when we talked about Lip Bu coming on board of getting our OpEx and our CapEx in line, getting the types of products that we’re going to build in alignment, really understanding market and ASPs. And so when we’ll see that across the board, but future products that are already on my roadmap show me that we can have a 50% gross margin across that entire product line, and so that’s the expectations that our shareholders have, that’s what our competitors can do, there’s no reason we can’t do it. But there’s some things that we have to change internally, I think particularly around our spending, the way we build products, the efficiency for the way we build products. One of the things you’ve heard Lip Bu say a lot of, we need to go to market a lot more on A stepping, you go every stepping costs a significant amount of money, and so we needed to be doing a lot more upfront silicon validation and things like that prior to tape ins and things like that.

Jay Karya, Analyst, BofA: More EDA.

Michelle Johnston Porthouse, Intel: More EDA, yes you might imagine he likes that. But there’s just a lot more of those types of things that we naturally need to build into our product processes that we’ve already started doing and now obviously we’ll do it more rapidly. That will help us get there. I think the most important message is we all know that that’s the expectation. And moving forward if you have a product and you’re going through like our decision matrix, you actually can’t get approved if you’re not a product that can show me that you can get above a 50% gross margin based on a set of industry expectations and ASP, which is something that we probably should have had before, but we have it now so that product doesn’t move forward, you actually don’t get engineers assigned to it if it’s not 50% or higher gross margins moving forward.

Jay Karya, Analyst, BofA: Okay, and then the last question is, in the theoretical scenario where Intel is not able to get a large external customer for 18A or 14A, how does your product strategy and insourcing versus outsourcing decision and the cost structure and margins change?

Michelle Johnston Porthouse, Intel: I don’t know if they really changed because when you think about what we’ve said about foundry and profitability at the end of twenty twenty seven, it has a very small external footprint. So I think part of this is just getting the right mix in the factory, the right cost structure, etc. So I think on the product side, it’s probably less on the product side. I think more it’s about foundry and thinking about what kind of capital deployments are they going to do and what kind of customers do you need to ensure that you have so that those dollars are spent well on behalf of shareholders. And so, you know if you’re thinking about 14A, you know in 18A we started that process not as a foundry process and then we tried to make it a foundry process.

14A we’re starting from day one with being a foundry process and having all the right PDKs and IPs in the industry. But if I were going through that process I would say to make those investments you need to know that you have a customer besides Intel products that’s going to fill that factory because you need that diligence I think to go and make that capital investment. And if you don’t have it then do you do iterations of 18A, 18AP and whatever after until you can show a customer that you can get there and then they come on board. And so I think those are the level of discussions that Lip Bu is going be having as he’s thinking about the overall balance sheet and the way that we deploy capital. But even before then, there’s a lot we can do, know, we have a lot of assets under construction, over $50,000,000,000.

How do we get all that deployed before we build anything else as we think about deploying our capital dollars? This year we’ll actually have the lowest number we’ve had in the last four years of AUC and I just think there’s a lot of financial discipline that we can have there that we’re laser focused on. You’ve got to know how to do all these things in parallel, right? But I feel good about where the foundry is, I feel good about where they’ll get to profitability by the end of twenty twenty seven, and I think to continue to make investments we’ve got to show we can bring other customers in.

Jay Karya, Analyst, BofA: Last question, I know we are at the end of our time, what are you most excited about the second half right, of of this year, right? I know there’s a lot of macro cross currents, but what what

Michelle Johnston Porthouse, Intel: Well, you know, I think there’s a great opportunity in the marketplace. I mean, like, obviously, I come from the client side of the business, but with Windows 11 refresh, with the explosion of AI, I mean AI is going to come to the edge at a rate and speed that I don’t think any of us have predicted. Like the excitement that I hear from customers about local AI, all the verticals for AI, I just think there’s an explosion of opportunity that we haven’t even seen unleashed yet. We just need to make sure that some of the other challenges that we’re all balancing around tariffs and things don’t slow that down, but I’m actually quite optimistic about the market, AI, where we are from a roadmap perspective and new places that you’ll see AI where I think very much play to Intel’s strengths. I remain very optimistic about the market in general and the way that Intel can play and service our customers there.

Jay Karya, Analyst, BofA: Terrific. Thank you MJ. Thank you for your insight. Really appreciate it.

Michelle Johnston Porthouse, Intel: Thank you everybody for coming.

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