And with that, this is a portfolio that will allow us to regain share in the core data center market.
John Pitzer: Thanks, Joe. Jonathan, can we have the next question, please?
Operator: Certainly. One moment for our next question. And our next question comes from the line of Ben Reitzes from Melius Research. Your question, please.
Ben Reitzes: Yes. Hi. Thanks. Appreciate it. I wanted to revisit the gross margins, and I appreciate the 60% flow-through comment that we should use as a rule of thumb. But Dave, starting at 44.5% in the first quarter, how do you – are you still looking for the overall reported non-GAAP number to be up year-over-year from the 43.6%? And you mentioned some volatility there. I just want to clarify on the call how the gross margin trajectory is going to look year-over-year and understanding there’s that volatility there? Thanks.
David Zinsner: Yes. Yes, to be clear, the way I was looking at gross margins is on a year-over-year basis on the 60% fall-through. So you should take the full year gross margins that we had in ’23, which were roughly 43.5%. And think about this 60% fall-through based on the 43.6% gross margins. I think when you do that, we obviously start off at a level that’s better on a year-over-year basis, but obviously down on quarter-to-quarter basis. And so, you should expect generally improving dynamics through the year. The only challenge will be this quarter-to-quarter always has volatility to it. So there could be quarters in which we get less ship through of previously reserved products. Sometimes it’s more. And so and kind of avoiding trying to pinpoint every quarter, because of the difficulty around pinpointing that, but we feel very confident around the 60% fall-through.
John Pitzer: Ben, do you have a follow-up?
Ben Reitzes: Yes, thanks, John. Could you talk a little bit more about the client market? There was – you mentioned that corporate, you said some strength and Dell had said there was some weakness. And heading into the first quarter, can you talk about the revenues on client and what makes you so confident that it’s really going to pick up? Thanks.
Pat Gelsinger: Yes. So as we look at the market year-on-year, we expect it to be a few points bigger than it was last year. So last year was 270. This year, a couple of points higher than that. I think that’s consistent with the various market forecasters that we have. Our market share position is very stable. We had good execution of market share through last year. And the product line is better this year with a number of tailwinds, like we said. So overall, we think it’s going to be a very solid year for us in our client business. Obviously, as we start the year, everybody is, I’ll say, managing through what their Q1 outlook looks like, even as they expect to see stronger business as we go through the year. I’d also comment, Ben, that some of these tailwinds really only start to materialize as you go into second quarter and second half.
AIPC is just ramping right now. The Windows 10 EOS goes into effect. And customers are starting to look at the post-COVID refreshes. So a lot of those benefits materialize as you go through the year. But our position in gaming, commercial, very strong for us overall. And I’ll tell you, we’re just seeing a lot of excitement for the AIPC. I describe this the Centrino moment. The most exciting category-defining moment since Wi-Fi was introduced two-plus decades ago. So, we do think that it’s going to bring multi-year cycle of growth, great ISVs, great new use cases, and a product line that is clearly leading the industry established in this category.
John Pitzer: Thanks, Ben. Jonathan, can we have the next question, please?
Operator: Certainly. One moment for our next question. And our next question comes from the line of Vivek Arora from Bank of America Security. Your question, please?
Vivek Arora: Thanks for taking my question. But I’m curious, now that we are a year into the generative AI deployments, what’s your view on how cloud customers are thinking about the CapEx between traditional and AI servers? Because when we look at the revenue growth across your GPU competitors, they seem to be capturing nearly all of the incremental CapEx and in some cases, even more than right, just the CapEx at the public cloud company. So does that really leave much room for your CPU business to grow right beyond just the seasonal variations? So just how are you looking at the AI market overall? And what part of that is Intel really able to capture when we just look at how much is being or needing to be dedicated to your GPU competitors?
Pat Gelsinger: Yes, thank you. And let’s just maybe three different aspects to it. The first one is clearly the high end cloud guys and what they’re doing for maximizing training environments. Clearly that’s been an accelerator market so far. But that even is giving, I’ll say a bit of a tailwind in the sense there are lots of head nodes associated with that. We do think, as we said, that the market moves much more from high end training to inferencing. Of where our product line is more substantive for it. But the enterprise market, as we see it for data centers, is very much going to be an on-premise play, taking advantage of inferencing in that data pools that they already have. And that’s an area of good strength for Intel.
And we’re starting to see that in some of the conversations with our OEM customers. And as I finished, probably 50 meetings between World Economic Forum and Davos and CDS with customers, I’ll say we have absolute unanimous response that they’re going to be deploying a lot of their AI on premise in their data centers. And, you know, Xeons and our on premise offerings are simply the preferred way for them to be taken advantage of those capabilities inside of their data centers. Inside of the TCO envelopes, power, networking management that, they have in place. Obviously, we need to be participating – more in the accelerator piece of that. And we’re seeing the growing pipeline of our opportunities. We saw a nice uptick in revenue in Q4 from a small number, but a lot of momentum as we come into the year.
And Gaudi3 is getting a lot of excitement, you know, clearly leading in TCO. So, we’re going to be competing much more for that high end accelerator footprint. But I think the message of 2024 is going to be inferencing, AI everywhere. That’s going to be at the edge. That’s going to be the AIPC. And it’s going to be in the enterprise data center, all areas that Intel has a much stronger footprint.
John Pitzer: Vivek, do you have a follow-up question?
Vivek Arora: Yes. Thank you, John. Thank you, Pat. So on the foundry side, I think you mentioned IFS, you know, some declines in Q1 after the strong Q4 that you had. So, I was hoping if you could just help us size what is IFS in Q1. And then longer term, you know, you mentioned now you have four 18A wins, but how do we quantify what they mean for ’24 or ’25 or ’26? And I think on the call you had mentioned somewhere about $10 billion in lifetime wins. I’m hoping that that’s what you meant for 18A. But when I look at that $10 billion over multiple years, that is not really that big relative to I think the $130 billion plus annual foundry market. So could you just help us size what does Intel’s external foundry business mean for 2024 or 2025 perspective? Thank you.
