00:00Sales in the data center segment soaring 59% last quarter.
00:04Let's get right to it with Bloomberg Tech co-host Ed Ludlow.
00:08He joins us live on the heels of a conversation that he just had with Intel CEO Lit Bouton.
00:13So Ed, talk to us a little bit about this because I know that one of the things he told
00:18you was that
00:18they have demands outstripping supply and that's a pretty good problem to have.
00:24Well, the distinction is last quarter they left a lot of money on the table
00:28because they could not get the CPUs into the hands of customers that the demand merited.
00:34So the situation is still that demand is growing faster than supply, but supply is still growing.
00:40And like the massive outperformance, even at the low end of the sales forecast for this quarter, right,
00:45you're beating consensus.
00:47So the market is a situation where CPU specifically is taking off for Intel.
00:52A lot of their top line performance is answered by that.
00:56And in the quarter gone, you know, that unit's growing 59% double what the rest of the business is
01:02growing at.
01:02So they have found their place in that market.
01:05But what they're battling to do is improve their own operations, their own foundries and their own processes
01:11so they can get the CPU product that people actually want out there into the real world.
01:16Yeah, no, it's a good point to make that.
01:18You know, it's a happy problem to have, a champagne problem to have for now,
01:22but quickly it could turn into a different situation here.
01:26Talk to us a little bit, though, about what we're seeing when it comes to CapEx.
01:29Of course, that has been the laser focus for investors, particularly when it comes to big tech.
01:34What did we hear from Intel?
01:36Okay, so CFO Dave Zindner, they are going to raise the CapEx guide for 2026.
01:42Right now it's at 18 billion.
01:44Dave told me that it can go up to 20 billion, and they'll communicate the specifics of that on the
01:48call.
01:49And in general, they don't often give numbers a year in advance.
01:53But CapEx in 2027 is going to be meaningfully higher than it is now forecast to be in 2026.
02:00The main point is that Lit Bhutan is very cautious to deploy capital.
02:05He wants to be certain of a return on that CapEx.
02:09But they have a lot of agreements in place, which extends to the foundry business.
02:14They booked them in the first two quarters of this year.
02:17They have a very good sense from customers what the demand is.
02:20So they are willing to deploy the CapEx for capacity.
02:23They're not going to put that money into what they call space, not new sites, new fabs, new facilities,
02:28but they will upgrade and add to the tooling.
02:32So this CapEx is going to equipment, it's going to tools,
02:35but it's still a bullish signal from them on the direction of travel in the semiconductor space.
02:40Ed, we saw reports a couple of days ago that the company was planning layoffs within its data center group.
02:46The earnings call will kick off at 5 o'clock.
02:49Is that something you expect to be addressed?
02:51Are we anticipating any type of update on headcount?
02:54Yeah, maybe, I mean, again, remind ourselves that the data center business is high-flying for Intel.
03:00It is the outperformance.
03:01So why would they cut roles in that division?
03:04And the way that both Lit Bu, the CEO, and Dave Zins explained to us is like,
03:09look, this is normal.
03:10They have quite a few new leaders at the top of Intel's organization that Lit Bu Tan has put in
03:15place.
03:16They have done reviews of each business line.
03:19They have cut various roles for improvement's sake.
03:23And they made a really big point that they tried to hire as competitively as possible,
03:27increasingly focused on some of the veterans of the industry.
03:30And so to them, this is kind of not a correlated thing.
03:34The data center business is doing really well.
03:35They're trying to improve it for efficiency and reducing workforce as a part of that strategy.
03:40Ed, just a quick question here.
03:42Clack and Applied Materials both outperforming after the print.
03:45Is this the earnings results that the entire industry really needed to see?
03:50Well, look, we know the stories.
03:52You know, AI demand means demand for CPUs as well as GPUs on the data center side.
03:58That's why Intel is doing well.
03:59On the chip equipment side, if you're going to build lots of new capacity in the United States and around
04:05the world,
04:06you need the equipment to fab those chips.
04:08If TSMC is telling you, like, this is our picture,
04:11then all of the chip equipment makers will also follow in the coattails of that.
04:17And it's a completely non-surprise in that respect.
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