John Pitzer: Perfect, thank you, Ben. Johnathan, can we have the next question, please?
Operator: Certainly, one moment for our next question. And our next question comes from the line of Ambrish Srivastava from BMO. Your question, please.
Ambrish Srivastava: Hi, thank you very much. This is either for Pat or for Dave. I just wanted to come back to the DCAI. In the PowerPoint, you mentioned competitive pressure but I think, Dave, if I heard you correct, you said ASPs were a record. Could you just explain what you meant by competitive pressure because I would have thought that would have led to ASPs being lower, or was its impact was on the unit side?
Pat Gelsinger: Yes, and there’s a couple of things to unpack there. Just our views of the quarter, we would have expected that we lost some market share. That was based on competitive losses from last year even that are just rolling through our customers. That said, we did a bit better than we thought we would in the quarter. We are ramping Sapphire Rapids, which has a higher ASP more rapidly than we would have expected also as we go to the higher core count versions, that drives up the per socket ASP more aggressively. So overall, we definitely feel those competitive pressures. And as I say, we’re working for issues that began years ago. But we’re also combining that with Sapphire Rapids, Emerald Rapids, Gen 5, the road map for Sierra Forest and Granite Rapids which have much higher core counts, which will drive higher ASPs as well.
So all of that put together, we do feel like we’re on a very solid trajectory for the business overall. We will see ASPs continue to rise. The road map is very healthy as we go forward. And I feel like the market and our customers are starting to feel that competitiveness come back to our business here and looking forward to the benefits that a stronger Intel road map will offer to them and their businesses.
John Pitzer: Ambrish, do you have a follow-up question?
Ambrish Srivastava: I did. I have a follow-up. Intel showing pretty steady execution and I can’t say that in the last several years, we haven’t seen that. But just coming back to the long-term model that Dave you were talking about, can you just help us understand what are the parameters around that revenue, mix of the business? Because you will have an IFS which would be dilutive to gross margin, potentially not to operating margin. But what’s the right way to think about that 60-40 in terms of the business mix and even size of the business?
David Zinsner: Yes. I’d say I think the first thing to kind of improve the gross margins is going to be around getting ourselves finally to process leadership and getting the products completely, as Pat was talking about, the product road map improving significantly, getting to the — to where we have definitive leadership across all products. I think those two things will drive a significant lift on the gross margins, irrespective of anything else we have on the business front. And then when I look at, as I talked about this internal foundry model, I just think there’s so much low-hanging fruit on the cost side, both in the business units and also in the manufacturing TD are kind of internal foundry business, that there’s significant improvement that we can make on gross margins.
Yes, mix does have an impact on the business, and we have a wide range of products that will have different margins. But almost all of them are punching below their weight right now. And as we improve all of them, that should lift the gross margins meaningfully over time.
John Pitzer: Thank you, Ambrish. Johnathan, can we have the next question, please.
Operator: Certainly, one moment for our next question. And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please.
Aaron Rakers: Yes, thanks for taking the question and also congrats on the execution in the quarter. Kind of going back to the prior question, just thinking about the trajectory of the ASP expansion in the Data Center segment. How do I look at that and kind of think about what the normalizing operating profit might look like in DCAI as you guys look out over time? I know that you turned profitable this quarter. I’m just trying to think about — understand how you guys are thinking about the path of profitability in that segment.
David Zinsner: Yes. Maybe I’ll start. Pat, feel free to chime in. Obviously, it was, I think, pretty important for us to show profitability this quarter. That was one of Pat and I’s goals written on a sheet of paper that we wanted to see this business return to profitability. That said, it’s making a lot of investments right now to improve the product portfolio on the CPU side and make the investments necessary on the AI front. But this business longer term should have margins that are very similar to margins you see from its peers when they are operating at healthy levels of margins. And so we have a lot of work to do to get there but I think the path is pretty clear. And of course, ASP will be a component of that but there’s a lot of efficiencies that you can drive beyond just ASPs that will improve the margins longer term.
Pat Gelsinger: Yes. And as Dave and I think about the 60-40 model that we’re driving to long term, we think about the Data Center business being above that for it, where some of the more volume-oriented businesses like client might be a little bit below that. But taken together, that’s how we’re driving the business. And overall, as we said, we see a lot of margin expansion potential across Data Center, Client, Networking and Foundry as we get back to process leadership and build that business up. I’d also emphasize that as we build our foundry capacity, we build more capacity in our factory network for our internal and external customers. That’s a tide that lifts all boats for us because it improves the profitability not just the foundry but the competitiveness and the profitability of our product businesses as well.
So overall, we feel like this is a really important milestone for us this quarter, seeing not just great financial results but the operational results were even better than that, which is what led me to say, hey, this was an outstanding quarter for us overall.
John Pitzer: Aaron, do you have a quick follow-up?
