“We expect gross margins to be moderately weaker sequentially with modest revenue growth and efficiencies offset by a continued ramp of new manufacturing nodes.”

In context

“rmal buying patterns. Now turning to our Q3 guidance. Weaker spending across consumer and enterprise markets, especially in China, and continued focus on AI server investments in the cloud have reduced our TAM expectations for 2024. As a result, customer inventory levels are elevated. We expect customers to reduce inventory over the second half of the year, along with the continued modest negative impact from export controls. These market dynamics should result in below seasonal revenue growth in Q3 with the client business flat to down and modest growth in data center and edge markets. With an expectation of healthier inventory positions exiting the quarter and the continuation of an enterprise refresh cycle, we should see revenue growth at the high end of seasonal in the fourth quarter. We expect gross margins to be moderately weaker sequentially with modest revenue growth and efficiencies offset by a continued ramp of new manufacturing nodes. While we will continue our work to improve near-term profitability, a heavier dependence on external wafers as we ramp AI PC products over the next several quarters will pressure gross margins. As a result of these factors, we expect revenue of $12.5 billion to $13.5 billion in the third quarter. At the midpoint of $13 billion, we expect gross margin of approximately 38% with a tax rate of 13% and EPS of negative $0.03, all on a non-GAAP basis. As Pat discussed earlier, lower than anticipated revenue in the back half of the year is putting pressure on gross margins and earnings. We are taking aggressive actions to significantly reduce spending in response. These actions, while difficult, will help streamline the organization to improve productivity and make better decisions more quickly.”