Thank you, John, and good afternoon, everyone. Despite growing economic headwinds, Q3 revenue was flat sequentially and only modestly below the midpoint of our guidance. In June, we were one of the first companies to highlight an abrupt and pronounced slowdown in demand, which has brought and beyond our initial expectations and is now having an industry-wide impact across the electronic supply chain. We are adjusting our Q4 outlook, and we are planning for the economic uncertainty to persist into 2023. While we are not satisfied with our results, we remain laser-focused on controlling what we can, and we are pleased that our PC share stabilized in Q2 and is now showing meaningful [Audio Gap] improvement in Q3. Our service share, while not where we want it to be, is tracking in line with our expectations, and we are encouraged by good execution in the quarter against our product roadmap. In addition, we are intensifying our cost reduction and efficiency efforts, and we are aggressively moving into the next phase of IDM 2.0 geared to unlocking the full potential of the IDM advantage. This afternoon, I will focus my comments in three areas: one, the key trends and dynamics that shape Q3 and are informing our outlook; two, the progress we are making on IDM 2.0, including our momentum on process and product road maps and our recent announcement that we are implementing an internal foundry model; and three, the actions underway to drive cost savings and efficiency gains aimed at accelerating our transformation. Specific to trends we are seeing, along with further deterioration in consumer PC demand in Q3, enterprise demand has begun to slow.
We expect PC units to decline mid- to high teens to approximately 295 million units in calendar year '22. Our own Q3 results reflect a strong product portfolio with Raptor Lake building on Alder Lake's momentum as well as working closely with customers to optimize their inventory, our market share and business objectives. We are still shipping below PC consumption and the inventory correction continued in Q3, but not as quickly as we forecasted. Importantly, however, PC usage remains strong, demonstrating the increased utility and value of the PC and ultimately supporting a TAM well above pre-pandemic levels. We are targeting a calendar year '23 PC unit TAM of between 270 million and 295 million units with a strong brand and product line driving additional share, especially at premium ASPs. The data center TAM is holding up better, although enterprise in China continue to show signs of weakness as to some but not all cloud customers.
Across our infrastructure and industrial exposed businesses, NEX demand was very solid, though not immune from the weakening economy. PSG continues to be a true standout with record Q3 revenue, up over 25% year-over-year. PSG backlog is robust, and it continues to be an area where we are supply chain-limited. Despite the challenging business environment, we made solid progress toward our long-term transformation in Q3, and we remain fully committed to using the macro uncertainty to accelerate our efforts. Each quarter, our confidence grows in achieving our goal of five nodes in four years.
On Intel 4, we are progressing towards a high-volume manufacturing and will tape out the production stepping at Meteor Lake in Q4. The first stepping of Granite Rapids is out of the fab, yielding well with Intel 3 continuing to progress on schedule. Intel 4 and 3 are our first nodes deploying EUV and will represent a major step forward in terms of transistor performance per watt and density. On Intel 20A and 18A, the first nodes to benefit from RibbonFET and PowerVia our first internal test chips, and those of a major potential foundry customer have taped out with silicon running in the fab. We continue to be on track to regain transistor performance and power performance leadership by 2025.
IFS is a major beneficiary of our TD progress, and we are excited to welcome NVIDIA to the RAMP-C program, which enables both commercial foundry customers and the U.S. Department of Defense to take advantage of Intel's at scale investments in leading-edge technologies. Since Q2, IFS has expanded engagements to seven out of the 10 largest foundry customers, coupled with consistent pipeline growth to include 35 customer test chips. In addition, IFS increased qualified opportunities by $1 billion to over $7 billion in deal value, all before we welcome the Tower team with the expected completion of the merger in Q1 '23. On the product front, we had a busy quarter.
Within client, as mentioned earlier, we added to the strong Alder Lake momentum with the launch of Raptor Lake desktop in Q3, driving a more than a 40% improvement in multi-thread performance, unquestioned leadership in gaming, 6 gigahertz out of the box and record-setting overclocking. We currently have over 500 OEM design wins. We launched Intel Unison to deliver best-in-industry multidevice user experience. In addition, we saw a meaningful development progress across multiple OEM designs on Intel 4-based Meteor Lake with volume ramps in 2023.
We now have all elements of the AXG portfolio in production with A770 giving our discrete graphics efforts a strong boost. The Flex family is building a strong pipeline of data center use cases, and Ponte Vecchio is now production of four HPC offerings and production blades deployed for lead customers. Combined with Sapphire Rapids and Sapphire Rapids HBM, PBC is the basis for strong traction with HPC customers like Argonne National Laboratory and Germany's Leibniz Supercomputing Centre. CSPs and telcos alike continue to move to software-based 5G, vRAN and O-RAN deployments. We announced Sapphire Rapids EE with vRAN Boost for in-line acceleration of 5G and network workloads. Edge and AI are proving a powerful combination for us with OpenVINO momentum building with customers like Chipotle, and we launched the Intel Geti computer vision software platform for RapidAI training with early customers such as Braven, Royal Brompton and Harefield hospitals. Further evidence of our AI portfolio taking shape was seen by Red Hat announcing support for Gaudi, Cnvrg.io and OpenVINO. Inspur announced Gaudi 2 with Sapphire Rapids for advanced AI use cases.
Amazon will be accelerating large transform models with Gaudi instances in EC2. This was also a very strong quarter for DCAI execution. Sapphire Rapids volume SKUs have now PRQed with a high-quality leadership product and a very strong volume ramp expected. Google gave the first preview of its C3 instances showing Sapphire Rapids capabilities as well as our leadership IPU, the E3200 or Mount Evans. We also saw strong milestones in the next three generations of server products. Emerald Rapids is showing good progress and is on track for calendar year '23. Granite Rapids is very healthy running multiple operating systems across many configurations. And with Sierra Forest, our first E-core product providing world-class performance per watt are both solidly on track for '24.
It's obvious, but we're stating our strategy is only as good as our execution. We have been taking aggressive action to rebuild our execution engine, driving execution excellence across our people, design and development and operations. In Q1, I discussed our return to OKRs and their importance to our culture. Last quarter, I touched upon the next evolution of our tick-tock model, or tick-tock 2, as a disciplined approach to consistent, predictable product execution. This quarter, I wanted to spend a bit of time on operational excellence and discuss our recently announced IDM 2.0 Acceleration Office, or IAO, ushering in the next phase of our IDM 2.0 strategy. During the first phase of IDM 2.0, we aggressively focused* on making the needed investments to approve our TD roadmap to regain transistor leadership and to ensure we have at scale manufacturing capacity by building ahead on shelves. Improvements in both areas now enables us to move forward with our next set of priorities, evolving our systems, business practices and culture to embrace an internal foundry model and establish a leadership cost structure. This means we will create what I like to call a new and clean API for the company by establishing consistent processes, systems and guardrails between our manufacturing teams and our business units. This will place our BUs on the same economic footing as external IFS customers and will allow our manufacturing group and BUs to be more agile, make better decisions and uncover efficiency and cost savings. We have already identified nine different subcategories for operational improvement that our teams will aggressively pursue. For example, product teams will be heavily incented to drive the high-quality A0 steppings, as they see the full cost of steppings, validation cycles, hot lots and capacity changes. Factories will move to rigorous capacity loading cycles, transparency of cost for loading changes and efficiency of capital utilization, structural and variable wafer costs. In addition to establishing better incentives, this new approach will provide transparency on our financial execution, allowing us to better benchmark ourselves against other foundries and drive to best-in-class performance. It will also provide improved transparency to our owners as we expect to share full internal foundry P&L into calendar year '24, ultimately, allowing you to better judge how we are creating value and allocating your capital.
A key benefit of IDM 2.0 is to unlock our full financial potential by capturing multiple profit pools not available to any one of our peers across architecture, design, wafer manufacturing, advanced packaging, supply chain and software. These pools were only partially long-term margin targets we established at Investor Day in February. Simple math would suggest there is meaningful upside to those targets as we execute and exploit the margin-stacking potential IDM 2.0 provides best-in-class semiconductor companies achieved gross margin in the 60s and operating margins in the 40s. And we aim to be best-in-class. This next phase of IDM 2.0 is a significant evolution in how we think and operate as a company. But just as we optimize to drive outside returns in the IDM 1.0 era, we will optimize to achieve best-in-class returns in the IDM 2.0 era. It's what engineers do, and we have the best engineers on the planet.
Complementing and augmenting these efforts will be an intensified focus to reduce costs and drive efficiencies in everything we do. As we stated during Q2 earnings, we have an obligation to our owners to be good stewards of your capital. We are responding to the current environment by taking aggressive actions to reduce costs across COGS and OpEx while mindfully protecting the investments needed to accelerate our transformation, ensure we are well positioned for long-term market growth. In addition to reducing near-term costs, we have also identified structural cost reductions and efficiency drivers, which Dave will outline a bit later.
In aggregate, our efforts should drive $3 billion in annual savings in the near term and $8 billion to $10 billion by the end of 2025. Not captured in these estimates are the start-up costs to support five nodes in four years which will begin to subside beyond calendar year '26, adding an additional $2 billion in COGS savings. Inclusive in our efforts will be steps to optimize our headcount. These are difficult decisions affecting our loyal Intel family, but we need to balance increased investment in areas like leadership and TD product and capacity in Ohio and Germany with efficiency measures elsewhere as we drive to have best-in-class structures. We will also continue to use our smart capital approach to support and inform our capital spending aspirations, aggressively building ahead on shells while aligning equipment purchases and installs with customer demand. We continue to see skips like our partnership with Brookfield as an innovative financial structure to more closely align fab build-out costs with fab output returns. Likewise, we see U.S. and EU chips as vital to enable us to establish a geographically diverse and secure supply chain for the semiconductor industry. We are confident in reaccelerating free cash flow growth and driving industry-leading free cash flow margins, which we get through this period of economic uncertainty affecting the entire industry and our own elevated investments to accelerate our transformation. Lastly, I was particularly pleased to join the Mobileye team earlier this week in New York to witness firsthand the successful completion of their IPO, especially in a difficult market. We believe that this will help unlock Mobileye's full operational and financial potential and is an additional avenue to create value for our owners. We remain committed to optimizing our value creation efforts through portfolio honing, reallocation of resources to higher returns, higher-growth businesses, M&A and where applicable, divestitures. Before turning it over to Dave, I want to close by saying I continue to be heartened and impressed by the dedication and commitment of all of our employees by far, the most important owners of this great company. They are passionately committed like me to reestablish Intel as a dominant driver of innovation and by the opportunity to improve the lives of everyone on the planet. It was also rewarding to see that same drive and dedication in the faces of our broader developer community at Intel Innovation, the rebirth of Intel IDF in September. We are the building blocks, an enabler of their vision and aspirations, and it is our commitment to them to be great partners and collaborators. Our ambitions are equal by our passions and our efforts across manufacturing, design, products and foundry are well on their way to driving our transformation and creating the flywheel, which is IDM 2.0.