Intel (INTC) stock surged by over 8% in premarket trading on Friday following the company’s impressive third quarter earnings report, which surpassed Wall Street’s expectations.
In the three-month period ending September 27, Intel reported revenue of $13.7 billion. This figure eclipsed the $13.15 billion anticipated by analysts surveyed by Bloomberg and also marked an increase from the $13.28 billion recorded in the same period a year prior. Furthermore, the company announced an adjusted earnings per share (EPS) of $0.23, significantly higher than the $0.01 predicted by Wall Street analysts. In a striking contrast, Intel had endured a loss of $0.46 during the same quarter in 2024.
CEO Lip-Bu Tan commented on the potential for artificial intelligence (AI) to create “attractive opportunities” within Intel’s product offerings. He highlighted that AI is accelerating demand for computing resources, which could significantly benefit Intel, especially as it repositions its struggling manufacturing segment.
Intel’s head of investor relations, John Pitzer, reaffirmed this sentiment in an interview with Yahoo Finance, stating, “We believe we’re well-positioned to play a more significant role in AI.” He emphasized the powerful computing capabilities that Intel’s products, notably traditional CPUs used in data center servers and AI PCs, can provide.
For the upcoming fourth quarter, Intel is forecasting an adjusted EPS of $0.08, which falls short of the $0.10 average estimated by analysts. The company anticipates revenue of around $13.3 billion, again slightly below the expected $13.4 billion. These conservative projections can be partially attributed to Intel’s recent divestment of a portion of Altera, a semiconductor firm it owned, which had contributed significantly to its revenue streams in previous quarters.
These results surfaced amidst a recent surge of high-profile investments from significant players like the US government, Nvidia (NVDA), and SoftBank (9984.T). The US government acquired a 9.9% stake in Intel in late August, while Nvidia’s $5 billion investment translates into a 4% ownership stake. These strategic investments are expected to bolster Intel’s financial standing and improve sentiments around the company’s turnaround prospects under new leadership.
Despite the positive earnings report, some analysts and investors express skepticism regarding Intel’s ongoing challenges, particularly in the third-party manufacturing sector. Although Intel typically manufactures its own chips, it expanded its operations to include outside customers in 2021. However, this pivot has yet to yield significant commitments from external clients.
Intel Foundry Services, the company’s manufacturing arm, posted an operating loss of $2.3 billion in the third quarter, a bit sharper than the $2.2 billion analysts anticipated but a notable improvement from the $5.8 billion loss reported the previous year. This trajectory suggests some progress, albeit slow, as the company hopes to stabilize this segment.
Creative Strategies principal analyst Ben Bajarin conveyed a sense of “cautious optimism” in light of Intel’s recent results, noting that “all eyes move to foundry.” This reflects the broader market sentiment that future success hinges heavily on bolstering Intel’s foundry operations, especially as the competitive landscape in the semiconductor industry intensifies.
Wall Street remains wary of Intel’s significant expenditures on this relatively new segment, with skepticism that these investments will yield fruitful returns. While policymakers are deeply interested in Intel’s success given its crucial role in the geopolitical landscape of semiconductor production, particularly against the backdrop of Taiwan’s dominance in chip manufacturing, the firm faces hurdles in meeting market demand amid fierce global competition.
Further complicating matters is Intel’s recent decision to halt promoting its advanced 18A chip production process as a method to attract external clients. Initial discussions with companies like Nvidia and Broadcom (AVGO) had ignited hopes for potential partnerships, but these have yet to materialize. Now, Intel is focusing its efforts on utilizing the 18A technology for its own internal products instead.
Intel is now channeling its energies towards its next-generation manufacturing process, termed 14A. The company advocates for this shift by highlighting positive feedback from early customer engagements. “Where we are today on 14A is absolutely ahead of where we [were] at a similar point in time in the 18A development,” noted Pitzer. This optimistic perspective reflects Intel’s commitment to advancing its technologies to reclaim its competitive edge in the chip manufacturing landscape.
