Intel (INTC) is back in the spotlight! The chip giant’s stock jumped over 7% in premarket trading Friday after delivering a massive surprise in its third-quarter earnings report, signaling that the company’s turnaround efforts might finally be gaining traction.
Thank you for reading this post, don't forget to subscribe!Here’s the breakdown of Intel’s Q3 victory and what it means for the future:
The Big Win
- Earnings Blowout: Intel reported adjusted earnings per share of $0.23, obliterating Wall Street’s meager $0.01 expectation. This is a dramatic recovery from the $0.46 loss reported in the same quarter last year.
- Revenue Beat: Revenue came in at $13.7 billion, topping analyst forecasts of $13.15 billion.
CEO Lip-Bu Tan credited the beat to one main catalyst: AI. He stated that “AI is accelerating demand for compute and creating attractive opportunities across our portfolio,” as data centers are now requiring more of Intel’s traditional CPUs to work alongside dedicated AI chips.
Why the Cautious Optimism? (The Foundry Challenge)
While the overall results were strong, the focus immediately shifts to Intel’s ambitious—and struggling—manufacturing arm, Intel Foundry Services.
- Persistent Losses: The foundry business reported a widening operating loss of $2.3 billion (from a $2.2 billion expectation).
- Geopolitical Stakes: Wall Street remains nervous about the heavy spending on this segment, but policymakers are heavily invested, viewing Intel as the only large-scale advanced semiconductor manufacturer in the US—a crucial defense against geopolitical risk.
Shifting Gears on Manufacturing
In a significant strategic move, Intel is de-emphasizing its latest manufacturing technology, 18A, for outside customers. Instead, it will use 18A primarily for its own high-profile chips, such as the upcoming Core Ultra series 3 and the Xeon 6+ data center chip.
The company is now pinning its hopes on the next next-generation process, 14A, to court external customers, with the head of investor relations noting that early customer feedback is already “absolutely ahead of where we [were] at a similar point in time in the 18A development.”
The Final Takeaway
The quarter also saw Intel bolster its balance sheet with high-profile infusions from the US government, Nvidia ($5 billion), and SoftBank.
The stronger-than-expected earnings suggest that new CEO Lip-Bu Tan’s cost-cutting and strategic focus on AI demand are paying off. However, the slightly conservative Q4 guidance (partially due to the Altera divestiture) reminds investors that the long, expensive road to becoming a world-class chip manufacturer is far from over.
Intel has momentum, but all eyes are now on its ability to execute in the foundry business.
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