Thursday’s fourth-quarter revenue and profit projections from Intel (INTC.O) exceeded Wall Street projections, with the company enthusiastic about a robust resurgence in personal computer sales, progress in its data center division, and an expanding clientele interested in its manufacturing services.
Although Nvidia (NVDA.O) continues to put intense pressure on Intel in the data center processor market, the company’s server chip business has stabilized and the PC slump has lessened, allowing it to increase gross margins more quickly than analysts had anticipated. Executives at the corporation had cautioned that a meaningful increase in margins might not occur until far into the following year.
Following the closing bell, the company’s stock price increased by 8%.
Additionally, the company has signed three clients for its semiconductor contract manufacturing division, and CEO Pat Gelsinger told Reuters that he anticipates closing a deal with a fourth client before the year is up.
After double-digit percentage declines earlier this year, the decrease in global PC shipments shrank to 7% in the third quarter. According to analysts at research firm Canalys, the market is expected to rebound over the eagerly awaited holiday season.
Using LSEG data, the company estimated adjusted current-quarter revenue of between $14.6 billion and $15.6 billion, versus an expectation of $14.35 billion.
Above analysts’ projection of 32 cents, the company anticipates adjusted profit per share for the fourth quarter of roughly 44 cents.
Gelsinger’s significant production investments to support its turnaround efforts have had a negative impact on the company’s gross margin, which decreased from over 60% in 2020 to the mid-30s in the second quarter. LSEG data indicates that the third quarter’s adjusted gross margin was 45.8%, above estimates of 42.7%.
Gelsinger stated in an interview that Intel has a fourth foundry client for its “18A” advanced manufacturing process, which it intends to begin producing in late 2024 and provide to clients via its Intel Foundry Services division.
“We now have three committed consumers on 18A, so we expect that we will satisfactorily conclude a minimum of one more this quarter,” said Gelsinger.
The number of chips that Intel would produce for those businesses was not disclosed by him, although he did state that the first has paid in advance and is “a very significant customer.”
In an interview, Gelsinger said, “The next two are quite meaningful, but not as big as the first one.” “But now we have interactions with essentially the who’s who of foundry customers.”
During an investor conference call, Gelsinger revealed that Intel is now negotiating with six potential clients for its advanced packaging division.
As far as Taiwan Semiconductor Manufacturing Co (2330.TW), the biggest chipmaker in the world, is concerned, “these wins are coups over TSMC,” said Glenn O’Donnell, research director at Forrester.
LSEG data indicates that Intel’s adjusted profits for the third quarter came in at 41 cents per share, as opposed to a forecast of 22 cents. Sales dropped by 8% to $14.2 billion.
The client segment, which includes Intel’s PC division, had a 3% decline in revenue to $7.9 billion. In response to a query regarding possible Nvidia competition for PC chips—which Reuters revealed this week is expected to debut as early as 2025—Gelsinger stated during the conference call that “we don’t see these as possibly all that significant overall.”
However, he went on to say that Arm-based PC chips would present “a great opportunity for our foundry” industry.
According to Chief Financial Officer David Zinsner, Intel anticipates a slowdown in programmable chip sales in the fourth quarter and multiple poor quarters in the upcoming year. Intel announced earlier this month that it intended to separate that division through an IPO.
10% less sales, or $3.8 billion, were made at its data center business, which additionally houses its AI chip group. But according to Gelsinger, the company has noticed a spike in demand for its “Gaudi” AI processors, with supply currently not keeping up with demand.
During a conference call, Gelsinger stated that despite the crisis, Intel’s factories in Israel—which is at war with Hamas following an incident earlier this month—are “not missing a single commitment.”