Intel’s Q3 Earnings Show Chipmaker’s Turnaround Plans Are Working

Intel (NASDAQ: $INTC) reported third-quarter financial results on Thursday, topping the consensus projections on top and bottom lines. One of the highlights of the reports was Foundry Services, the chipmaker’s smaller business unit focused on in-house chip manufacturing. This division registered 300% revenue growth from last year and agreed deals with three major customers. 

Intel’s Q3 EPS and Revenue Beat Estimates

Intel’s stock soared more than 11% at the opening bell on Friday after the chipmaker reported better-than-expected profit and revenues for Q3 2023. The company’s shares stood at $36.13 at the time of writing.

According to the report, Intel generated 41 cents in adjusted earnings per share (EPS) in Q3, smashing the consensus estimates of 22 cents. Net income stood at $297 million in the three-month period, or 7 cents per share, down from $1.02 billion, or 25 cents per share reported in the year-ago quarter.

Revenue came in at $14.16 billion, down 8% year-over-year (YoY), though better than analysts’ estimates of $13.53 billion. This was the seventh consecutive quarter of declining sales for Intel, although the company expects revenue to grow again in the current quarter. 

Intel posted a Q3 gross margin of 45.8%, roughly unchanged from last year.

Per segment, Intel’s Client Computing group, which accounts for laptop and PC processor shipments, saw its sales decline 3% YoY to $7.9 billion. Meanwhile, sales at the Data Center and AI unit plummeted 10% to $3.8 billion amid increased competition and a smaller overall market for server processors.

On the other hand, Intel’s subsidiary for self-driving car parts, Mobileye, was one of the bright spots of the report, with its sales expanding by 18% to $530 million. 

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Intel’s Foundry Services Sees 300% in Revenue Growth as Chipmaker Focuses on In-House Manufacturing

Remarkably, it was Intel’s Foundry Services unit that caught the eye. As the chipmaker’s in-house chip-manufacturing business, Foundry raked in $311 million in revenue in Q3, representing a YoY increase of almost 300%. 

Intel CEO Pat Gelsinger said the growth was partly due to “agreements with new foundry customers,” with one of them making a prepayment during the quarter. The chipmaker has focused more on Foundry Services lately as part of Gelsinger’s strategy to turn around the company’s business after facing numerous headwinds. The end goal of this venture is to provide other chipmakers with a domestic alternative to manufacturing giants such as Taiwan Semiconductor (TSMC).

Intel’s CFO David Zinsner said that Intel agreed to deals with three customers for its 18A process node without revealing their names. The sophisticated 18A chip’s manufacturing process is expected to be industry-leading in terms of performance in 2025, the company said. 

Do you think Intel could become one of the leading chip manufacturers and compete with the likes of TSMC in the future? Let us know in the comments below.