Intel announced fourth-quarter revenue and profit estimates on Thursday that surpassed Wall Street estimates. The firm is excited about a strong rebound in personal computer sales, advancements in its data center segment, and an increasing number of customers who are interested in the manufacturing services.
While Nvidia is still putting Intel under a lot of competitive pressure in the data center processor industry, Intel has been able to grow its gross margins faster than experts had predicted since its server chip business has steadied and the PC slump has lessened. Corporation executives had issued a warning, stating that significant profit growth might not happen until well into the following year.
After the close of the trading bell, shares of the California-based Santa Clara firm increased by 8%.
Additionally, the company has secured three customers for its semiconductor contract manufacturing business. At the end of the year, Chief Executive Pat Gelsinger said that the company hopes to win a deal for a fourth customer.
The drop in worldwide PC sales went down to 7% in the third quarter following double-digit percentage declines earlier this year, and the industry is expected to rebound over the eagerly awaited holiday season, according to analysts from research firm Canalys.
In contrast to an expectation of $14.35 billion based on LSEG data, the company projected adjusted current-quarter sales of between $14.6 billion and $15.6 billion.
A fourth-quarter modified profit for each share of approximately 44 cents is expected by the company, exceeding the 32-cent estimate of analysts.
The company's gross margin dropped from over 60% in 2020 to the mid-30s in the second quarter due to significant production investments made to support Gelsinger's recovery initiatives. LSEG data indicates that the adjusted gross margin for the third quarter was 45.8%, as opposed to projections of 42.7%.
In an interview, Gelsinger said that Intel now has a fourth foundry client for its cutting-edge manufacturing technique, known as "18A." The company intends to begin producing "18A" in late 2024 and will make it available to clients via its Intel Foundry Services division.
As of right now, Gelsinger stated, they have three committed clients on 18A and anticipate concluding at least one more this quarter.
He did not reveal the number of chips Intel will produce for those businesses, but he did say that the first has paid in full and is a highly important client.
Gelsinger emphasized that while the next two are not as noteworthy as the first, they are still quite meaningful. Currently, however, they are interacting with nearly every known customer of a foundry.
Gelsinger added during an investor conference call that Intel is now in discussions with six potential clients on its advanced packaging division.
Based on LSEG data, Intel's adjusted profits for the third quarter came in at 41 cents per share, versus an estimate of 22 cents. Revenue decreased 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 question regarding possible Nvidia competition for PC chips, which is expected to arrive in the market as early as 2025, Gelsinger stated during the conference call that, in general, they don't see those as possibly all that significant.
However, he also mentioned that their foundry business may have a lot of potential supported by Arm-based processors for PCs.
Chief Financial Officer David Zinsner stated that Intel expects several weak quarters in the next year as well as a decrease in programmable chip sales in the final quarter of the year. Intel declared earlier in the month that it planned to split that division via an initial public offering (IPO).
Its data center sector, which also includes its AI chip group, saw a 10% decline in sales to $3.8 billion. However, Gelsinger stated that the business has witnessed a spike in demand for its "Gaudi" AI chips, with supply currently not keeping up with demand.
Amidst the ongoing confrontation between Israel and Hamas following an incident earlier this month, Gelsinger stated that despite the fighting, Intel's plants in Israel are not missing a single commitment.