Intel's third-quarter revenue reached $14.2 billion, representing an 8% decline from the previous year.
Earnings per share (EPS) for the quarter were 7 cents per share, while non-GAAP EPS stood at 41 cents per share, exceeding Intel's July expectations by 21 cents. Revenue surpassed the upper limit of Intel’s guidance, benefiting from strong operating leverage and disciplined expense management. The gross profit margin was 45.8%, up 2.8 percentage points from earlier forecasts.
Intel reported notable milestones in process and product development, foundry, and artificial intelligence (AI). The company expects fourth-quarter revenue of $14.6 billion to $15.6 billion, with EPS predicted at 23 cents and non-GAAP EPS at 44 cents. After hours, Intel's stock rose 6% to $34.50 per share following the better-than-expected results. However, its market value is now $136 billion, approximately half of its worth in 2021.
"Simply put, this quarter highlights the significant progress we've made towards our IDM 2.0 transformation," said CEO Pat Gelsinger during an analyst call. "Though many viewed our goals as ambitious when we embarked on our five nodes and four-year journey two and a half years ago, we're gaining clearer visibility on achieving our target with nearly 150 million chip products already deployed."
In the analyst call, Gelsinger noted Intel is on track to reduce costs by $3 billion in 2023, having already achieved $1.8 billion in cuts via various divestitures since he became CEO in 2021. "We have much work ahead as we persistently strive to implement our strategy," he added.
CFO David Zinsner commented, "Our quarterly results surpassed expectations for the third consecutive time, with revenue exceeding the high end of our guidance and EPS benefiting from effective operational strategies. Our recent portfolio actions reflect our commitment to judiciously allocate our shareholders' capital and unlock value."
Intel has integrated its Accelerated Computing Systems and Graphics Group with its Client Computing and Data Center and AI Groups to enhance market effectiveness and streamline costs. This reorganization led to modifications in segment reporting beginning in the first quarter of 2023.
Business Unit Revenue Overview
- Client Computing Group (CCG): Revenue of $7.9 billion, down 3% year-over-year.
- Data Center and AI (DCAI): Revenue of $3.8 billion, down 10%.
- Network and Edge (NEX): Revenue of $1.5 billion, down 32%.
- Mobileye: Revenue of $530 million, up 18%.
- Intel Foundry Services (IFS): Revenue of $311 million, up 299%.
Gelsinger acknowledged that the company lost some market share this quarter but emphasized the positive trajectory of overall business performance: "Our customers are noticing our renewed competitiveness."
Intel remains committed to achieving five manufacturing nodes within four years and regaining leadership in transistor performance and power by 2025. The Intel 7 and Intel 4 nodes, the latter being its first using extreme ultraviolet (EUV) technology, are already in high-volume production. Recent advancements also include the release of the 0.9 PDK for Intel 18A and the introduction of one of the industry's first glass substrates for advanced packaging, set for release later in the decade.
The company continues to expand its manufacturing capabilities, with recent developments including the opening of Fab 34 in Leixlip, Ireland, and plans for a wafer fabrication facility in Magdeburg, Germany, alongside an assembly and test facility in Wrocław, Poland. This strategy aims to establish a cutting-edge semiconductor manufacturing value chain in Europe.
In terms of technological innovation, Intel plans to install the world’s first high-NA EUV tool for commercial use by the end of the year at its Oregon facility. The company has submitted manufacturing proposals in Arizona, New Mexico, Ohio, and Oregon, totaling over $100 billion in U.S. investments in manufacturing and research to the Department of Commerce’s CHIPS Program Office.
Moreover, Intel secured a pre-payment from a major customer for investments into Intel 18A and Intel 3, accelerating plans for two new cutting-edge chip factories in Chandler, Arizona. In collaboration with Tower Semiconductor, Intel will also provide foundry services and manufacturing capacity.
Product Developments
Intel's 4th Gen Intel Xeon Scalable processors are now being widely adopted by the world’s leading cloud service providers, and the 5th Gen Intel Xeon processor, codenamed Emerald Rapids, is in production with an official launch scheduled for December 14.
Customer traction continues with Intel Gaudi2 accelerators, recently validated for competitive performance by MLCommons. Additionally, collaboration with Stability AI aims to construct one of the largest AI supercomputers powered entirely by 4th Gen Intel Xeon processors and 4,000 Gaudi2 AI accelerators.
In client computing, Intel is launching the AI PC era with its powerful Intel Core Ultra processors, codenamed Meteor Lake, which commenced shipping in Q3, with a formal launch also set for December 14, alongside the 5th Gen Xeon processors.
Gelsinger addressed a query regarding the potential use of Arm-based processors for Windows clients, stating he does not view that competition as significant and reaffirmed Intel’s investment in the RISC-V processor ecosystem.
Earlier in the month, Intel introduced its 14th Gen desktop processor family, promising the fastest desktop performance for enthusiasts. Long-term, Gelsinger projects the total addressable market for processor chips will increase to around 300 million units, up from approximately 270 million today.
To unlock further shareholder value, Intel plans to spin off its Programmable Solutions Group (PSG) into an independent entity, which would provide autonomy and flexibility for growth in the FPGA sector. Intel may seek private investment to accelerate PSG's development, with an IPO anticipated in the next two to three years.
Gelsinger concluded, "Our roadmap looks promising," while also addressing the ongoing conflict in Israel. He expressed concern for Intel’s employees there, stating, "Our highest priority is the safety and welfare of our people." Despite the challenges, he noted the resolve of the teams maintaining operations and progress amidst the situation, emphasizing a collective hope for a swift return to peace.
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