Intel has reported a strong third quarter, surpassing Wall Street expectations with a significant boost in revenue and net income. This positive turnaround is supported by strategic cost-cutting measures and substantial investments from major players like SoftBank, Nvidia, and the U.S. government. As Intel continues its recovery, attention now turns to its foundry business, a critical area for future growth and innovation.
Intel’s Strong Third-Quarter Performance
Intel’s third-quarter earnings revealed a revenue increase to $13.7 billion, up $800 million from the previous quarter, and a net income of $4.1 billion—a remarkable recovery compared to a $16.6 billion loss in the same period last year. These results reflect the company’s ongoing efforts to stabilize and grow amidst industry challenges.
Major Investments Boost Intel’s Balance Sheet
During the third quarter, Intel’s balance sheet grew by $20 billion, largely due to significant investments. In August, SoftBank invested $2 billion, followed by the U.S. government acquiring a 10% equity stake, with $5.7 billion received out of a planned $8.9 billion. Additionally, Nvidia purchased a $5 billion stake in September as part of a collaboration to develop chips together. CEO Lip-Bu Tan emphasized that these investments provide operational flexibility and underscore Intel’s strategic importance as the only U.S.-based semiconductor company with leading-edge logic, research, development, and manufacturing capabilities.
Intel also generated $5.2 billion from selling its stake in Altera, a hardware company it had owned since 2015, and divested from Mobileye, an autonomous driving technology company.
The Foundry Business: Challenges and Opportunities
Despite the strong financial quarter, Intel provided limited details about the future of its foundry business, which manufactures custom chips for clients. This segment has faced difficulties since its inception and has been a focus for CEO Tan, who implemented significant layoffs in the foundry division during the summer.
The foundry business is a priority for the U.S. government, with investment agreements including clauses that penalize Intel if it divests from this segment within the next five years. Wall Street analysts have noted that while Intel has sufficient cash, a clear strategy is essential to revitalize the foundry operations.
Tan described Intel’s foundry business as “uniquely positioned” to meet growing chip demand but shared few specifics beyond ongoing engagement with potential customers. He emphasized that growth will be disciplined and highlighted the importance of building trust with customers by delivering wafers that meet performance, yield, cost, and schedule requirements.
Looking Ahead: Building Trust and Growth
Building a world-class foundry is a long-term endeavor based on trust and adaptability. Intel aims to ensure its processes accommodate the diverse needs of various customers, helping them develop their products effectively. As the company navigates this path, its focus remains on delivering value and fostering strong partnerships to secure its position in the semiconductor industry.