Introduction
Intel, a globally renowned semiconductor giant, recently reported its third-quarter financial results, showcasing a combination of revenue challenges and operational excellence.
Despite a decrease in year-over-year revenue, the company exceeded expectations, demonstrating its commitment to transformation and cost-cutting initiatives.
In this blog post, we’ll delve into the key details of Intel’s Q3 earnings, its progress on IDM 2.0 transformation, and its future outlook.
Intel Q3 Revenue & Financial Performance
Intel reported third-quarter revenue of $14.2 billion, reflecting an 8% decrease from the previous year.
However, the company’s earnings per share (EPS) told a different story. The EPS came in at 7 cents a share, while the non-GAAP EPS stood at 41 cents a share, surpassing Intel’s own expectations by 21 cents.
This impressive performance was attributed to strong operating leverage and disciplined expense management.
Additionally, Intel’s gross profit margins reached 45.8%, exceeding its July forecasts by 2.8 percentage points.
Here is a table summarizing the revenue figures for Intel in various business groups for the third quarter of the year:
| Business Group | Q3 2023 Revenue (in billions) | Year-over-Year Change |
|---|---|---|
| Client Computing Group (CCG) | $7.9 | -3% |
| Data Center and AI (DCAI) | $3.8 | -10% |
| Network and Edge (NEX) | $1.5 | -32% |
| Mobileye | $0.53 | +18% |
| Intel Foundry Services (IFS) | $0.31 | +299% |
“Simply put, this quarter demonstrates the meaningful progress we have made towards our IDM 2.0 transformation. The foundation of our strategy is reestablishing transistor power and performance leadership. While many thought our ambitions were a bit audacious when we began our five nodes and four year journey, roughly two and a half years ago, we have increasing line of sight towards achieving our goal until seven has done with nearly 150 million units in aggregate of [chip products] already in the market.”
~Pat Gelsinger, CEO, Intel
Read More: 4 Major Concerns to Secure Semiconductor Supply Chain as per Intel CEO
Intel’s Vision
5 nodes in 4 years
Intel has reaffirmed its commitment to achieving its goal of implementing five manufacturing nodes in four years, aiming to regain leadership in transistor performance and power efficiency by 2025.
Among these nodes, Intel 4, the company’s first to utilize extreme ultraviolet (EUV) technology, has entered high-volume manufacturing.
Intel marked a significant achievement with the release of the 0.9 PDK for Intel 18A. Furthermore, Intel unveiled plans for an industry-first glass substrate for advanced packaging, scheduled for later this decade.
This innovation is poised to facilitate transistor scaling within a package and further advance Moore’s Law, enhancing data-centric applications.
Intel is also investing in expanding its manufacturing capacity to ensure a secure and resilient global supply chain. During the quarter, the company inaugurated Fab 34 in Leixlip, Ireland.
Coupled with future facilities in Magdeburg, Germany, and Wrocław, Poland, Intel aims to create an end-to-end semiconductor manufacturing value chain in Europe, a unique endeavor in the industry.
Comparing Intel to rivals like TSMC, Intel’s CEO, Pat Gelsinger, emphasized that Intel stands out as the only leading-edge semiconductor manufacturer with a significant presence in every major region worldwide.
Intel’s plans include the installation of the world’s first high-NA EUV tool for commercial use at the Gordon Moore Park in Oregon. This marks a vital step in the company’s modernization and infrastructure expansion efforts.
Read More: Intel to Start Mass EUV Production in Ireland; 2 Out of 5 nodes achieved
4 Manufacturing proposals for US Chips act
Intel has submitted four major manufacturing proposals to the U.S. Department of Commerce’s CHIPS Program Office, representing over $100 billion in U.S. manufacturing and research investments.
Additionally, a major customer’s commitment to Intel 18A and Intel 3, along with a pre-payment, will enable Intel to accelerate the construction of two new cutting-edge chip factories in Chandler, Arizona.
Furthermore, Intel Foundry Services (IFS) and Tower Semiconductor have reached an agreement, with Intel providing foundry services and 300 mm manufacturing capacity to support Tower’s global customer base, utilizing Intel’s advanced manufacturing facility in New Mexico.
Read More: Intel Signs 2 More Customers for 18A, Boosting Foundry Ambitions
Intel’s Product Roadmap
Intel’s 4th Gen Intel Xeon Scalable processor has continued its robust rollout, with the world’s top-10 cloud service providers now offering it in general availability.
Simultaneously, the 5th Gen Intel Xeon processor, codenamed Emerald Rapids, has entered production and commenced customer shipments this month, with an official launch set for December 14.
The customer traction remains strong, notably with Intel Gaudi2 accelerators, whose competitive performance was recently validated through MLCommons benchmarking.
In collaboration with Stability AI, Intel is embarking on the construction of one of the world’s largest AI supercomputers, powered by 4th Gen Intel Xeon Scalable processors and 4,000 Intel Gaudi2 AI accelerators.
In the realm of client computing, Intel is ushering in the era of the AI PC with the Intel Core Ultra processors, codenamed Meteor Lake.
These processors, based on Intel 4, have started shipping to customers in the third quarter and are scheduled for an official launch on December 14, alongside the 5th Gen Intel Xeon processor.
Read more: Intel Foundry, Even if Successful, Will Be Overshadowed by TSMC: Chang
Arm & RISC-V PC Processors
When asked about the possibility of using Arm-based chips for Windows clients, Intel CEO Pat Gelsinger expressed that he doesn’t perceive such competition as particularly significant.
However, Intel is making investments in the RISC-V alternative processor ecosystem.
Intel also recently introduced the new Intel Core 14th Generation desktop processor family, which boasts the world’s fastest desktop frequencies and offers the ultimate desktop experience for enthusiasts.
Gelsinger anticipates that the total available market for PC processors will grow to around 300 million units in the long term, up from the current figure of approximately 270 million.
Read More: Nvidia to Challenge Intel with Arm-Based PC Chips
Separation of PSG Group
Furthermore, Intel is exploring innovative ways to create value for shareholders. The company has announced its intention to separate its Programmable Solutions Group (PSG) operations into an independent business.
This move aims to provide PSG with the autonomy and flexibility required to accelerate its growth and enhance its competitiveness in the FPGA industry. Intel may consider partnering with private investors to expedite PSG’s growth while retaining a majority stake. Over the next two to three years, Intel plans to conduct an IPO for PSG.
Gelsinger summarized Intel’s position by stating, “Our roadmap is great.”
Read More: 5 Reasons for Intel to Spin off its PSG Unit
10% Stake of IMS sold to TSMC
In Q3, Intel sold a 10% stake in its IMS Nanofabrication business to TSMC for around $4.3 billion, mirroring a previous sale to Bain Capital Special Situations.
These moves emphasize Intel’s dedication to advancing its IDM 2.0 strategy, growing core businesses, and benefiting shareholders.
Read More: 10% Stake of IMS sold to TSMC
CEO’s Vision
Intel’s CEO, Pat Gelsinger, shared the company’s strategic vision during an analyst call. He emphasized Intel’s IDM 2.0 transformation, which focuses on reestablishing transistor power and performance leadership.
During an analyst call, Gelsinger stated that Intel is making progress towards achieving a $3 billion cost reduction target for 2023, with cost-cutting initiatives already yielding $1.8 billion in savings since he assumed the role of CEO in 2021.
Gelsinger highlighted the company’s remarkable progress in this transformation journey, which started approximately two and a half years ago.
Intel aims to reach its goal with nearly 150 million chip units in the market.
Their proactive cost management aligns with the mission to boost competitiveness and profitability in a dynamic market.
Read More: How Intel lost a decade
Outlook for Q4
Intel provided guidance for the fourth quarter, anticipating revenue between $14.6 billion and $15.6 billion. The EPS is expected to be 23 cents a share, with a non-GAAP EPS of 44 cents a share.
This outlook reflects Intel’s optimism about its future performance. Notably, the market value of Intel stands at $136 billion, representing a significant change from its 2021 valuation.
“We feel like we are on a very solid trajectory for the business overall. Our customers are starting to see that competitiveness come back to our business here.”
~Pat Gelsinger, CEO, Intel
Organizational Changes
Intel made recent organizational changes, combining its Accelerated Computing Systems and Graphics Group into the Client Computing Group and Data Center and AI Group.
This strategic move aims to streamline operations, enhance the go-to-market approach, and reduce costs.
The company has adjusted its segment reporting to align with these reorganizations, showcasing its adaptability in response to market dynamics.
“Our results exceeded expectations for the third consecutive quarter, with revenue above the high end of our guidance and EPS benefiting from strong operating leverage and expense discipline. As demonstrated by our recent portfolio actions, we are highly focused on being great allocators of our owners’ capital and unlocking value for shareholders.”
~David Zinsner, Intel CFO
Conclusion
Intel’s Q3 results demonstrate resilience and transformation. Despite revenue challenges, operational excellence, cost-cutting, and IDM 2.0 progress fueled a strong performance.
Intel’s dedication to innovation, diversification, and strategic realignments positions it for growth and success in the semiconductor industry.
