Intel’s earnings for the third quarter surpassed Wall Street’s forecasts on Thursday, fueled by increased revenue alongside significant cost reductions and substantial investments in the past couple of months, as CEO Lip-Bu Tan aims to revitalize the struggling semiconductor giant.
Intel’s revenue performance and its $4.1 billion in net income offer a considerably brighter picture compared to its series of quarterly deficits. However, the company’s recovery narrative necessitates multiple chapters focusing on cost management through workforce reductions and other savings, as well as a number of notable investments from Softbank, Nvidia, and the U.S. government.
Intel augmented its balance sheet by $20 billion during the third quarter, the company disclosed in its third-quarter earnings presentation on Thursday, resulting in a surge in its stock value. This expansion was primarily attributed to three major investments in the company over the past three months.
In August, SoftBank invested $2 billion. Shortly thereafter, the U.S. Government acquired an unprecedented 10% equity stake in Intel. The company has so far received $5.7 billion of the projected $8.9 billion from the U.S. Government. In September, Nvidia also purchased a $5 billion stake in Intel as part of a broader agreement to jointly develop chips in the future.
“The steps we implemented to bolster the balance sheet provide us with increased operational adaptability and position us favorably to continue executing our strategy confidently,” Tan stated during the company’s earnings conference call. “I am particularly grateful for the trust and confidence that President Trump and Secretary [Howard] Lutnick have placed in me. Their support underscores Intel’s pivotal role as the sole U.S.-based semiconductor company with cutting-edge logic, [research and development], and manufacturing capabilities.”
The company also secured $5.2 billion from finalizing the sale of its ownership stake in Altera, a hardware company it had possessed since 2015, on September 12. Additionally, it divested its stake in Mobileye, an autonomous driving technology company.
Intel increased its quarterly revenue by $800 million in the third quarter, reaching $13.7 billion, compared to $12.9 billion. Intel reported a net income of $4.1 billion in the third quarter, a significant turnaround from the $16.6 billion loss reported in the same period last year.
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The foundry biz
Despite the robust quarter, there was limited information regarding the future of Intel’s foundry business, which produces customized chips for clients. The business has struggled since its inception and has been a point of emphasis for Tan, who initiated substantial layoffs within its foundry division this summer.
The business seems to be a priority for the Trump administration; a critical requirement of the government’s investment in Intel includes stipulations that would penalize Intel if it were to divest from its foundry operations within the next five years.
Wall Street is keenly observing the foundry business for indications of the company’s sustained growth. Intel analysts informed TechCrunch in August that the company needed not cash for its turnaround but rather a strategy to stabilize its foundry business.
Tan stated that Intel believes its foundry business is “uniquely positioned” to take advantage of the growing demand for chips but provided few specifics — beyond mentioning that the company is actively engaging with prospective foundry clients — and added that the expansion of the foundry business would be carefully managed.
“Establishing a world-class foundry is a long-term endeavor built on trust,” Tan explained. “As a foundry, we must guarantee that our process is easily adaptable for a diverse range of customers, each with their distinct methods of creating their own products. We must strive to satisfy our customers as they rely on us to manufacture wafers and fulfill all their requirements for outstanding performance, yield, cost-effectiveness, and timely delivery.”
