Intel (NASDAQ: INTC) stock rose over 8% on Friday, following the company’s third-quarter earnings release. Shares are currently trading 7.81% higher at US$23.20. This is despite Intel reporting a US$16.6bn loss for July-to-September, which was below expectations. The market liked the upbeat fourth-quarter guidance and growth in the company's data centre and artificial intelligence (AI) segments, which highlighted Intel's efforts to reposition itself as a key player in AI.
Intel's revenue came in at US$13.28bn, slightly above the anticipated US$13bn, bolstered by performance in its Data Center and AI (DCAI) segment. This segment generated US$3.35bn in revenue, marking a 9% year-over-year increase and surpassing analyst expectations. Intel attributed this growth to rising demand for its Xeon processors, which are engineered to handle demanding workloads, including AI, data analytics and cloud computing, and its Gaudi AI accelerators, designed to enhance deep learning training and inference tasks, which aim to compete with Nvidia’s AI chips. While uptake of Gaudi has been slower than anticipated, the chipmaker sees strong customer interest.
CEO Pat Gelsinger acknowledged that Intel has a long road ahead in capturing AI market share, but the DCAI results reflect steady progress. “The momentum we are building across our product portfolio to maximise the value of our x86 franchise, combined with the strong interest Intel 18A is attracting from foundry customers, reflects the impact of our actions and the opportunities ahead,” Gelsinger said in a statement.
While Intel continues to face intense competition from established players like Nvidia and AMD, the company is banking on its foundry services to diversify customer base. During the quarter, Intel secured two new customers for its 18A manufacturing process. Intel has also engaged Amazon Web Services (AWS) for custom chip development, a move that could pave the way for Intel to expand its footprint in the data centre space.
Looking forward, Intel has provided a midpoint revenue estimate of US$13.8bn for the fourth quarter, exceeding Wall Street's US$13.66bn expectation. Additionally, the company anticipates adjusted earnings of US$0.12 per share, approximately 50% above analyst estimates, with a projected gross margin of 39.5%.
Despite these gains, some analysts remain cautious. Morgan Stanley’s Joseph Moore noted that while Intel’s improvements are encouraging, significant work remains to position itself competitively in AI. Evercore ISI analyst Mark Lipacis echoed this sentiment, highlighting Intel’s need for further advancements in its foundry and data centre segments to sustain long-term growth. However, the positive market reaction suggests that investors see potential in Intel's gradual turnaround.
