Intel Corp. has announced its prediction of a return to sales growth in the fourth quarter, signaling a promising comeback for the tech giant. The company expects sales in the period to be between $14.6 billion and $15.6 billion, surpassing the average analyst estimate of $14.4 billion.
Additionally, Intel’s projected profit of 44 cents per share exceeds analysts’ expectations of 31 cents per share.
This optimistic outlook reflects the success of Intel’s turnaround efforts under the leadership of CEO Pat Gelsinger. While the PC market, Intel’s largest business unit, has experienced a historic slump due to inventory buildup, the company believes it has overcome the worst of it.
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However, Intel’s server unit continues to face challenges as customer spending shifts towards chips made by Nvidia Corp.
The market responded positively to Intel’s quarterly report, with the company’s shares surging by as much as 8.9% in after-hours trading. This marks the third consecutive time that investors have applauded Intel’s performance.
The company’s stock has also kept pace with the broader rally in the chip industry, driven by the increasing demand for artificial intelligence.
Gelsinger expressed his satisfaction with the progress made so far but acknowledged that there is still much work to be done. He highlighted the company’s plan to regain leadership in the chip industry and its success in attracting new customers for its outsourced manufacturing division.
Intel also provided an optimistic forecast for its adjusted gross margin, projecting a rate of 46.5% in the fourth quarter compared to the estimated 44.2%. This measure serves as an indicator of Intel’s factory network productivity.
The company is confident that it can restore its margins to over 60% once it regains technological leadership in chip production.
In the third quarter, Intel reported earnings of 41 cents per share on sales of $14.2 billion, surpassing analysts’ estimates. The client computing segment, which includes Intel’s PC chip business, generated $7.87 billion in revenue, while data center sales reached $3.8 billion.
Despite facing increased competition, Gelsinger remains optimistic about Intel’s position in the market. While Nvidia and Advanced Micro Devices Inc. are developing PC processors using Arm Holdings Plc’s technology, Gelsinger does not expect Arm to significantly impact Intel’s market share.
Gelsinger also praised the dedication of Intel’s staff in Israel, where the company has a major design center and factory. Despite the conflict with Hamas, the operations in Israel have continued smoothly, thanks to the resilience of the employees and Intel’s diversified factory locations.
Although Intel’s turnaround is still in its early stages, the company is making progress. Gelsinger believes that data center operators will shift back to Intel’s Xeon processors for running AI models and providing services, as Nvidia’s accelerators are primarily used for AI training.
Additionally, Intel’s push into the foundry industry, where it produces outsourced chips for other companies, has shown promising results. While the foundry division currently represents a small fraction of Intel’s business, Gelsinger has received positive client commitments and interest.
Overall, Intel’s resurgence is driven by inventory restocking, but the company aims to achieve significant milestones in foundry services and AI. With its positive sales outlook and strategic initiatives, Intel is well-positioned for a promising comeback in the tech industry.
