Intel reported third-quarter revenue of $16.5 billion on 29 October, up 21% from a year earlier, in a quarter its chief financial officer said produced the company’s strongest data centre revenue growth in 15 years. According to the earnings release filed with the US Securities and Exchange Commission, earnings per share attributable to Intel were $0.60, and non-GAAP earnings per share were $0.52, against $0.23 a year earlier. Gross margin was 43.0%, up from 38.2%, and the company generated $5.1 billion in cash from operations. Chief executive Lip-Bu Tan said the results showed “improving execution” and that demand for Intel’s CPUs “remains robust”.
The evidence for a turnaround is in the data centre numbers. Revenue from the Data Center and AI unit rose 78% to $7.3 billion, and Tan said the company’s immediate priority is to unlock more supply to meet “extraordinary demand” for its Xeon family of server processors. The Intel Foundry business, which makes chips, reported revenue of $6.7 billion, up 58%. Intel also announced a collaboration with ASML on High-NA EUV manufacturing, completed a $23 billion public equity offering, announced a multiyear collaboration with Oracle to expand Xeon-based computing on Oracle Cloud Infrastructure, and released the 0.9 version of its process design kit for its 14A manufacturing technology in October. Revenue from Intel Products as a whole rose 22% to $15.4 billion, the company announced plans to acquire the quantum-software firm Classiq, and Acer, ASUS and Lenovo announced the first Googlebook devices powered by Intel Core Ultra Series 3 processors. Non-GAAP operating margin rose to 19.6% from 11.2%, and non-GAAP net income rose 169% to $2.8 billion.
The case for caution begins with the PC business. Revenue from the Client Computing and Physical AI Group fell 5% to $8.1 billion, and the chief financial officer David Zinsner said, “we see the PC slowdown continuing at least through the first half of next year”. Intel forecast fourth-quarter revenue of $15.0 billion to $16.0 billion, below the third-quarter figure, and non-GAAP earnings per share of $0.25. On a GAAP basis, net income attributable to Intel fell 18% to $3.3 billion and earnings per share fell from $0.90 to $0.60, and the fourth-quarter GAAP forecast is only $0.10 a share. The company also guided to a lower gross margin in the fourth quarter, of 37.1% on a GAAP basis and 38.0% non-GAAP, compared with 43.0% and 44.1% in the third quarter.
The results matter because Intel is a major designer and manufacturer of processors, and its fortunes affect server buyers, PC makers and anyone who relies on its chips. Data centre demand driven by artificial intelligence is now lifting the company’s server chips, and the Oracle collaboration shows large cloud operators are willing to commit to its next generation. A weaker PC market, however, hits the business that has long supplied most of its volume.
Intel’s quarter shows a company with a stronger server business and a softer consumer one. The next two quarters will show whether supply can keep pace with demand, and whether outside customers sign on to its foundry.
