Advances in artificial intelligence and foundry will fuel future growth

“We have much more ahead of us and we are acting with urgency to deliver on our priorities. We need to fight for every inch and perform better than ever before, and our teams are committed to this approach, building a leaner, more profitable Intel,” said Intel CEO Pat Gelsinger.

Intel’s business beat expectations in the latest quarter, with improvements coming at a modest pace as its AI PC and server businesses and Intel Foundry are expected to drive further growth, CEO Pat Gelsinger said Thursday.

Gelsinger, in prepared remarks during Intel’s fiscal third quarter 2024 earnings call, said that from an operating perspective, third-quarter results exceeded the company’s expectations as it achieved key milestones in Intel’s foundry and Intel products.

“Fundamental business trends are improving at a modest pace, and our fourth-quarter guidance is slightly above current consensus,” he said.

(Related: Intel, AMD and Nvidia executives on new x86 partnership: “Let’s make sure x86 stays x86”)

Overall, Gelsinger said Intel’s business processes are having a positive impact at the company.

“We have much more ahead of us and we are acting with urgency to deliver on our priorities,” he said. “We need to fight for every inch and perform better than ever before, and our teams are taking that approach to build a leaner, more profitable Intel.”

Investors seemed to like Gelsinger’s message. The company’s shares, down 3.5 percent during the day, rose more than 6 percent to $22.95 a share in after-market trading hours after the market closed Thursday.

Big changes are behind us

Intel completed the vast majority of layoffs in its fiscal third quarter and is on track to cut its workforce by more than 15 percent by the end of the year, Gelsinger said.

“These were difficult but necessary changes that reduce complexity and make us a leaner, faster and more flexible company,” he said.

Intel has also cut capital expenditures by more than 20 percent compared to its plan since the start of 2024, which has helped the company respond quickly to market demand, Gelsinger said.

“With our transition to EUV (extreme ultraviolet lithography) now complete and the launch of Intel 18a on the horizon, we have a more normal pace of new developments in Intel 14aa and beyond,” he said. “In addition, our teams are obsessively focused on improving productivity, allowing us to produce more with less over time.”

Intel has begun to simplify and streamline parts of its portfolio to improve efficiency and greater value, and is regaining leadership in the product portfolio by narrowing its focus on fewer projects, with the top priority being maximizing the value of its x86 franchise to the customer. According to Gelsinger, the edge and data center markets.

This includes moving the edge business into the client computing group, focusing the NEX (networking and edge technologies) portfolio on networking and telecommunications services, and integrating the software business into core business units to create more integrated solutions, he said. he said.

“The restructuring costs we took on in the third quarter were significant and necessary to right size the company as we cut costs by more than $10 billion in 2025,” he said. “There was also significant degradation, primarily related to Intel 7 hardware and space, reflecting excessive COVID-era costs that we concluded could not be transferred to more advanced nodes now that we have fully transitioned to EUV processing.”

Overall, to meet its 2025 financial commitments, Intel plans to reduce non-product sales costs by US$1 billion, reduce operating expenses to US$17.5 billion, and increase gross and net capital expenditures. which should result in positive free cash flow throughout the year. – Gelsinger said.

Intel Product Business

Intel’s core x86 franchise and the ecosystems it has developed over the past three-plus years of investment remain a tangible source of value and differentiation for the company, its partners and customers, Gelsinger said.

“Going forward, we are taking steps to grow and further unlock the value of our x86 franchise,” he said. “We are committed to delivering the next level of customization, compatibility and scalability needed to meet current and future next-generation computing needs, and we see this opening up a number of significant opportunities for all of our businesses. I’m especially excited about AMD’s recent announcement of the x86 Ecosystem Advisory Group. “We’re bringing together leaders from across the ecosystem to help shape the future of x86, with a focus on simplifying software development, ensuring interoperability and consistent interfaces across vendors, and providing developers with standardized architectural tools and guidance.”

The group’s founders also include Broadcom, Dell, Google, HPE, HP Inc., Lenovo, Meta, Microsoft Oracle and Red Hat, he said.

Progress on the artificial intelligence front

In September, Intel released the Intel Core Ultra 200 V series processors, formerly known as Lunar Lake, aimed at AI-powered PCs, Gelsinger said. The company also continues to develop a robust AI PC ecosystem, including more than 100 independent software vendors, 300 applications and 500 AI models, and continues to plan to ship more than 100 million AI PCs by the end of 2025, he said.

This month, Intel launched Arrow Lake, aimed at developing artificial intelligence-powered desktop PCs and bringing NPU (neural processing unit) to enthusiast desktop and workstation platforms, Gelsinger said. This will be followed in the second half of 2025 by the launch of Panther Lake, the company’s first client processor built on the Intel 18a, he said.

“Overall we are making good progress at CCG (Client Computing Group),” he said. “Our market position is strong with a product roadmap and ecosystem that increasingly differentiates us from competitors, particularly in the enterprise market as customers continue to see the growing value of our vPro solutions.”

Intel’s data center and artificial intelligence division, which is focused on delivering powerful artificial intelligence systems to enterprise customers, has also launched several new projects, although Gelsinger said he still has a lot of work to do.

This includes the release of the latest Intel Xeon 6 processors, which double the performance of the previous generation with increased core counts, memory bandwidth and built-in AI acceleration to handle compute-intensive workloads, Gelsinger said.

This quarter, Intel also released the Gaudi 3 AI accelerator, which delivers twice the network bandwidth and 1.5 times the memory bandwidth of its predecessor, enabling greater language model efficiency, Gelsinger said. IBM has already agreed to deploy Gaudi 3 as a service on the IBM Cloud.

“The overall adoption of Gaudi has been slower than we expected as adoption rates have been impacted by the product transition from Gaudi 2 to Gaudi 3, as well as the ease of use of the software,” he said. “As a result, we will not achieve our goal of $500 million in revenue for Gaudi in 2024. However, looking at the longer term, we continue to be encouraged by the market available to us. There is a clear need for higher TCO (total cost of ownership) solutions based on open standards, and we continue to enhance Gaudí’s value proposition.”

Intel Foundry

Intel is committed to disciplined execution of its roadmap to return to process leadership, Gelsinger said. Upcoming Panther Lake and Clearwater Forest have reached the early stages of Intel 18a ahead of launch next year, and the company has seen a significant increase in the number of requests for proposals (requests for quotation) it is actively quoting, he said.

“While we won’t win them all, we are confident in our competitive position based on feedback from potential customers,” he said.

According to Gelsinger, Intel recently announced a multi-year, multi-million dollar commitment from AWS to expand its partnership to include a new custom Xeon 6 chip on the Intel 3 and a new AI Fabric chip on the Intel 18a. In addition to AWS, the company received two more 18a wafer design wins from compute-focused companies in the third quarter, he said.

“We also received an additional $3 billion in direct funding through the Secure Enclave program to produce semiconductors for the U.S. government,” he said. “We are proud to be the U.S. Government’s partner of choice to strengthen the domestic semiconductor supply chain and ensure continued U.S. leadership in advanced manufacturing, microelectronic systems and process technologies.”

Intel Q3 2024 by the numbers

For the fiscal third quarter of 2024, which ended Sept. 28, Intel reported total revenue of $13.28 billion, down 6.2% from the $14.16 billion it reported for the third fiscal quarter of 2023.

Total revenue beat analysts’ expectations by $240 million, according to Seeking Alpha.

That included revenue for the client computing group of $7.33 billion, up from $7.87 billion. Within the Client Computing Group, Intel’s desktop revenue was $2.07 billion, up from $2.75 billion; laptop sales revenue was $4.89 billion, up from $4.50 billion; and other revenue was $272 million, down from $611 million.

Intel also said data center and AI revenue was $3.35 billion, up from $3.08 billion, and network and edge revenue was $1.51 billion, up from $1.445 billion.

Intel also reported Intel Foundry revenue of $4.35 billion, up from $4.73 billion. Other revenue, including from Altera, Mobileye and other businesses, was $1.04 billion, up from $1.45 billion.

Intel also reported a GAAP net loss of $15.64 billion, or $3.88 per share, compared with last year’s GAAP net income of $297 million, or 7 cents per share. On a non-GAAP basis, Intel reported a net loss of $1.98 billion, or 46 cents per share, compared with last year’s non-GAAP net income of $1.74 billion, or 41 cents per share.

Non-GAAP earnings were 43 cents per share below analysts’ expectations, according to Seeking Alpha.

Looking ahead, Intel expects fiscal fourth quarter 2024 revenue to be between $13.3 billion and $14.3 billion, down from the $15.4 billion it reported for fiscal fourth quarter 2023.

Intel also said it expects a GAAP loss of 24 cents per share, down from 63 cents per share, and non-GAAP earnings of 12 cents per share, down from 54 cents per share.