Intel is surging as computer sales start growing again

At Intel Innovation on Sept. 27, 2022, Intel revealed its new 13th Gen Intel Core processor family powered by Intel’s performance hybrid architecture. The new processor family launched with six new unlocked desktop processors. (Credit: Intel Corporation)

Intel Corp. is anticipating a return to sales growth in the fourth quarter, driven by improvements in the personal computer market and a more competitive product lineup. The company expects sales in the range of $14.6 billion to $15.6 billion, surpassing analysts’ expectations, and an adjusted profit of 44 cents per share, well above the estimated 31 cents.

Read: Nvidia aim to take on Intel with ARM-based PC chips

The optimistic outlook reflects Intel’s ongoing turnaround efforts under CEO Pat Gelsinger. The company, which has grappled with a historic slump in its PC market due to inventory issues, now believes it has navigated through the worst. In contrast, the server unit is still facing challenges due to a shift in customer spending toward Nvidia’s chips.

Intel’s shares, already up 23% this year, surged by as much as 8.9% in after-hours trading following the announcement, marking the third consecutive quarterly report that has pleased investors. This momentum has allowed Intel to keep pace with the broader rally in the chip industry this year, driven by increased demand for artificial intelligence.

The third quarter demonstrated progress in Intel’s plan to regain leadership in the chip industry and included the acquisition of new customers for its outsourced manufacturing division. Gelsinger acknowledged the company’s progress and emphasized that more work remains.

Intel also predicted an adjusted gross margin of 46.5% in the fourth quarter, surpassing expectations. This figure is an indicator of the efficiency of Intel’s factory network. The company is growing more confident that, once it reclaims technological leadership in chip production, it will be able to restore its margins to previous levels.

In the third quarter, Intel reported earnings of 41 cents per share on revenue of $14.2 billion, exceeding analysts’ estimates. The client computing (PC chip) business generated $7.87 billion in revenue, while data centre sales amounted to $3.8 billion.

Gelsinger remains confident about the growth of the PC market, expecting it to reach annual shipments of about 270 million units. However, the market is becoming more competitive, with Nvidia and Advanced Micro Devices working on PC processors using technology from Arm Holdings. Gelsinger does not anticipate Arm technology taking a significant share of the market.

Intel’s CEO also praised the dedication of the staff in Israel, where Intel has a major design centre and factory. Despite the conflict with Hamas, workers have kept operations going, demonstrating the company’s ability to mitigate risks with its diverse factory locations.

While Intel’s PC market is improving, sales remain lower than a year ago, and the company is trailing Nvidia in semiconductors that support powerful AI systems. Gelsinger expects data centre operators to shift back to other processors, specifically Intel’s Xeons, to run AI models and provide services.

Intel’s foundry industry, where it manufactures outsourced chips for other companies, is still in its early stages. Gelsinger has yet to announce major customers for the program, although he expressed optimism about the client commitments and interest received. The foundry division accounted for $311 million in revenue last quarter, compared to $78 million the previous year.