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Intel Exceeds Profit Forecasts Amid Cost Reductions and Strategic Investments

  • tech360.tv
  • 1 hour ago
  • 3 min read

Intel surpassed its profit estimates for the September quarter, driven by Chief Executive Officer Lip-Bu Tan's aggressive cost-cutting measures and significant new investments. The chipmaker's shares rose by 7% in after-hours trading following the announcement.


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This marks Intel's first earnings report since receiving multibillion-dollar investments from Nvidia, Japan's SoftBank, and an unprecedented stake from the United States government. These investments were anticipated to provide a major cash infusion.


Finance Chief Dave Zinsner confirmed that Intel received SoftBank's funds in the third quarter, though Nvidia's cash had not yet arrived. These investments are expected to be a crucial lifeline for the Santa Clara, California-based company.


Blue background with geometric shapes. "Intel" in white text is centered, with a small blue square above the letter "i."
Credit: INTEL

Intel has struggled to maintain its dominance in the PC and server central processing unit markets against Advanced Micro Devices. Repeated attempts to penetrate the artificial intelligence chip market, led by Nvidia, have not yet yielded results.


Following a share price drop of about 60% last year, Intel stock has seen nearly a 90% increase so far in 2025 due to new investments. This performance has enabled it to outperform Nvidia's stock.


Michael Schulman, chief investment officer at Running Point Capital, noted that shares "popped after-hours based on better-than-feared guidance ex-Altera, visible cost and gross margin progress, AI-PC buzz, and $15 billion of fresh strategic funding that shores the balance sheet."


Intel acquired Altera in 2015 for $16.7 billion but sold a 51% stake in the programmable chip designer to Silver Lake in September. Nvidia previously announced it would invest $5 billion in Intel, acquiring about a 4% stake after new shares are issued.


In August, Intel secured $2 billion from SoftBank. Following calls for CEO Tan's resignation over China ties by President Donald Trump, a Washington meeting led to the United States government taking a 10% stake for $8.9 billion.


CEO Tan stated on an investor conference call that a new central engineering group will streamline Intel's chip design efforts and offer custom-designed chips to external customers. This venture will place Intel in competition with Marvell Technologies.


Both Marvell Technologies and other companies assist customers like Alphabet's Google and Amazon in creating their artificial intelligence chips. Demand for Intel's chips was strong in the third quarter, leading to tight supply, according to Mr. Zinsner.


Data centre operators are upgrading central processing units to keep pace with advanced artificial intelligence chips. Mr. Zinsner described the situation, saying, "We're under-shipping demand at this point, which I guess is a high-class problem."


However, Mr. Zinsner also noted that yields for Intel's 18A manufacturing process "are not where we need them to be in order to drive the appropriate level of margins." He predicted yields would likely not reach an industry-acceptable level until 2027. Intel has faced challenges with its 18A manufacturing technology yields.


For the September quarter, Intel reported adjusted gross margins of 40%, exceeding estimates of 35.7%. Adjusted profit reached 23 cents per share, outperforming expectations of 1 cent per share, according to LSEG data.


The company announced in July that its workforce would be over one-fifth smaller by the end of the year. Mr. Tan has significantly scaled back the costly manufacturing ambitions of his predecessor, Pat Gelsinger.


Mr. Tan has aggressively reduced costs and divested assets after Mr. Gelsinger's plans to turn Intel into a contract chip manufacturer, competing with Taiwan's TSMC, resulted in the company's first annual loss since 1986 in 2024.


Intel forecasts current-quarter revenue between $12.8 billion and $13.8 billion, with a midpoint of $13.3 billion. This compares to analysts' average estimate of $13.37 billion. Mr. Zinsner added that Intel plans capital expenditures of $27 billion in 2025, an increase from $17 billion in 2024.

  • Intel exceeded third-quarter profit estimates due to cost cuts and strategic investments.

  • The company received significant investments from SoftBank, Nvidia, and the United States government.

  • Intel is seeing strong demand for its chips but is facing challenges with manufacturing yields for its 18A process.


Source: REUTERS


 
 
 

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