Intel stock pops on earnings, analyst says there's 'cautious optimism'

Intel's Q3 Earnings Beat and Q4 Outlook [00:00]

• Revenue for the third quarter was $13.7 billion, exceeding the analyst consensus of $13.15 billion.
• Adjusted earnings per share (EPS) came in at 23 cents, also surpassing expectations.
• For the fourth quarter, Intel projects adjusted EPS of 8 cents and revenue of $13.3 billion at the midpoint of its range.
• The guidance for Q4 revenue appears slightly below the $13.4 billion expected by analysts.
• Guidance for the fourth quarter excludes Alterra.

  "AI is accelerating, he says, demand for compute and creating attractive opportunities across our portfolio."

Foundry Division Performance and Future Potential [00:51]

• Intel's manufacturing arm, foundry, reported an operating loss of $2.3 billion for the third quarter.
• This loss was wider than anticipated but represented an improvement from the previous year.
• The foundry business is a key focus for future growth, with hopes for product volumes and opportunities with other customers.
• Investments are being monitored, with no significant increase in capital expenditures seen yet, which would signal progress on the 14nm node and foundry advancements.
• Execution is critical, with the ramp-up of Panther Lake and Clearwater Forest, based on the 18A process, being crucial for high-end chips.
• Wafer economics for these products are noted as better than when manufactured at TSMC.
• The company is not currently chasing low-end market segments for significant volume in foundry.
• The foundry side represents a huge expense, and the company needs to see customer revenue opportunities materialize.

  "The all eyes move to Foundry here as we look for the next year where just again a lot of the upside is in the hopes of not just product volumes but also foundry opportunity with other customers."

AI Strategy and CPU's Role in the AI Era [03:45]

• A key concern has been Intel's position within the AI mega-trend and its strategy for AI accelerators.
• The role of the CPU, in both desktop and server markets, is seen as enduring and potentially becoming more important in the AI era.
• There's an opportunity to view CPUs as a growth category in data centers, in terms of both dollars and volume.
• Leveraging Nvidia's dominance across the stack, especially in data centers, and tying Intel's CPUs to Nvidia's upside is a strategic lever.
• While not directly pursuing GPU or dedicated AI ASIC volumes, being the preferred CPU for Nvidia presents an interesting upside.
• The company is not entirely abandoning the idea of Intel-based GPUs or ASICs for inference.
• Currently, the AI market is dominated by Nvidia, and being tied to Nvidia is considered a net positive for Intel in both client and server segments.

  "So while that might be less attractive for those who want to see them, you know, really pull out an AI accelerator and go after the volumes from a GPU or a dedicated AI ASIC, the opportunity there to be the preferred or the the head CPU headnote of choice for Nvidia actually becomes a really interesting upside."

Attracting External Foundry Customers and Leadership's Turnaround Plan [05:05]

• Policymakers in Washington are keen for the foundry business to succeed for geostrategic reasons.
• Attracting external customers for the next-generation 14A manufacturing process is a key objective.
• Customer engagement and work with PDKs for 14A are needed to assess quality.
• Industry participants were waiting for Intel to deliver on its product roadmap (Panther Lake and Clearwater Forest on 18A) before seriously considering their foundry services.
• The success of Panther Lake and Clearwater Forest is expected to encourage deeper examination of 18A's quality.
• Customer wins and commitments for 14A, which will also feed back into 18A and 18P, are essential for the foundry business to scale.
• CEO Lip Bhutan's turnaround plan, initiated in March, is seen as taking time but has shown positive signs.
• Lip Bhutan is recognized as a strong dealmaker, evidenced by agreements with the government and Nvidia.
• A customer-centric approach and a focus on becoming partners are apparent in his strategy.
• Efforts to control costs and manage the balance sheet are also viewed positively.
• Continued investment and execution are desired, with this quarter's results serving as evidence.
• The leadership's dynamic approach and willingness to explore new deal structures are seen as beneficial.
• Ultimately, seeing customer commitments to Intel Foundry is crucial for broader confidence.

  "I mean I think he's been a very good dealmaker to be honest with you."