Intel’s third-quarter earnings beat Wall Street expectations on Thursday, the results boosted by revenue growth combined with bigger cuts and multiple, major investments over the past two months as CEO Lip-Bu Tan looks to turn around the semiconductor giant.
Intel’s revenue results and net income of $4.1 billion paint a much more favorable picture than its series of quarterly losses. But the company’s turnaround story is worth plenty of capital devoted to cutting costs through layoffs and other cuts, as well as a series of high-profile investments from Softbank, Nvidia and the U.S. government.
Intel added 20 billion dollars on its balance sheet during the third quarter, the company announced in its third-quarter earnings call on Thursday, sending the stock surge. This increase is largely due to three major investments in the company in the last three months.
In August, SoftBank invested $2 billion. A few days later, the US government took an unprecedented 10% equity stake in Intel. The company has received $5.7 billion of a planned $8.9 billion from the US government so far. Nvidia also bought a $5 billion stake in Intel in September as part of a broader deal to develop chips together over time.
“The actions we have taken to strengthen our balance sheet give us greater operational flexibility and position us well to continue to execute our strategy with confidence,” Tan said on the company’s earnings call. “In particular, I am honored by the trust and confidence of President Trump and the Secretary [Howard] The Lutnicks have been placed in me. Their support underscores Intel’s strategic role as the only US-based semiconductor company with cutting-edge logic, [research and development] and construction”.
The company also received $5.2 billion from the Sept. 12 closing of the sale of its ownership stake in Altera, a hardware company it had owned since 2015. It also sold its stake in Mobileye, a self-driving technology company.
Intel increased its quarterly revenue by $800 million in the third quarter to $13.7 billion, up from $12.9 billion. Intel had net income of $4.1 billion in the third quarter, a sharp reversal from the $16.6 billion loss it reported in the same period last year.
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The foundry biz
Despite the strong quarter, there weren’t many details about what will happen next with Intel’s foundry business, which makes custom chips for customers. The business tanked from the start and was the focus of Tan, who began major layoffs at his foundry business this summer.
The operation appears to be a priority for the Trump administration. A key condition of the government’s investment in Intel includes language that it would penalize Intel if it divests from its foundry operations in the next five years.
Wall Street is watching the foundry closely for signs of long-term growth for the company. Intel analysts told TechCrunch in August that the company didn’t need cash to turn itself around, but rather a strategy to get its foundry business back on track.
Tan said Intel believes its foundry business is “uniquely positioned” to capitalize on growing demand for chips, but was tight-lipped on specifics – other than that the company is actively engaging with potential foundry customers – and added that growth in the foundry business will remain disciplined.
“Building a world-class foundry is a long-term effort based on trust,” Tan said. “As a foundry, we must ensure that our process can be easily used by a variety of customers, each with their own unique way of manufacturing their own products. We must learn to appreciate our customers as they rely on us to manufacture wafers, to meet all their needs for robust performance, performance, cost and schedule.”
