Intel Corp.’s third-quarter profit on Thursday beat Wall Street expectations, a performance buoyed by higher revenue combined with deep cuts and multiple big investments in the past two months as CEO Lip Vu Tan seeks to turn around the struggling semiconductor giant.
Intel’s revenue performance and $4.1 billion net income paint a much brighter picture than the company’s string of quarterly losses. But the company’s recovery story deserves several chapters devoted to cost reductions 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 to its balance sheet in the third quarter, the company announced during its third-quarter earnings call Thursday, sending the stock soaring. This growth is primarily due to three large investments in the company over the past three months.
SoftBank invested $2 billion in August. Days later, the US government acquired an unprecedented 10% stake in Intel. The company has so far received $5.7 billion of the planned $8.9 billion from the U.S. government. Nvidia also bought a $5 billion stake in Intel in September as part of a broader deal to co-develop chips over the long term.
“The steps we have taken to strengthen our balance sheet provide us with greater operational flexibility and position us to continue executing our strategy with confidence,” Tan said during an earnings call. “I am especially honored by the trust and confidence that President Trump and Secretary (Howard) Lutnick have placed in me. Their support highlights Intel’s strategic role as the only U.S.-based semiconductor company with cutting-edge logic, (research and development) and manufacturing.”
The company also completed the sale of its ownership interest in hardware company Altera, which it had owned since 2015, on September 12, for which it received $5.2 billion. It also sold its stake in self-driving technology company Mobileye.
Intel’s quarterly revenue rose $800 million to $13.7 billion from $12.9 billion in the third quarter. Intel’s third-quarter net income was $4.1 billion, a sharp reversal from a $16.6 billion loss in the same period a year earlier.
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Despite a strong quarter, there are few details about what will happen next with Intel’s foundry business, which makes custom chips for customers. The business has struggled from the start, and this summer Mr Tan began making significant job cuts in the foundry business, which has become a focus for Mr Tan.
The project appears to be a priority for the Trump administration. A key condition of the government’s investment in Intel includes language that imposes penalties if Intel exits the foundry business over the next five years.
Wall Street is closely monitoring Foundry’s signs of long-term growth. An Intel analyst told TechCrunch in August that the company doesn’t need cash to rebuild, but rather a strategy to get its foundry business back on track.
Tan said Intel believes its foundry business is “uniquely positioned” to take advantage of expanding chip demand, but added that growth in the foundry business will remain disciplined, without providing further details beyond saying the company is actively engaging with potential foundry customers.
“Building a world-class foundry is a long-term commitment based on trust,” said Tan. “As a foundry, we must make our processes easy to use by a variety of customers who have their own unique ways of building their own products. We must learn how to delight the customers who rely on us to manufacture their wafers, meeting all of their needs for strong performance, yield, cost, and schedule.”
