Intel CEO Gelsinger: AI, Foundry Advances Will Foster Future Growth
‘We have a lot more ahead, and we are acting with urgency to deliver on our priorities. We need to fight for every inch and execute better than ever before, and our teams are embracing this mindset as we build a leaner, more profitable Intel,’ says Intel CEO Pat Gelsinger.
Intel’s business in its latest quarter exceeded its expectations with improvements being made at a modest pace as the AI PC and server business and Intel Foundry are expected to help propel growth going forward, CEO Pat Gelsinger said Thursday.
Gelsinger, in his prepared remarks during Intel’s third fiscal quarter 2024 financial analyst conference call, said that operationally, the Q3 results exceeded the company’s expectations as it achieved key milestones across Intel foundry and Intel products.
“Underlying trends in the business are improving at a measured pace, and our outlook for Q4 is modestly above current consensus,” he said.
[Related: Intel, AMD, Nvidia CEOs On The New x86 Partnership: ‘Making Sure That x86 Remains x86’]
Overall, Intel’s business execution across the company is having a positive impact, Gelsinger said.
“We have a lot more ahead, and we are acting with urgency to deliver on our priorities,” he said. “We need to fight for every inch and execute better than ever before, and our teams are embracing this mindset as we build a leaner, more profitable Intel.”
Investors seemed to have liked Gelsinger’s message. The company’s stock, down during the day by 3.5 percent, rose by over 6 percent to $22.95 per share in after-hours trading a few hours after the close of the market Thursday.
Big Changes Behind
Intel completed the vast majority of its layoffs during the third fiscal quarter, and is on track to a greater than 15 percent workforce reduction by year-end, Gelsinger said.
“These were hard but necessary changes that are reducing complexity and making us a leaner, faster, and more agile company,” he said.
Intel also reduced capital expenditures by over 20 percent relative to its plan from early 2024, helping to position the company to react quickly to market demand, Gelsinger said.
“With our transition to EUV (extreme ultraviolet lithography) now complete, and the launch of Intel 18a on the horizon, we have a more normal cadence of new development at Intel 14aa and beyond,” he said. “In addition, our teams are maniacally focused on improving fab productivity, allowing us to produce more with less over time.”
Intel has started simplifying and streamlining parts of its portfolio to unlock efficiencies and great value, and is re-establishing product portfolio leadership with a narrowed focus on fewer projects, with the top priority being to maximize the value of its x86 franchise across the client, edge, and data center markets, Gelsinger said.
This includes moving its edge business into its Client Computing Group, focusing its NEX (networking and edge) portfolio on networking and telco, and integrating its software business into its core business units to foster more integrated solutions, he said.
“The restructuring charges we took in Q3 were significant and necessary to right-size the company as we reduced spending by over $10 billion in 2025,” he said. “There was also a sizable impairment, mostly related to Intel 7 equipment and space reflecting excess COVID-era spending that we have concluded cannot migrate to more advanced nodes now that we have fully transitioned to EUV processing.”
Overall, to meet its 2025 financial commitments, Intel plans to cut non-product costs of sales by $1 billion, lower opex to $17.5 billion, and drive gross and net capex, and as a result should see a positive free cash flow during the year, Gelsinger said.
Intel’s Product Business
Intel’s core x86 franchise and the ecosystems it has developed over the last three-plus years of investment remain a tangible source of value and differentiation for the company and its partners and customers, Gelsinger said.
“Going forward, we are taking steps to supercharge and further unlock the value of our x86 franchise,” he said. “We intend to drive new levels of customization, compatibility, and scalability needed to meet current and future demands of next generation computing, and we see this unlocking a range of meaningful opportunities across all our businesses. I am particularly excited about the recent announcement with AMD to create the x86 Ecosystem Advisory Group. We are bringing together leaders from across the ecosystem to help shape the future of x86 with a focus on simplifying software development, ensuring interoperability and interface consistency across vendors, and equipping developers with standardized architectural tools and guidelines.”
Founding members of that group also include Broadcom, Dell, Google, HPE, HP Inc., Lenovo, Meta, Microsoft Oracle, and Red Hat, he said.
Progress On The AI Front
Intel in September launched its Intel Core Ultra 200 V series processors, previously known as Lunar Lake, aimed at AI PCs, Gelsinger said. The company also continues to nurture a robust AI PC ecosystem with over 100 ISVs, 300 applications, and 500 AI models, and remains on track to ship over 100 million AI PCs accumulative by the end of 2025, he said.
Intel this month launched Arrow Lake aimed at developing desktop AI PCs and bringing the NPU (neural processing unit) to the enthusiast desktop and workstation platforms, Gelsinger said. This will be followed in the second half of 2025 with the launch of Panther Lake, the company’s first client CPU built on Intel 18a, he said.
“Overall, we are making good progress at CCG [Client Computing Group],” he said. “Our share position is strong with a product roadmap and ecosystem that is increasingly setting us apart from our competition, especially in the enterprise market, as customers continue to see increasing value from our vPro solutions.”
Intel’s data center and AI business, which is focused on delivering powerful AI systems to enterprise customers, also so several new launches, although Gelsinger said it still has a lot of work to do.
This includes the launch of Intel’s latest Xeon 6 processors which double the performance of the prior generation with increased core count, memory bandwidth, and embedded AI acceleration to target compute-intensive workflows, Gelsinger said.
Intel this quarter also launched its Gaudi 3 AI accelerator, featuring twice the networking bandwidth at 1.5-times the memory bandwidth of its predecessor for large language model efficiency, Gelsinger said. IBM has already agreed to deploy Gaudi 3 as a service on IBM Cloud.
“The overall uptake of Gaudi has been slower than we anticipated, as adoption rates were impacted by the product transition from Gaudi 2 to Gaudi 3, and software ease of use,” he said. “As a result, we will not achieve our target of $500 million in revenue for Gaudi in 2024. That said, taking a longer term view, we remain encouraged by the market available to us. There is clear need for solutions with superior TCO (total cost of ownership) based on open standards, and we are continuing to enhance the Gaudi value proposition.”
Intel Foundry
Intel is looking to disciplined execution of its product roadmap to return to process leadership, Gelsinger said. The company’s upcoming Panther Lake and Clearwater Forest have met early Intel 18a milestones ahead of next year's launches, and the company has seen a material increase in the number of RFQs (requests for quotes) it is actively quoting, he said.
“While we will not win them all, we are confident in our head-to-head position based on feedback from potential customers,” he said.
Intel recently unveiled a multi-year, multi-million-dollar commitment by AWS to expand its partnership to include a new custom Xeon 6 chip on Intel 3 and a new AI fabric chip on Intel 18a, Gelsinger said. Beyond AWS, the company in the third quarter added two additional 18a wafer design wins from compute-centric companies, he said.
“We were also awarded an additional $3 billion in direct funding under the Secure Enclave program to produce semiconductors for the U.S. government,” he said. “We are proud to be the U.S. government's partner of choice to fortify the domestic semiconductor supply chain and ensure the U.S. maintains its leadership in advanced manufacturing, micro electronic systems, and process technology.”
Intel’s 3Q’24 By The Numbers
For its fiscal third quarter 2024, which ended September 28, Intel reported total revenue of $13.28 billion, down 6.2 percent from the $14.16 billion the company reported for its third fiscal quarter 2023.
Total revenue beat analyst expectations by $240 million, according to Seeking Alpha.
That included revenue for its Client Computing Group of $7.33 billion, down from $7.87 billion. Within Client Computing Group, Intel reported desktop-related revenue of $2.07 billion, down from $2.75 billion; notebook-related revenue of $4.89 billion, up from $4.50 billion; and other revenue of $272 million, down from $611 million.
Intel also reported data center and AI revenue of $3.35 billion, up from $3.08 billion, and network and edge revenue of $1.51 billion, up from $1.445 billion.
Intel also reported Intel Foundry revenue of $4.35 billion, down from $4.73 billion. Other revenue, including from its Altera, Mobileye, and other businesses, was $1.04 billion, down from $1.45 billion.
Intel also reported a GAAP net loss of $15.64 billion or $3.88 per share compared to last year’s GAAP net income of $297 million or 7 cents per share. On a non-GAAP basis, Intel reported a net loss of $1.98 billion or 46 cents per share compared to last year’s non-GAAP net income of $1.74 billion or 41 cents per share.
Non-GAAP earnings was 43 cents per share lower than analyst expectations, according to Seeking Alpha.
Looking ahead, Intel expects fourth fiscal quarter 2024 revenue of $13.3 billion to $14.3 billion, down from the $15.4 billion the company reported for its fourth fiscal quarter 2023.
Intel also said it expects a GAAP loss of 24 cents per share, down from 63 cents per share, and non-GAAP earnings of 12 cents per share, down from 54 cents per share.