Intel beats third-quarter profit estimates as cost cuts, investments pay off
INTEL beat expectations for September-quarter profit as CEO Lip-Bu Tan’s drastic cost-cutting measures helped the chipmaker shore up its finances amid a slew of high-profile investments in the company.
Shares were up 7 per cent in after-hours trading. This marks the Santa Clara, California-based company’s first earnings announcement after multibillion-dollar investments from Nvidia and Japan’s SoftBank as well as an unprecedented US government stake, with investors anticipating a major cash boost.
Intel received the SoftBank money in the third quarter but has not yet received Nvidia’s cash, finance chief Dave Zinsner said in an interview with Reuters.
The investments are expected to be a major lifeline for Intel, which has been struggling to maintain its dominance in the PC and server central processing unit markets as it competes with Advanced Micro Devices, while repeated attempts to break into the AI chip market commanded by Nvidia have not produced results.
After its share price dropped about 60 per cent last year due to these concerns, Intel stock has risen nearly 90 per cent so far in 2025 thanks to the new investments in the company, helping it outperform the stock of artificial-intelligence chip leader and Wall Street darling Nvidia.
“Shares popped after-hours based on better-than-feared guidance ex-Altera, visible cost and gross margin progress, AI-PC buzz, and US$15 billion of fresh strategic funding that shores the balance sheet,” said Michael Schulman, chief investment officer at Running Point Capital.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Intel acquired Altera in 2015 for US$16.7 billion but sold a 51 per cent stake in the programmable chip designer to Silver Lake in September.
Nvidia said last month it would invest US$5 billion in Intel, giving it a stake of about 4 per cent after new shares are issued. In August, Intel secured US$2 billion from SoftBank.
After US President Donald Trump called for CEO Tan’s resignation over China ties, a hastily arranged Washington meeting produced an unusual deal involving the US government taking a 10 per cent stake for US$8.9 billion.
On a conference call with investors, Tan said that a newly formed central engineering group will streamline Intel’s work on its own chip designs and will also offer custom-designed chips for external customers, a business where it will compete against Broadcom and Marvell Technologies.
Those two companies are both helping customers such as Alphabet’s Google and Amazon make their AI chips.
Demand for Intel’s chips was strong enough during the third quarter that the company is tight on supply, CFO Zinsner said. One of the factors is that data centre operators have realised that they need to upgrade the central processing unit in order to keep pace with the advanced AI chips, he said. Upgrading the CPU gives power and performance advantages that help build and run AI applications.
“We’re under-shipping demand at this point, which I guess is a high-class problem,” Zinsner said.
During the conference call, Zinsner said that Intel’s yields - a measure of how many of the chips it makes come out functioning well - for its 18A manufacturing process “are not where we need them to be in order to drive the appropriate level of margins.”
Zinsner said yields would likely not hit “an industry-acceptable level” until 2027. Reuters reported in August that Intel is struggling with yields on its 18A manufacturing technology.
For the September quarter, it recorded adjusted gross margins of 40 per cent, beating estimates of 35.7 per cent, while adjusted profit of 23 cents per share also outperformed expectations of a profit of 1 cent per share, according to data compiled by LSEG.
The company will end the year with a workforce that is over one-fifth smaller than last year, it had said in July, while Tan has significantly pared back the expensive manufacturing ambitions of his ousted predecessor, Pat Gelsinger.
Tan has aggressively cut costs and divested assets, after Gelsinger’s ambitions of turning Intel into a contract manufacturer of chips that would compete against Taiwan’s TSMC led to the company in 2024 recording its first annual loss since 1986.
Intel forecast current-quarter revenue between US$12.8 billion and US$13.8 billion, with a midpoint of US$13.3 billion, compared with analysts’ average estimate of US$13.37 billion. Zinsner said that Intel plans capital expenditures of US$27 billion in 2025 versus US$17 billion in 2024. REUTERS
Share with us your feedback on BT's products and services
