Struggling Intel Hints At Turnaround With Optimistic Forecast

Intel announced thousands of job cuts earlier this year, was hit with reports of unreliable processors, and struggled to fend off a takeover from Qualcomm. But it has now given a fourth-quarter revenue forecast that is above estimates, and has sparked a glimmer of hope that it is capable of turning around its business.

Fourth-quarter revenue will be $13.3 billion (A$20.23 billion) to $14.3 billion (A$21.75 billion), the company said. If it does lean towards the top end of that estimate, it would be higher than the $13.6 billion (A$20.68 billion) average that analysts predicted.

News of a better-than-expected fourth-quarter sent the company’s shares up 9.2 per cent in extended trading. This year, its shares have sipped a staggering 57 per cent.

Intel’s chief executive officer Pat Gelsinger called the company’s turnaround plans as the “most audacious rebuilding plan” in corporate history, in an interview with Bloomberg.

As Intel looks to cut costs, it is axing as many as 16,500 jobs. While bringing in cost efficiencies is one focus area, another will be to obtain new customer orders.

Orders for Intel’s AI accelerator chip, Gaudi, have been weaker than expected and it won’t reach the company’s $500 million (A$760.34 million) revenue target this year, said Gelsinger.

Its rival, AMD, increased its forecast for a similar product to more than $5 billion (A$7.6 billion), while Nvidia is expected to have revenue of more than $100 billion (A$152.07 billion) from its AI chip unit this year.

Gross margin, or the percentage of sales remaining after deducting the cost of production, was 15 per cent in the quarter.

In the third quarter, the company had a loss of 46 cents a share, excluding certain items, and revenue of $13.3 billion (A$20.23 billion), down 6 per cent. That quarterly sales total is its lowest for the third quarter in more than a decade, but came in ahead of the company’s projections, added Gelsinger.

Intel’s so-called foundry unit had sales slipped 8 per cent from the prior-year quarter to $4.4 billion (A$6.69 billion). PC chip sales were $7.3 billion (A$11.1 billion). Its data centre and AI chip unit gained 9 per cent for sales of $3.3 billion (A$5.02 billion).

Gelsinger’s strategy includes a new factory network that he plans to fill with orders from other chipmakers, in addition to Intel’s own designs.

For the next two years, the majority of work done by Intel’s factories will come from orders from its own chip design unit, he said, adding that the financial benefit of outside business will start to show up in 2026.