3 takeaways from Intel earnings: Cash flow, foundry progress and hardware surprise

Intel has marked a significant turnaround by returning to profitability in the third quarter, breaking a six-quarter losing streak. This milestone comes as the company released its latest earnings report, showcasing strong revenue driven by sustained demand for its chips, a trend that is projected to continue through 2026. Client computing revenue, encompassing chips for personal computers and laptops, saw a 5% year-over-year increase, benefiting from a stabilized PC market and promising prospects linked to artificial intelligence. During a call with analysts, CEO Lip-Bu Tan emphasized that AI serves as a robust foundation for ongoing growth. While the demand for chips was a silver lining, the foundry segment still faces hurdles. The company's foundry business hasn't yet secured a significant client, with its revenue declining by 2% compared to the previous year. Intel is working on its new 18A nodes, which are tailored for AI and high-performance computing, with Tan expressing optimism about the rollout of their Panther Lake technology this year. In terms of financial health, Tan noted improvements in cash flow and liquidity, which have been a key priority since he assumed the CEO role in March. Intel secured an $8.9 billion investment from the U.S. government in August, alongside $2 billion from Softbank. The anticipated $5 billion deal with Nvidia is expected to close by the end of the fourth quarter, which, along with other transactions, could leave Intel with approximately $35 billion in cash. Intel's stock has seen a remarkable uptick of over 50% since August 22, coinciding with the announcement of the government’s stake in the company. CFO David Zinser mentioned that maintaining communication with the U.S. government, now Intel's largest shareholder, is essential, although they do not disclose quarterly performance details ahead of time. Despite challenges, the company’s older manufacturing processes have performed better than expected, successfully meeting some of the demand for central processing units (CPUs) using existing inventory. However, a supply crunch is anticipated in the upcoming quarters, particularly concerning their older 10 and 7 manufacturing technologies, as many clients are opting for these reliable options rather than waiting for next-generation chips.