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I'm Ed Ludlow.
In just a few moments, Intel CEO Pat Gelsinger will join us for a live interview following their latest earnings report, the company giving a fourth quarter revenue forecast slightly above estimates, but sparking optimism that Intel is capable of reclaiming some lost market share in keycages.
The shares are really surging.
But it's also important to note two other giants of the technology world have also reported numbers this evening. Apple, the world's most valuable company, down two percentage points in after hours. It grew in every geography around the world, apart from in Greater China. iPhone revenue overall beat there's much to unpick there. Amazon gave a strong forecast for the final three months of this year, whether it's on an operating income basis or a revenue basis, and a
return to growth in its cloud unit AWS. There is some signal that Amazon is regaining momentum. We will check in on all three names throughout the thirty minutes, but a focus right now is in Intel. It had a painful third quarter gone and it's given us a signal about what might come next. Let's first of all, go to Bloomberg's senior executive editor, Tom Giles, who leads technology coverage in the newsroom.
Where to start.
You know, Intel has moved on really from a painful third quarter and tried to tell us that it's regaining footing going fullwood.
Take it from that.
Tull slightly Slightly is the key here. A lot of what they did in the most recent quarter was they slash costs, slashed expenses, They cut headcount. They have taken a step back on investor payouts, so a lot of this is about retrenching. They did give a forecast for the fourth quarter that slightly exceeded analysts expectations. That was enough to get the stock moving. It's definitely up and after hours, but I look at the report and I see that they are not out of the woods yet
by any stretch of the imagination. I look at their orders for AI chips. There's still not a lot of momentum there. They're not going to meet that five hundred million dollar threshold that they had talked about. We are still wondering about whether there's going to be interest after the election from an outside company. Bloomberg has reported on
Qualcomm and their potential interest in an Intel deal. We've also reported that they're going to put that off until after the election, maybe not see a lot of movement there until after the new year. This was an investors are breathing a sigh of relief. But Gelsinger still has a lot of explaining to do and a lot of expectations that he still needs to live up.
To, and we will get the opportunity to put those questions to him. Bloomberg, Tom Giles, thank you, stay with us. I want to bring in Bloomberg's Ian King, who's led semiconductor coverage in the Bloomberg newsroom since nineteen ninety.
Eight and for a lot of that time.
In all seriousness, Intel has led in certain products, right chips that go into PCs in some sense data center. But the quarter that just happened, their third quarter was painful. Billions of dollars of impairment charges, headcount reduction. Take that and explain why it's so important for this chip company to have taken those actions.
Yeah, I mean Pat Gelsing has spelt it out. He said, we are resizing the company for the size of revenue that we expect going forward. And going forward we expect maybe three to five percent growth. If we push it, maybe we'll get into the sort of seven percent range. So that is a long way off what Intel's direct compares are doing right now, particularly in that AI chip market.
Ian one more to you please. You spoke to Pat Gelsinger on the phone very quickly. Their business is split in two. There's the chips that they make that go into Pcason data centers. Then there's the manufacturing business. Gelsinger explained to you sort of the plan to run them as distinct divisions, but within one whole company.
Yeah, he's talking about them being sort of better to be split but still together, which he was asked about again on the call, And people are still kind of struggling with this. It's like, well, how come if you're splitting them up, you're not going to go the whole way and split up the company and His point is like, no, no, we need to manage the overall finances and guess what, the majority of work that's going to be done in those factories is go to be our chips for the next couple of years.
That's the Bloomberg News reporting on the numbers that Intel posted. You see them on the screen there, thanks to Bloomberg, Zy and King. Let's get reaction from the investment community. Joanne Feine is Advisor's capital management partner and portfolio manager actually currently with no exposure to Intel, but you're someone who's covered semiconductors semi capital equipment for many years at multiple firms. Just your reaction to the Intel print and what they told us about their progress.
You know, they made a lot of progress, and that's an important step forward. They had a lot of cost cutting to do. They seem like they got a lot of it done last quarter, which is why we're seeing such a big charge, which had a large impact on that adjusted EPs. But you know, as Ian just said that they have a long way to go because they are taking a huge hit on their gross margin by outsourcing, and that reflects the lack of execution in the past on the manufacturing side.
And it isn't just to an end.
We didn't get good news about that this quarter. It's in fact really not going to play through until twenty twenty six when they rant Panther Lake in real volume. And even then, on the call, Pat Gelsinger said that seventy percent will be in house, but thirty percent will not, And I think that's a smart business decision. They have to be a reliable provider of that chip, and if there's any kind of hiccup in the yields they're going to get on Panther Lake, they had better have another
source so they can meet their customer demands. But you know, the gross margin is everything. They've gone from over sixty percent down to under forty percent. Yes, and that's because they haven't executed.
Now.
I've always said that if somebody can write the ship, it's Pat Gelsinger, a former Intel guy and back at the Helm, and he's made incredible progress. He and Dave's Inzer have made incredible progress here this last.
Quarter, and the stock is markedly higher and after hours. In a minute, I'm going to ask Ian about that kind of history of Intel and its leadership in the field of semi conductors. AI accelerators. Those are the GPUs, the high performance chips that we've all been talking about, because they go into data centers and they use to
train AI models. And what Intel told us is that their version of that Goudy is not getting traction nowhere near the traction frankly that in video and AMD to a lesser extent of getting What did you make of that, Joan.
Yeah, they're a distant follower and it's going to take them a lot to really make any inroads there. And it isn't just in video and AMD's new products, but it's also custom silicon that are coming out of the cloud guys themselves, like Google for example, working with Broadcom, Open Ai also evidently working with Broadcom. So there's a lot of players already there that have really outstanding products and you can see that in their soft guidance for
twenty twenty five. They're targeting three to five percent revenue growth. That's what they're managing the business to and that really does reflect the different opportunity Intel has. It isn't just the AI accelerators, it's also that they've lost so much market share in server to AMD Okay. They used to be ninety seven percent. Now they're just around forty percent.
Those are one of the questions that we'll get to you, Dranfeeni, stay with us for a moment. I want to go back to Bloomberg's Ian King. Historically, Intel was the leader in the product categories, but also in its margins. It was a company that had sixty percent margins or above. That is not the case anymore.
Why Historically, what the massive advantage that they had was the best factories in the industry. Right These factories coust multiple tens of billions of dollars to put in the ground. But if they're good and if they give you better products, that's an asset. Right now, that is the reverse where they are not the best and they are weighing on the margins. And as we talked about it, and that was all of the questions they got, when are these advancements?
Were the answers, well, two years.
And what do you mean by So there's this foundry business, and part of it is serving Intel. They're their own biggest customer in the first instance, but they've named some pretty impressive people out there that they hope to manufacture chips for. There seems to be now a timeline building and when that might happen.
Yeah, I mean the optimistic view is like, now we've made our factories great again. Now they're good. That'll help our products and it will also help us attract outside money. The analyst are turning around and saying, well, when and what's happening in the interim is, as Johanne said, they're
still outsourcing a big chunk of their best stuff. So obviously that's horrendous margins and it has the negative impact of if you've got factories and you're not running them flat out making your best stuff, that's not a place where you want to be in this.
Industry, Joanne.
When I moved to California six years ago, Intel was part of the law and history of Silicon Valley. It's why people speak about them in that respect. In the court of gone, they took very painful decisions. And when I posted on social media that Pat Gelsinger was doing this special program, many voice support for him, but did say, look, there are some very difficult questions we still have. What would your difficult question be for him?
How are you going to bring that gross margin up? And I guess the second one, and related is how do you convince potential foundry customers that they're going to get priority in those wafer starts when they need them? And that's always been the challenge in eras past. When Intel has talked about starting a foundry business, the concern among potential customers was, how do we know we're going
to get the wafer starts that you promise us? How do we know you're not going to prioritize your own products? And then secondly, do they have the extensive libraries that they need to build chips for other companies? And that's a set of libraries that obviously have built up over many, many years and decades at TSMC and Samsung, But it's a new thing for Intel, and can they execute to build other companies' products as well as they do for their own.
Amtheenia of Advisors, Capital Management, and of course Bloomberg's Ian King. Thank you to you both. Now we are joined by the Intel CEO, Pat Gelsinger, who's come straight from the company's call with analysts. Kindly, you are joining us live on Bloomberg Television and Radio, and Pat, thank you for your time.
In the quarter gone.
We were just talking about how you made painful decisions, and those showed up as impairment charges and were reflected on the bottom line to start, Could I ask if that's it now that those actions are taken and you now have line of sight on what you want to do, or if there will be more sort of restructure to come.
Yeah, we worked very hard this quarter to get this done and the people actions, the restructuring chargers you'll largely finished this quarter, so it was a challenging quarter that way, but to also deliver better than expect the results if we eliminate those one time chargers and to take our guidance up for Q four.
I'm very proud of our team being able to do both of those this quarter.
Some of the most difficult restructuring charges maybe in the history of Intel since our memory microprocessor decision almost forty years ago. Getting that done and still beating results and taking the guide up, this was a very significant quarter for our team to execute. Very proud of their discipline results.
Pat the investor base of cheering you. I'm going on the reaction of your stock in after hours, but a lot of that does seem to be a focus on what you were guiding to in the final three months of this year. Away from sort of the financials and numbers, could you talk a little bit about the product business and the foundry business that gave you some confidence in that guide.
Yeah, and if we take it apart a little bit, the client business, we've launched our lunar Lake product, the second generation of our AIPC and the AIPC category very solid. We'll be launching the commercial version of that into a good market, believe next year for a Windows refresh, a corporate refresh cycle, and we start to see more strength in the AIPC category overall, with strong set of use cases and ISVs bringing new software into the marketplace. So
we feel good about the client business. Data center quarter on quarter a little bit better than people forecast for that business, and a stronger product line with our Xeon six products now starting to ramp, you know. And finally on the Intel foundry quarter and quarter growth in that area, and a strong pipeline of external customers. We announced Amazon and two other AT and A customers, some additional advanced packaging customers. So we're starting to see that business come
to life. And that's a long term business because when people move designs, it takes several years for major designs to move into our foundry. So we've been at it now a couple of years, and we're starting to see the results of those hard work and getting back to competitive process technology with AT and A. So a very good quarter of operational results.
Pat we have a question from our audience, and that question comes from Clem DeLong, who's the CEO and founder of Hugging Face, and he makes the point that on his platform there are many more smaller models now available and it's leading him to have a question for you about Intel's place in the on device trend we're seeing with AI and how you're going to enable more on device AI use.
Well, thank you, Clem, A great question, and a Hugging Face a great company, and you know, as you think about these models, you know we do see it moving from the training phase of you know, trillions of parameters to the inferencing phase, and exactly like the questioner says, in that inferencing phase, more of that will happen on prem for data center customers, and many of those smaller models will be retrained with enterprise's own data.
A lot of those.
Will just run on zeon need a special accelerator, or it'll be zeon plus an accelerator, but also then the edge use cases and AIPC use cases.
Ed.
I call it the three laws of the edge, right, the laws of physics, right, the.
Speed of light.
If I have to go to the cloud, I had time. Your second law is the law of economics, right, it's cheaper to run on my device. And finally the laws of the land. My data on my device in my data center. So we see it moving from a cloud training world to an edge and on prem world for inferencing for the future.
I therefore have to ask you about GOUDI. Your AI accelerator did not get the traction that you'd hoped and you won't be making the outline target of five hundred million dollars in sales for this fiscal year or calendar year. Why is it a use case issue that the data center operators aren't looking at it or something else.
Yeah.
Two factors that we pointed out. One is is that now we have Gouty three coming out, so there's more enthusiasm for the next generation product that we're just starting to ramp now. The second one is the software and the software use cases the AI world has moved very rapidly and innovating very quickly, and the robustness and the completeness of the Gouty software stack hasn't been as great.
And it's an accelerator, not a full reprogrammable GPU, so that makes some of the software porting and optimizations a bit more difficult. Obviously, as we get more of that running on Goudy, we solve the software problems. But secondly then it's also to move to a complete GPU capability, which we'll be doing out in time, and that development effort is also well underway, so we feel we have a solid position. The world is coming to more on
prem and enterprise use cases. Like the last question ask and Gouty three good early indications from the marketplace and its success as we ramp it in twenty five.
If you're just joining us on Bloomberg Television and Radio, we're live with the Intel CEO Pat Gelsinger. Pat Bloomberg's reported that arm and Qualcom, two of your peers, are interested in buying some or part of Intel. Can you confirm whether or not you received a formal offer from them or anyone else, and what Intel's consideration of them would be.
Yeah, and Obviously, there's been rumors and churn in the industry, and I think all of that just indicates how important Intel is to the Intel into the industry structure and semiconductors, and how important those supply chains are.
For the world.
We don't view any of these rumors as particularly emeritus. We laid out a strategy, we reaffirmed that with our board of directors, and obviously, as we've taken these steps this quarter and restructuring and getting our costs where they need to be, we have the capacity to go on the journey that we've laid out to produce sustainable profitability
and result in shareholder return. So with that, I'm committed, the team's committed, we have the board support for the strategy that we've laid out, and Q three shows that's exactly what we're going to do.
But I've been trying to help our audience understand Intel's historic and current business right the products, but also foundry. And what you said was that twenty twenty six is when those third party customers start to show up. But could you just outline the path to that what you want to hold yourself to for next year in developing that business as a sort of standalone unit.
Yeah, and it's a great question ed and clearly we've started to see that already emerge. And even this quarter we saw quarter and quarter growth of the external foundry business, largely driven by some of those early.
Packaging design wins.
So these advanced packages are sort of a faster on ramp, but ultimately it's becoming a wafer foundry for the d street. And as we said, three major design wins this quarter, you know, one with Amazon and two other compute use cases. So we'll be updating you know, the market as we win more of those customers and describing the lifetime deal value of those to the marketplace as well. So we'll
give some of those breadcrumbs along the way. But it takes a couple of years for people to move these designs, a year to design it, a year to bring it into production until it starts to ramp in the marketplace. So key milestones for eighteen A that customers are now beginning those design cycles, the design tools, the design libraries.
Are being moved over to eighteen A, but.
It really isn't until twenty six that those results start to really help Intel's products. And then twenty six twenty seven until we start to see meaningful volumes externally.
That way just days away from an election in this country, and I'm particularly interested in your assessment and planning for might happen to the Chips Act programs. Of course, I don't expect you to know what will happen in the election. You do not have a crystal ball. But former President Trump has kind of made disparaging remarks about President Biden's economic agenda. How are you planning for that?
Please?
Yeah, And I'd say maybe three different perspectives. Number One, the Chips Act was a bipartisan act and with that strong support from both sides of the aisle. And with that, we believe the importance of that in terms of industrial policy. The semiconductor industry is well supported by Congress and both parties. Second, we are disappointed by how long and how slow the dispensing of funds has been and well over two years
at this point. I've invested thirty billion in capital and we've seen zero dollars of the Chips grants at this point. So we do believe that that has been too slow, and we're somewhat frustrated by that, and we've taken out of our financials four this year. That said Yil, there's also the Investment tax credit that we are seeing in It is much larger than the grant portion of the CHIPSAC and that is now law, and that will be beneficial.
But clearly, I think whoever wins the election, the importance of this industry, the importance of rebuilding this supply chain of manufacturing is well supported. And Intel as a designer, R and D and manufacturer is unique in the United States and in the overall structure of the industry. And we expect the broad support rate of the administration regardless which party wins as a result.
Thank you, Pat.
Two quarters ago your CFO told me you were two over indexed to CPU, and we know what happened with Goudi. You made painful decisions in the court to gone reduce headcount by sixteen five hundred. Do you now have the plan in place and are you confident from here?
You know, we laid out a clean sheet program that we went through to really benchmark the business. We took a conservative view of the funding plan, as we call it internally, saying you know, we're taking a modest growth outlook and we're building our cost structure to that very modest outlook, but we've also built now a lot of
optionality to scale up into the business. We have a shell ahead where we have capacity that we can scale into if necessary, and we've made a smaller, more efficient Nimbre company that is able to execute with more agility and speed as well. So we feel like we're now well set up for the future. This was a challenging quarter for me for the company, but we feel like
we're well set up for the future. And the good operational results that exceeded the markets expectations and the increased guidance for Q four, we feel like we're now in a very solid position.
Intel CEO Pat Gelsinger, thank you for joining us here on this special bluebot technology straight from the analyst school.
Appreciate your time.
Thank you, ed like always, Okay, let's get more reactions to that conversation the numbers and what is the big earning story this Thursday Bloomberg Intelligence and this Congensabani who's just posted his reaction on the Bloomberg terminal saying details on two new eighteen eight customers will be key to offset pains from the third quarter pains that We've just been through extensively, Kunjan, But just go a bit deeper into your thesis and your reaction to what Pat said.
Yeah, this is a name that I struggled with most ed there were a lot of positives. If you want to take a positive view, right, they came in slightly better.
You have to if you want to.
But to be fair, they came in slightly better than feared on most top line Q three, Q four, the free cash flow target is moving in the right direction. The gross to netcapax, the ratio is improving. But at the same time, we thought the gross margin floor was sort of something they already said last quarter. Right, so
we have this massive significant impairment charges. Yes, you can ignore that, and the gross margin was better than a bit of there, but you have to make sure, right, how many times are we going to draw this clean sheet and go on?
From their AI accelerators, the chip that everyone talks about, Goudie's not getting traction. They won't make five hundred million dollars in sales this year. What was your reaction to that.
That's part of sort of the negatives out of today, right, the AI story doesn't seem to get any better In fact, this announcement makes it sort of slow down even more. Based on the implied guide of for DCAI, it seems that the share loss have not stopped. And on the other hand, you have the competitor AMD suggesting strong turing ramp next quarter, right versus a flatish guide from Intel. So that tells me both in CCG and Data Center that the share loss have not stopped yet.
Bloomberg Intelligence analyst can Jensavanni, we just talked about his research, but check it out on.
The Bloomberg terminal.
I want to get the final word with Bloomberg Senior executive editor Tom Giles, who has led this news rem for a long time.
Interesting interview.
I think, you know Pat Gelsia coming clean on how it is, but he still projects confidence.
I just watch you.
My overall takeaway from that conversation with Pat was he's really trying to accentuate the positive. He acknowledged it's difficult to cut sixteen five hundred jobs. They made some really hard decisions in the quarter. At the same time, he's being as honest as he could about the AI outlook. You need to have if you're a ship maker right now, you need to be able to sell an AI story and Intel is just not doing that right now.
Ian King has been sending the headlines we're reporting on the terminal right that this is difficult, but they demonstrated progress. Bloomberg's Tom Giles, who leads the news room here at Bloomberg Technology, thank you very much. This was part of a mega earnings period. Right when it comes to the megacaps, Intel's still the story.
It's up eight percentage points.
Apple, the world's most valuable company in Amazon also reports.
But the movements in.
There after hours stock was a little bit more muted and a difficult one. Intel up eight percent. It's an interesting one.
You know.
I don't know whether or not investors will stay with the momentum in the stock. If they believe it, they will have to. I guess Tom Giles digest what Pat Gelsinger told us.
Yeah, absolutely. I mean it's surged a lot, it's come back a little bit. I think as the market as the reality sinks in that they've got a tough row to hold ahead. And it's just it's there was not enough in this story to say that Intel is in the clear, and I thought Pat was upfront about that as much as he really tried to accentuate how good things are going.
Got it.
Bloombg's Tom Giles again, Senior executive editor for Bloomberg Technology.
We appreciate it.
That does it for this edition, special edition of bloombate Anology. We'll be back tomorrow morning and we'll review the entire thing.
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