With Intel’s recovery underway, all eyes are on its foundry business

Intel’s third-quarter earnings beat Wall Street expectations on Thursday, results buoyed by a surge in revenue combined with deeper cuts and multiple, large investments over the past two months as CEO Lip Bo Tan looks to turn around the struggling semiconductor giant.

Intel’s revenue results and net income of $4.1 billion provide a much more upbeat view than its string of quarterly losses. But the company’s recovery story deserves several chapters devoted to cost-cutting through layoffs and other cuts as well as a series of high-profile investments from Softbank, Nvidia and the US government.

Intel added $20 billion to its balance sheet during the third quarter, the company announced in its third-quarter earnings presentation Thursday, sending its shares soaring. This growth is largely due to three major investments in the company over the past three months.

In August, SoftBank invested $2 billion. A few days later, the US government took an unprecedented 10% stake in Intel. The company has received $5.7 billion of the planned $8.9 billion from the US government so far. Nvidia also bought a $5 billion stake in Intel in September as part of a broader deal to develop chips together over time.

“The actions we have taken to strengthen the balance sheet give us greater operational flexibility and put us in a good position to continue executing our strategy with confidence,” Tan said on the company’s earnings call. “In particular, I am honored by the confidence of President Trump and the Secretary [Howard] He put Lutnick in me. Their support highlights Intel’s strategic role as the only US-based semiconductor company with a leading edge. [research and development] And manufacturing.”

The company also received $5.2 billion from the closing of the sale of its ownership stake in Altera, a hardware company it had owned since 2015, on September 12. It also sold its stake in Mobileye, a self-driving technology company.

Intel increased its quarterly revenue by $800 million in the third quarter to $13.7 billion, compared to $12.9 billion. Intel generated net income of $4.1 billion in the third quarter, a sharp reversal from the $16.6 billion loss it reported in the same period last year.

Foundry business

Despite this strong quarter, there weren’t many details about what happens next with Intel’s foundry business, which makes custom chips for customers. The business has faltered from the start and has been the focus of Tan, who began major layoffs at his foundry business this summer.

This work appears to be a priority for the Trump administration. One of the key conditions for the government’s investment in Intel includes language that it will penalize Intel if it abandons its foundry business over the next five years.

Wall Street is closely monitoring the foundry for signs of the company’s long-term growth. Intel analysts told TechCrunch in August that the company doesn’t need cash to turn itself around, but rather a strategy to put its foundry business on the right track.

Tan said Intel believes its foundry business is “uniquely positioned” to benefit from growing demand for chips, but did not go into specifics – beyond saying the company is actively approaching potential foundry customers – and added that growth in its foundry business will remain disciplined.

“Building a world-class foundry is a long-term effort built on trust,” Tan said. “As a foundry, we need to ensure that our process can be easily used by a variety of customers, each with their own unique way of building their own products. We must learn how to delight our customers as they depend on us to build chips, to meet all their needs for robust performance, productivity, cost and schedule.”