Intel (INTC) unveiled its third-quarter earnings after the market closed on Thursday, surpassing analyst predictions for both revenue and earnings. Additionally, the company’s fourth-quarter guidance hints at revenue growth for the first time since 2020, leading to a significant surge in Intel’s stock, with shares rising over 7% following the announcement.

CEO Pat Gelsinger’s Optimistic Statement

Intel CEO Pat Gelsinger expressed his enthusiasm about the standout performance in the third quarter. He highlighted the progress made across various fronts, such as advancements in process and product roadmaps, new foundry customer agreements, and the company’s expanding presence in the field of artificial intelligence. Gelsinger stated, “We continue to make meaningful progress on our IDM 2.0 transformation by relentlessly advancing our strategy, rebuilding our execution engine, and delivering on our commitments to our customers.”

Q3 Earnings Exceed Expectations

Intel’s Q3 revenue reached $14.2 billion, with adjusted earnings per share (EPS) of $0.41. This exceeded analysts’ expectations, who had anticipated revenue of $13.5 billion and adjusted EPS of $0.31.

Revenue Breakdown

• Intel’s Client Computing division generated $7.9 billion in revenue, surpassing the projected $7.4 billion.
• The Data Center and AI business brought in $3.8 billion, slightly below Wall Street’s estimate of $3.9 billion.

Despite the overall revenue being down 8% compared to the previous year, this marks an improvement from the same period last year when Intel experienced a 15.2% decrease.

Intel’s Resurgence in the PC Market

Intel, like other chip manufacturers, is capitalizing on the rebound in the PC market. This sector had faced challenges due to declining sales over the past two years. While the latest figures are still lower than the previous year, they represent an improvement from Intel’s second-quarter results, which showed a loss of $2.8 billion.

The decline in PC sales can be attributed to the impact of the COVID-19 pandemic, as consumers bought significant numbers of laptops and desktops for both work and leisure, resulting in reduced demand for new machines. Additionally, inflationary pressures and high interest rates contributed to the drop in PC sales.

According to research firm Gartner, January witnessed a remarkable 28.5% decline in PC shipments, the most substantial drop recorded since the company began tracking PC shipments in the mid-1990s. However, signs are now indicating a potential turnaround, with Gartner analyst Mikako Kitagawa anticipating a return to growth in the PC market in the fourth quarter.

Challenges in the AI Space

While Intel has made significant strides in the PC market, it still lags behind Nvidia (NVDA) in terms of providing solutions for high-end AI systems. Nvidia’s graphics cards and software outperform Intel’s current efforts, and bridging this gap may take time.

Intel Foundry Services Performance

Intel Foundry Services, the company’s chip-building division, reported revenue of $311 million, surpassing expectations of $254 million.

Intel’s Ongoing Transformation

Intel is currently in the midst of a substantial corporate transformation. The company, after losing ground to long-time rival AMD (AMD) in the PC chip market, has faced criticism for not keeping pace with Nvidia’s AI capabilities.