Intel Corporation experienced a surge in its stock prices during after-hours trading, following its optimistic forecast of sales growth in the fourth quarter. This surge is primarily driven by improvements in the personal computer market and a more competitive product lineup.

Sales Forecast Exceeds Expectations

Intel, in a statement on Thursday, announced a sales forecast ranging from $14.6 billion to $15.6 billion for the upcoming quarter. This figure exceeded the average analyst estimate of $14.4 billion. Excluding certain items, the predicted profit stands at 44 cents per share, surpassing the 31-cent projection made by analysts, according to Bloomberg data.

Positive Outlook for Intel’s Turnaround

This positive outlook reflects the increasing momentum in Intel’s efforts to turn the company around under the leadership of CEO Pat Gelsinger. The company’s largest business unit, the PC market, appears to be recovering from a historic slump caused by inventory build-up. However, the server unit continues to face challenges due to shifting customer spending patterns, favoring chips from Nvidia Corp.

Stock Price Soars

Intel’s stock price, already up 23% for the year, surged by as much as 8.9% during after-hours trading after the late Thursday announcement. This marks the third consecutive time that investors have shown enthusiasm for the company’s quarterly reports. These positive results have enabled Intel to keep pace with the broader rally in the chip industry this year, driven by optimism about increased demand for artificial intelligence applications.

Progress in the Plan

During an analyst call, Gelsinger emphasized that the quarter represented a step forward in Intel’s plan to regain its position as a leader in the chip industry. Notably, the company won new customers for its outsourced manufacturing division. However, Gelsinger acknowledged that there is still much work ahead.

Intel’s Margin Projections

Intel predicts that its adjusted gross margin, representing the portion of sales remaining after production costs are deducted, will reach 46.5% in the fourth quarter. This figure surpasses the estimated 44.2%. The gross margin serves as an indicator of Intel’s factory network’s productivity. At its peak, Intel’s gross margin exceeded 60%.

Confidence in Technological Leadership

Intel’s leadership is increasingly confident that, once it regains technological leadership in chip production, it can restore its margins to those historic levels. Chief Financial Officer Dave Zinsner expressed this confidence during the analyst call.

Q3 Earnings and Segment Performance

In the third quarter, Intel reported earnings of 41 cents per share with sales of $14.2 billion. Analysts had estimated earnings of 21 cents and revenue of $13.5 billion. In the last quarter, Intel’s PC chip business, known as client computing, generated $7.87 billion in revenue, surpassing the estimate of about $7.4 billion. Data center sales amounted to $3.8 billion, slightly below the average projection of $3.94 billion.

Competition in the Market

However, Intel faces increased competition in the data center market. Companies like Nvidia and Advanced Micro Devices Inc. are working on PC processors utilizing Arm Holdings Plc technology. Intel’s CEO noted that the crowded field reflects growing excitement in the industry but doesn’t expect Arm technology to significantly capture the market share.

Acknowledgment of Israeli Operations

Gelsinger also praised the efforts of Intel’s staff in Israel, where the company maintains a major design center and factory. Despite the conflict with Hamas, workers have continued operations near the town of Kiryat Gat, close to the Gaza border, and sites affected by terrorist attacks. Intel’s diverse factory locations enable the company to mitigate the risk of disruptions.

Intel’s Ongoing Turnaround

Intel’s turnaround efforts are still in their early stages. While the PC market is showing improvement, sales remain below last year’s levels. Additionally, Intel is striving to catch up with Nvidia in semiconductors that power AI systems.

AI Processors and Foundry Services

Gelsinger expects data center operators to shift their budgets away from Nvidia chips back to other types of processors. While Nvidia’s accelerators are ideal for AI training, Intel’s Xeons will be essential for running AI models and providing services. Gelsinger has also been working to attract customers to Intel’s foundry services, launching an effort to build factories globally, which is showing early signs of success.

Conclusion

Intel’s resurgence, driven in part by inventory restocking, signals positive progress. The next milestones for the company involve expanding its foundry services and capitalizing on the growing demand for AI-related products in the market.