Intel's Q3 results reveal early signs of success in its foundry transformation strategy, despite an 8% YoY revenue decline to $14.2B. The company's aggressive cost reduction program delivered $3B in savings YTD, with gross margins improving 290bps sequentially to 45.8%. Foundry Services revenue grew 300% YoY, now accounting for $311M as major customers like Microsoft commit to future capacity. Management expects the PC market to stabilize in 2024, while the company's manufacturing technology roadmap remains on track with 5 nodes in 4 years.
Key Risks
Manufacturing process development execution with $20B+ annual capex at risk
Competitive pressure in data center and PC markets impacting margins
High fixed cost structure requiring significant volume for profitability
Customer concentration with top 3 accounting for 39% of revenue
Key Opportunities
Foundry services expansion targeting $20B+ revenue by 2030
AI acceleration market entry through Gaudi3 and integrated features
Manufacturing leadership restoration by 2025 through 5 nodes in 4 years
Geographic diversification benefits from semiconductor supply chain shifts
Bottom Line
Intel's Q3 results demonstrate meaningful progress in its strategic transformation, despite ongoing revenue challenges. The foundry business is gaining credibility faster than expected, while cost reduction efforts are delivering substantial savings. Manufacturing execution remains critical, with multiple process node transitions ahead. The company's competitive position appears to be stabilizing, though significant work remains to restore leadership. Key metrics to watch include foundry revenue growth, gross margin progression, and manufacturing yield rates for new nodes. The contrarian insight is that Intel's manufacturing advantage in leading-edge nodes could return sooner than consensus expects, potentially creating significant upside in both internal products and foundry services.