Intel's Earnings Report: Challenges and Future Outlook

Intel is cautiously optimistic about regaining market share after a painful quarter, but faces significant challenges ahead.

### Intel's Recovery Efforts Amidst Market Challenges: Insights from CEO Pat Gelsinger
* 📈 Intel CEO Pat Gelsinger joined Bloomberg Technology to discuss the company's latest earnings report, which showed a fourth-quarter revenue forecast **slightly above estimates**, indicating **potential recovery** after a painful third quarter.
* 💡 Gelsinger emphasized that Intel has made **significant cost cuts**, including a headcount reduction, to align with expected revenue growth of **3%-5%**, while also acknowledging the challenges in **regaining market share in AI chips**.
* 🔍 Analysts noted that Intel's recent performance was a **step forward**, but the company still faces difficulties, particularly in the AI chip market where it **trails behind competitors like NVIDIA and AMD**.
* 🛠 The restructuring actions taken during the quarter were highlighted as **necessary for future profitability**, with Gelsinger stating, "**Some of the most difficult restructuring charges may be in the history of Intel**."
* 📊 Despite some positive indicators, such as a **strong pipeline of external customers** for Intel's foundry business, industry experts remain cautious about the company's ability to **regain its former market dominance**.
* 🤔 Gelsinger addressed investor concerns regarding the Chips Act, expressing frustration over the **slow distribution of funds**, while remaining optimistic about **bipartisan support for the semiconductor industry**.
* 📉 Ultimately, while Intel's stock saw a rise after the earnings report, market analysts suggest that the company still has a **challenging road ahead** to fully recover and **regain investor confidence**.

FROM THE HEART OF WHERE INNOVATION, MONEY, AND POWER COLLIDE, FROM SILICON VALLEY AND BEYOND, THIS IS BLOOMBERG TECHNOLOGY WITH CAROLINE HYDE AND ED LUDLOW. ED: LIVE FROM SAN FRANCISCO TO TV AND RADIO AUDIENCES AROUND THE WORLD, WELCOME TO A SPECIAL EDITION OF BLOOMBERG TECHNOLOGY. I MEANT LUDLOW. IN A FEW MOMENTS, UNTIL CEO PAT GELSINGER WILL JOIN US FOR A LIVE INTERVIEW FOLLOWING THE LATEST EARNINGS REPORT. THE COMPANY GIVING A FOURTH-QUARTER REVENUE FORECAST SLIGHTLY ABOVE ESTIMATES BUT SPIKING OPTIMISM INTEL IS CAPABLE OF RECLAIMING LOST MARKET SHARE IN KEY CATEGORIES. THE SHARES ARE REALLY SEARCHING. IT IS IMPORTANT TO NOTE TWO

OTHER GIANTS OF THE TECHNOLOGY WORLD ALSO REPORTED NUMBERS THIS EVENING. APPLE, THE WORLD'S MOST VALUABLE COMPANY, DOWN TWO PERCENTAGE POINTS. IT GREW IN EVERY GEOGRAPHY AROUND THE WORLD APART FROM IN GREATER CHINA. IPHONE REVENUE OVERALL BEACH. A STRONG AMAZON FORECAST OF FINAL FOUR MONTHS OF THE YEAR. THEY RETURN TO GROWTH IN THE SOLID UNIT AWS. THERE IS A SIGNAL OF AMAZON REGAINING MOMENTUM. WE WILL CHECK IN ON ALL THREE NAMES IN THE NEXT 30 MINUTES BUT NOW THE FOCUS IS ON INTEL. IT HAD A PAINFUL THIRD QUARTER AND IT IS GIVING US A SIGNAL ABOUT WHAT MIGHT COME NEXT. FIRST WE WILL GO TO THE BLOOMBERG SENIOR EXECUTIVE EDITOR TOM GILES WHO LEADS TECHNOLOGY COVERAGE IN THE

NEWSROOM. WHERE TO START? INTEL HAS MOVED ON FROM A PAINFUL THIRD QUARTER AND IS TRYING TO TELL US IT HAS REGAINED FOOTING GOING FORWARD. TOM: SLIGHTLY IS THE KEY HERE. A LOT OF WHAT THEY DID IN THE MOST RECENT QUARTER WAS THEY CUT COSTS, CUT EXPENSES, CUT HEADCOUNT. IT THEY TOOK A STEP BACK ON INVESTOR PAYOUT. A LOT OF IT IS ABOUT RETRENCHING. AND THEY DID GIVE A FORECAST FOR THE FOURTH QUARTER THAT SLIGHTLY EXCEEDED ANALYST EXPECTATIONS. IT WAS ENOUGH TO GET THE STOCK MOVING. IT IS DEFINITELY UP IN AFTER HOURS. I LOOK AT THE REPORT AND SEE THEY ARE NOT OUT OF THE WOODS YET BY ANY STRETCH OF THE IMAGINATION. I LOOK AT THEIR ORDERS FOR AI CHIPS. THEY ARE -- THERE IS STILL NOT

A LOT OF MOMENTUM THERE. THEY WON'T MEET THE 500 MILLION DOLLARS THRESHOLD THAT THEY HAD TALKED ABOUT. WE ARE STILL WONDERING WHETHER THERE WILL BE INTEREST AFTER THE ELECTION FROM AN OUTSIDE COMPANY. BLOOMBERG HAS REPORTED ON QUALCOMM. THEIR POTENTIAL INTEREST IN AN INTEL DEAL. WE HAVE ALSO REPORTED THAT THEY WILL PUT THAT OFF UNTIL AFTER THE ELECTION, MAYBE NOT SEE A LOT OF MOVEMENT THERE UNTIL AFTER THE NEW YEAR. INVESTORS ARE BREATHING A SIGH OF RELIEF BUT GELSINGER STILL HAS A LOT OF EXPECTATIONS TO LIVE UP TO. ED: I WANT TO BRING IN BLOOMBERG'S IAN KING WHO HAS LED SEMICONDUCTOR COVERAGE IN THE BLOOMBERG NEWSROOM SINCE 1998.

AND FOR THAT WHOLE TIME, INTEL HAS LED IN CERTAIN PRODUCTS, CHIPS THAT GO INTO PCS, DATA CENTERS. THEIR THIRD QUARTER WAS PAINFUL. BILLIONS OF DOLLARS OF IMPAIRMENT CHARGES. HEADCOUNT REDUCTION. TAKE THAT AND EXPLAIN WHY IT IS SO IMPORTANT FOR THE TRIP COMPANY TO HAVE TAKEN THOSE ACTIONS. IAN: PAT HILL CENTER SPELLED IT OUT. HE SAID, WE ARE RESIZING THE COMPANY FOR THE SIZE OF REVENUE WE EXPECT GOING FORWARD AND GOING FORWARD WE EXPECT MAY BE 3%-5% GROSS AND IF WE PUSH IT MAY BE WE WILL GET TO THE 7% RANGE. IT IS A LONG WAY OFF WHAT INTEL DIRECT COMPARISONS ARE DOING NOW, PARTICULARLY IN THE AI CHIP MARKET. EDIT: EN YOU SPOKE TO PAT GELSINGER ON THE PHONE BRIEFLY.

THERE BUSINESS IS SPLIT IN TWO, THE CHIPS FOR PCS AND DATA CENTERS AND MANUFACTURING. GELSINGER SORT OF EXPLAIN TO YOU THE PLAN TO RUN THEM AS DISTINCT DIVISIONS BUT IN ONE WHOLE COMPANY. IAN: HE IS TALKING ABOUT THEM A BETTER TO BE SPLIT, BUT STILL TOGETHER. HE WAS ASKED ABOUT THIS ON THE CALL AND PEOPLE STILL STRUGGLE WITH IT. HOW COME IF YOU ARE SPLITTING THEM UP YOU WANT TO GO THE WHOLE WAY TO SPLIT UP THE COMPANY? HE IS LIKE NO, NO WE NEED TO MANAGE THEIR OVERALL FINANCES. GUESS WHAT? THE MAJORITY OF THE WORK DONE IN THOSE FACTORIES WILL BE OUR CHIPS THE NEXT COUPLE YEARS. ED: THOSE ARE THE NUMBERS INTEL POSTED. LET'S GET REACTION FROM THE INVESTMENT COMMUNITY.

JOANN FEENEY IS AN ADVISOR'S CAPITAL MANAGEMENT PARTNER AND PORTFOLIO MANAGER CURRENTLY WITH NO EXPOSURE TO INTEL, BUT SOMEBODY THAT HAS THE ENDEAVOR -- COVER TO SEMICONDUCTORS FOR MANY YEARS AT MULTIPLE FIRMS. WHAT IS YOUR REACTION TO THE INTEL PRINT AND WHAT THEY TOLD US ABOUT THEIR PROGRESS? JOANNE: THEY MADE A LOT OF PROGRESS. IT'S AN IMPORTANT STEP FORWARD. THEY HAD A LOT OF COST CUTTING TO DO AND IT SEEMS LIKE THEY GOT A LOT DONE LAST QUARTER. WE ARE SEEING A BIG CHARGE ON THE INDUCTED EPS. BUT THEY HAVE A LONG WAY TO GO. BECAUSE, THEY ARE TAKING A HUGE HIT ON THEIR GROSS MARGIN BY OUTSOURCING. THAT REFLECTS THE LACK OF EXECUTION IN THE PAST ON THE

MANUFACTURING SIDE. IT IS NOT JUST COMING TO AN END. WE DID NOT GET GOOD NEWS ABOUT THAT THIS QUARTER. IT IS IN FACT REALLY NOT GOING TO PLAY THROUGH. UNTIL 2020 SIX WHEN THEY WRAP PANTHER LIKE IN REAL VOLUME. AND EVEN DEAD ON THE CALL, PAT GELSINGER SAID 70% WILL BE IN HOUSE BUT 30% WILL NOT. I THINK THAT IS A SMART BUSINESS DECISION. THEY HAVE TO BE A RELIABLE PROVIDER OF THE SHIP. IF THERE IS ANY HICK UP IN THE YIELDS THEY WILL GET ON PANTHER LIKE THEY HAD BETTER HAVE. THEY HAVE GONE FROM 40% TO. THAT IS BECAUSE THEY HAVE NOT EXECUTED. I HAVE ALWAYS SAID IF SOMEBODY CAN RIGHT THE SHIP IT IS A PET GOES UNDER A FORMER INTEL GUY BACK AT THE HELM.

HE ENDED DAVE KINZER HAVE MADE INCREDIBLE PROGRESS THIS QUARTER. >> THE STOCK IS MARKEDLY HIGHER AFTER HOURS. IN A MINUTE, I WILL ASK IAN ABOUT INTEL AND ITS LEADERSHIP IN SEMICONDUCTORS. AI IS A LIMIT IS ARE THE GP USE, HIGH-PERFORMANCE CHIPS WE HAVE BEEN TALKING ABOUT BECAUSE IT THEY GO INTO DATA CENTERS AND ARE USED TO TRAIN AI MODELS. UNTIL TOLD US THEIR VERSION OF THIS ISN'T GETTING TRACTION. NO WHERE NEAR THE TRACTION NVIDIA AND AMD COME UP TO A LESSER EXTENT, ARE GETTING. WHAT DID YOU MAKE OF THAT? JOANNE: THEY ARE A DISTANT FOLLOWER. IT WILL TAKE THEM OUT TO MAKE INROADS. IT IS NOT JUST NVIDIA AND AMD NEW PRODUCTS. IT IS CUSTOM SENECA COMING OUT

OF THE CLOUDS THEMSELVES LIKE GOOGLE, OPENAI, BROADCOM, OPENAI WORKING WITH BROADCOM. IT REFLECTS THE DIFFERENT OPPORTUNITY INTEL HAS. IT'S NOT JUST AI ACCELERATORS. IT IS THAT THEY HAVE LOST SO MUCH MARKET SHARE IN SERVER TO ANDY. THEY USED TO BE 97%. >> JOANNE FEENEY, STAY WITH US. I WANT TO GO BACK TO IAN KING. HISTORICALLY, INTEL WAS THE LEADER IN PRODUCT CATEGORIES AND MARGINS. IT WAS A COMPANY WITH A 60% MARGINS OR ABOVE, AND THAT IS NOT THE CASE ANYMORE. WHY? IAN: HISTORICALLY, THE MASSIVE ADVANTAGE THEY HAD WAS THE BEST FACTORIES IN THE INDUSTRY THAT CAUSED MULTIPLE TENS OF BILLIONS OF DOLLARS TO PUT IN THE GROUND.

IF THEY ARE GOOD AND GIVE YOU BETTER PRODUCTS, IT'S AN ASSET. RIGHT NOW, IT'S AT THE REVERENCE. THEY ARE THE BEST. -- RIGHT NOW, IT'S THE REVERSE. AS THEY ARE NOT THE BEST. LAYING ON THE MARGINS. ED: WHAT WERE THE ANSWERS? IAN: TWO YEARS. ED: WHAT DO YOU MEAN? THERE IS THIS FOUNDRY BUSINESS, AND PART OF IT IS SERVING INTEL, THEIR OWN BIGGEST CUSTOMER, AND THEY HAVE NAMED IMPRESSIVE PEOPLE THEY MEAN TO MANUFACTURE CHIPS FOR. NOW, DOES THERE SEEM TO BE A TIMELINE BUILDING OF WHEN THAT MIGHT HAPPEN? IAN: THE OPTIMISTIC IS NOW WE HAVE MADE OUR FACTORIES GREAT AGAIN. NOW THEY ARE GOOD, AND IT WILL HELP OUR PRODUCTS AND ATTRACT OUTSIDE MONEY. THE ANALYSTS ARE SAYING, WHEN? WHAT IS HAPPENING IN THERE AND

DRUM IS, AS JOANNE SAID, THEY ARE OUTSOURCING A BIG CHUNK OF THEIR BEST STUFF AND THAT HAS TREMENDOUS MARGINS AND THE NEGATIVE IMPACT THAT IF YOU HAVE FACTORIES AND YOU AREN'T MAKING YOUR BEST STUFF THAT'S NOT HOW YOU WANT TO BE IN THE INDUSTRY. ED: WHEN I MOVED TO CALIFORNIA AT SIX YEARS AGO INTEL WAS PART OF THE LORE, THE HISTORY OF SILICON VALLEY. THEY TOOK A VERY PAINFUL DECISIONS. WHEN I POSTED ON SOCIAL MEDIA PETCO SINGER WAS DOING THIS SPECIAL PROGRAM MANY VOICED -- PAT GELSINGER WAS DOING THIS SPECIAL PROGRAM MANY VOICED HIS SUPPORT FOR HIM. WHAT WOULD YOUR QUESTION BE FOR HIM? >> HOW WOULD YOU BRING THAT GROWTH MARGIN UP?

HOW WILL YOU CONVINCE POTENTIAL FOUNDRY CUSTOMERS THEY WILL GET PRIORITY IN WAFER STARTS WHEN THEY NEED THEM? THAT HAS ALWAYS BEEN THE CHALLENGE IN YEARS PAST WHEN INTEL HAS TALKED ABOUT STARTING A FOUNDRY BUSINESS. THE CONCERN AMONG POTENTIAL CUSTOMERS WAS, HOW DO WE KNOW YOU WILL GET THE WAFER STARTS YOU PROMISED? HOW DO WE KNOW YOU WON'T PRIORITIZE YOUR OWN PRODUCTS? SECONDLY, DO THEY HAVE THE EXTENSIVE LIBRARIES THEY NEED TO BUILD CHIPS FOR OTHER COMPANIES? THAT IS A SET OF LIBRARIES THAT HAVE OBVIOUSLY BUILT UP OVER MANY MANY YEARS AND DECADES AT TSMC AND SAMSUNG. BUT IT'S NEW FOR INTEL. CAN THEY EXECUTE TO BUILD OTHER COMPANIES' PRODUCTS AS WELL AS THEY DO FOR THEIR OWN?

ED: JOANNE FEENEY OF ADVISORS CAPITAL MANAGEMENT AND BLOOMBERG'S IAN KING, THANK YOU. WE ARE JOINED BY PAT GELSINGER LIVE ON BLOOMBERG TELEVISION AND RADIO. PAT, THANK YOU FOR YOUR TIME. WE WERE JUST TALKING ABOUT HOW YOU MADE PAINFUL DECISIONS THAT SHOWED UP AS IMPAIRMENT CHARGES AND WILL REFLECT ON THE BOTTOM LINE. CAN I ASK IF THAT'S IT NOW? THAT THE ACTIONS ARE TAKEN AND NOW YOU HAVE LINE OF SIGHT ON WHAT YOU WANT TO DO OR WILL THERE BE MORE RESTRUCTURING TO COME? PAT: WE WORKED VERY HARD THIS QUARTER TO GET THIS DONE. THE PEOPLE ACTIONS, THE RESTRUCTURING CHARGES, THEY WERE LARGELY FINISHED THIS QUARTER. IT WAS A CHALLENGING QUARTER THAT WAY.

BUT TO DELIVER BETTER THAN EXPECTED RESULTS IF WE ELIMINATE ONE TIME CHARGES AND TAKE GUIDANCE UP FOR Q4. I'M PROUD OF OUR TEAM BEING ABLE TO DO BOTH THOSE THIS QUARTER. SOME OF THE MOST DIFFICULT RESTRUCTURING CHARGES MAY BE IN THE HISTORY OF INTEL SINCE OUR MEMORY MICROPROCESSOR DECISION ALMOST FOUR YEARS AGO. GETTING THAT DONE AND STILL BEATING RESULTS AND TAKING THE GUIDE UP. IT WAS A VERY SIGNIFICANT QUARTER FOR OUR TEAM TO EXECUTE. I AM VERY PROUD OF THEIR DISCIPLINE AND RESULTS. ED: THE INVESTOR BASE IS A CHEERING YOU ON THE REACTION OF YOUR STOCK AFTER HOURS. A LOT OF THAT SEEMS TO BE A FOCUS ON WHAT YOU WERE GUIDING TO THE FINAL THREE MONTHS OF THIS YEAR. AWAY FROM THE FINANCIALS AND

NUMBERS, CAN YOU TALK ABOUT THE PRODUCT BUSINESS AND FOUNDRY BUSINESS THAT GAVE YOU CONFIDENCE IN THAT GUIDE? PAT: IF WE TAKE IT APART A LITTLE BIT, THE CLIENT BUSINESS, WE HAVE LAUNCHED OUR LUNAR LAKE PRODUCT, THE SECOND GENERATION OF RA IPC. THE AI PC CATEGORY IS VERY SOLID. WE WILL LAUNCH THE COMMERCIAL VERSION OF THAT INTO WHAT WE BELIEVE IS A GOOD MARKET FOR A WINDOWS REFRESH CORPORATE REFRESH CYCLE. WE SEE MORE STRENGTH IN THE AI PC CATEGORY OVERALL WITH A STRONG CASE IS USE CASES AND ISVS BRINGING A MORE USE CASES TO THE MARKETPLACE. A DATA, BETTER QUARTER ON QUARTER THAN PEOPLE PROJECTED FOR THE BUSINESS AT A STRONGER PRODUCT LINE WITH OUR PRODUCTS IS STARTING TO RAMP. FINALLY ON THE INTEL FOUNDRY QUARTER ON QUARTER GROWTH IN

THAT AREA. AND A STRONG PIPELINE OF EXTERNAL CUSTOMERS. WE ANNOUNCED AMAZON AND TWO OTHER 18 BIG CUSTOMERS FROM ADDITIONAL ADVANCED PACKAGING CUSTOMERS. WE ARE SEEING THAT BUSINESS COME TO LIFE. IT'S A LONG TERM BUSINESS. WHEN PEOPLE MOVE DESIGNS IT TAKES SEVERAL YEARS FOR MAJOR DESIGNS TO MOVE INTO FOUNDRIES. WE HAVE NOW BEEN AT IT A COUPLE YEARS AND WE ARE SEEING THE RESULTS OF THE HARD WORK. GETTING BACK TO COMPETITIVE PROCESS TECHNOLOGY WITH 18 IN, A VERY GOOD QUARTER OF OPERATIONAL RESULTS. ED: WE HAVE A QUESTION FROM THE CEO AND FOUNDER OF HUGGING FACE. HE MAKES THE POINT THAT ON HIS PLATFORM THERE ARE MANY MORE SMALLER MODELS NOW AVAILABLE. THAT LEADS HIM TO HAVE A QUESTION FOR YOU ABOUT INTEL'S PLACE WAS AT THE ON DEVICE A

TREND WE ARE SEEING WITH AI AND HOW WE WILL SEE MORE ON DEVICE AI USE? PAT: AS YOU THINK ABOUT THE MODELS, WE SEE IT MOVING FROM THE TRAINING PHASE, TRILLIONS OF PARAMETERS, TO THE INFERENCING PHASE. IN THE INFERENCING PHASE MORE OF IT WILL HAPPEN FOR A DATA CENTER CUSTOMERS AT SMALLER MODELS WILL BE RETRAINED WITH ENTERPRISE'S OWN DATA. A LOT WILL JUST RUN. IT WILL BE PLUS AN ACCELERATOR. THEN THE EDGE USE CASES AND A IPC USE CASES. I CALL THIS THE THREE LAWS OF THE EDGE. THE LAWS OF PHYSICS, THE SPEED OF LIGHT. IF I HAVE TO GO TO THE CLOUD, I HAVE TIME. SECOND IS THE LAW OF ECONOMICS. IT IS CHEAPER TO RUN IT ON MY DEVICE. SECOND, -- FINALLY, THE LAWS OF

THE LAND. MY DATA ON MY DEVICE IN MY DATA CENTER. WE SEE IT MOVING FROM A CLOUD TRAINING ROLE TO AN EDGE ROLE INFERENCING FOR THE FUTURE. ED: THEREFORE, I HAVE TO ASK YOU ABOUT YOUR AI ACCELERATOR. IT DID NOT GET THE TRACTION YOU HOPED. YOU WON'T BE MAKING THE TARGET OF THE $500 MILLION IN SALES FOR THIS FISCAL YEAR, THIS CALENDAR YEAR. WHY? IS IT A USE CASE ISSUE THAT DATA CENTER OPERATORS AREN'T LOOKING AT IT OR SOMETHING ELSE? PAT: TWO FACTORS. ONE, WE HAVE THREE COMING OUT, SO THERE IS MORE ENTHUSIASM FOR THE NEXT GENERATION OF A PRODUCT WE ARE NOW STARTING TO RAMP. SECOND IS SOFTWARE. THE SOFTWARE USE CASES, THE AI WORLD HAS MOVED VERY RAPIDLY AT INNOVATING VERY QUICKLY. THE ROBUSTNESS AND COMPLETENESS

OF THE SOFTWARE STACK HAS NOT BEEN AS GREAT. IT IS AN ACCELERATOR, NOT A FULL REPROGRAMMABLE GPU. IT MAKES SOME OF THE SOFTWARE PORTING AND OPTIMIZATION MORE DIFFICULT. OBVIOUSLY, AS WE GET MORE RUNNING, WE SOLVE THE SOFTWARE PROBLEMS. SECONDLY, IT IS TO MOVE TO A COMPLETE GPU CAPABILITY, WHICH WE WILL BE DOING OUT IN TIME. IS THAT DEVELOPMENT EFFORT IS ALSO WELL UNDERWAY. WE FEEL WE HAVE A SOLID POSITION. THE MORE -- WORLD IS COMING TO MORE ON PA AND USE CASES. SUCCESS IS RAMPANT IN 25. ED: WE ARE LIVE WITH THE INTEL CEO PAT GELSINGER. ARM AND QUALCOMM, TWO OF YOUR PEERS, ARE INTERESTED IN BUYING INTEL. PAT: THERE HAS OBVIOUSLY BEEN RUMOR AND CHURN IN THE INDUSTRY, AND IT INDICATES HOW IMPORTANT

INTEL IS TO SEMICONDUCTORS AND HOW IMPORTANT THE SUPPLY CHAINS ARE FOR THE WORLD. WE DON'T FEEL ANY OF THE RUMORS AS PARTICULARLY EMERITUS. -- PARTICULARLY MERITOUS. WE LAID OUT A STRATEGY AND AFFIRMED IT WITH OUR BOARD OF THE DIRECTORS. WE HAVE TAKEN STEPS THIS QUARTER, RESTRUCTURING, GETTING COSTS WHERE THEY NEED TO BE. WE HAVE CAPACITY TO GO ON A JOURNEY WE LAID OUT TO PRODUCE SUSTAINABLE PROFITABILITY AND RESULTS AND SHAREHOLDER RETURN. WITH THAT I AM COMMITTED. THE TEAM IS COMMITTED. WE HAVE BOARD SUPPORT FOR THE STRATEGY WE LAID OUT AND Q3 SHOWS IT IS EXACTLY WHAT WE WILL DO. ED: I HAVE BEEN TRYING TO HELP OUR AUDIENCE UNDERSTAND INTEL'S CURRENT AND HISTORIC BUSINESS. THE PRODUCTS IT ALSO FOUNDRY.

YOU SAID 2026 IS WHEN THIRD-PARTY CUSTOMERS THAT SHOW UP. CAN YOU OUTLINE THE PATH TO THAT? WHAT DO YOU WANT TO HOLD YOURSELF TO FOR NEXT YEAR DEVELOPING THE BUSINESS AS A STANDALONE UNIT? PAT: GREAT QUESTION, ED. WE HAVE SEEN THAT ALREADY EMERGE. AT THIS QUARTER, WE SAW QUARTER ON QUARTER GROWTH OF THE EXTERNAL FOUNDRY BUSINESS, LARGELY DRIVEN BY SOME EARLY PACKAGING DESIGN WINS, ADVANCED PACKAGES, SORT OF A FASTER ON-RAMP. BUT ULTIMATELY, IT'S BECOME IN A WAY FOR A FACTORY FOR THE INDUSTRY. THREE MAJOR DESIGN WINS THIS QUARTER. ONE WAS AMAZON AND TWO OTHER COMPUTE USE CASES. WE WILL BE UPDATED, THE MARKET, AS WE WIN MORE CUSTOMERS.

DESCRIBING THE LIFETIME DEAL VALUE OF THOSE TO THE MARKETPLACE AS WELL. WE WILL GIVE SOME BREADCRUMBS ALONG THE WAY. BUT IT TAKES A COUPLE OF YEARS FOR PEOPLE TO MOVE THE DESIGNS. A YEAR TO DESIGN IT. A YEAR TO BRING IT INTO PRODUCTION. UNTIL IT STARTS TO RAMP IN THE MARKETPLACE. KEY MILESTONES FOR 18 A AS CUSTOMERS BEGIN DESIGN CYCLES. THE DESIGN TOOLS. THE DESIGN LIBRARIES ARE BEING MOVED OVER TO 18 A. IT IS REALLY NOT UNTIL 26 THAT THE RESULTS START TO REALLY HELP INTEL PRODUCTS AND THEN 26, 27 UNTIL WE START TO SEE MEANINGFUL VOLUMES EXTERNALLY. ED: WE ARE DAYS AWAY FROM AN ELECTION IN THIS COUNTRY AND I AM PARTICULARLY INTERESTED IN YOUR ASSESSMENT AND PLANNING

FOR WHAT MIGHT HAPPEN TO THE CHIPS ACT PROGRAMS. I DON'T EXPECT YOU TO KNOW WHAT HAPPENED -- WHAT WILL HAPPEN IN THE ELECTION BECAUSE YOU DON'T HAVE A CRYSTAL BALL. FORMER PRESIDENT TRUMP HAS SORT OF MADE DISPARAGING REMARKS ABOUT PRESIDENT BIDEN'S ECONOMIC AGENDA. HOW ARE YOU PLANNING FOR THAT? PAT: THREE PERSPECTIVES. NUMBER ONE, THE CHIPS ACT WAS A BIPARTISAN ACT WITH STRONG SUPPORT FROM BOTH SIDES OF THE AISLE. 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.

IT IS WELL OVER TWO YEARS AT THIS POINT. I HAVE INVESTED $30 BILLION IN CAPITAL, AND WE SAW ZERO DOLLARS OF CHIPS GRANTS. WE BELIEVE THAT HAS BEEN TOO SLOW, AND WE ARE FRUSTRATED. WE HAVE TAKEN IT OUT OF OUR FINANCIALS FOR THE YEAR. THAT SAID, IT IS ALSO THE INVESTMENT TAX CREDIT WE ARE SEEING THAT IS MUCH LARGER THAN THE GRAND PORTION OF THE CHIPS ACT. THAT IS NOW LAW. IT WILL BE BENEFICIAL. CLEARLY, I THINK WHOEVER WINS THE ELECTION, THE IMPORTANCE OF THIS INDUSTRY, THE IMPORTANCE OF REBUILDING THE SUPPLY CHAIN AND MANUFACTURING, IS WELL SUPPORTED, AND INTEL, AS A DESIGNER, R&D, AND MANUFACTURER, IS UNIQUE IN THE UNITED STATES AND OVERALL STRUCTURE OF THE INDUSTRY, AND WE EXPECT THE BROAD SUPPORT OF THE

ADMINISTRATION REGARDLESS OF WHICH PARTY WINS AS A RESULT. ED: TWO QUARTERS AGO YOUR CFO TOLD ME YOU WERE TWO OVER INDEXED TO CPU AND WE KNOW WHAT HAPPENED. YOU MAKE PAINFUL DECISIONS IN THE QUARTER AND REDUCED HEADCOUNT BY 16,500. DO YOU HAVE THE PLAN IN PLACE? ARE YOU CONFIDENT FROM HERE? >> WE LAID OUT A CLEAN SHEET PROGRAM TO BENCHMARK THE BUSINESS. WE TOOK A CONSERVATIVE VIEW OF THE FUNDING PLAN, AS WE CALL IT INTERNALLY. SAYING WE ARE TAKING A MODEST GROWTH OUTLOOK AND BUILDING OUR COST STRUCTURE TO THAT VERY MODEST OUTLOOK. NOW WE HAVE ALSO BUILT A LOT OF OPTIONS TO SCALE UP INTO THE BUSINESS. WE HAVE CAPACITY WE CAN SCALE INTO IF NECESSARY. WE HAVE MADE A SMALLER, MORE EFFICIENT COMPANY ABLE TO

EXECUTE WITH MORE AGILITY AND SPEED AS WELL. WE FEEL WE ARE WELL SET UP FOR THE FUTURE. IT WAS A CHALLENGING QUARTER FOR ME, FOR THE COMPANY. BUT WE FEEL WELL SET UP FOR THE FUTURE AND GOOD OPERATIONAL RESULTS THAT EXCEEDED MARKET EXPECTATIONS. WITH INCREASED GUIDANCE FOR Q4, WE FEEL LIKE WE ARE IN A VERY SOLID POSITION. ED: INTEL CEO'S GELSINGER THANK YOU FOR JOINING US ON BLOOMBERG TECHNOLOGY. PAT: THANK YOU, ED, LIKE ALWAYS. ED: LET'S GET MORE REACTION TO THE CONVERSATION NUMBER THE END THE BIG EARNINGS THIS THURSDAY. THE BLOOMBERG INTELLIGENCE ANALYST JUST POSTED ITS REACTION ON THE BLOOMBERG TERMINAL SAYING DETAILS ON TWO NEW ANA CUSTOMERS WILL BE KEY TO OFFSET PAINS FROM THE THIRD

QUARTER, PAINS WE HAVE BEEN THROUGH EXTENSIVELY. GO DEEPER INTO YOUR THESIS AND REACTION TO WHAT PAT SAID. >> THERE ARE A LOT OF POSITIVES IF YOU WANT TO TAKE A POSITIVE VIEW. THAT THEY CAME IN SLIGHTLY BETTER. BUT TO BE FAIR, THEY CAME IN SLIGHTLY BETTER THAN FEARS ON MOST TYPE LINES, Q3, Q4. THE FREE CASH FLOW LINE IS MOVING IN THE RIGHT DIRECTION. AND AT THE SAME TIME, WE THOUGHT GROSS MARGIN FOR WAS SOMETHING THAT ALREADY RESET LAST QUARTER. WE HAVE MASSIVE SIGNIFICANT IMPAIRMENT CHARGES. YES YOU CAN IGNORE THAT. THE GROSS MARGIN WAS BETTER THAN ANTICIPATED THERE. BUT HOW MANY TIMES WILL WE DRAW A CLEAN SHEET AND GO FROM THERE?

ED: AI ACCELERATORS, THE SHIP EVERYBODY TALKS ABOUT, GAUDI GETTING TRACTION. KUNJAN: THAT IT WAS ONE OF THE NEGATIVES OF TODAY. THE AI STORY DOESN'T GET ANY BETTER. BASED ON THE IMPLIED GUIDES IT SEEMS THAT YOUR LOSS HAS NOT STOPPED. AND A FLAP DIED FROM INTEL. IT TELLS ME IT HASN'T STOPPED YET. ED: CHECK HIS RESEARCH OUT ON THE BLOOMBERG TERMINAL. FINAL WORD WITH BLOOMBERG SENIOR EXECUTIVE EDITOR TOM GILES WHO HAS LED THE NEWSROOM A LONG TIME. INTERESTING INTERVIEW, PAT GELSINGER COMING CLEAN THE ODD HOW HARD IT IS BUT HE STILL PROJECTS CONFIDENCE. TOM: I LOST YOU. MY OVERALL TAKE AWAY FROM THAT CONVERSATION WITH PAT WAS HE IS REALLY TRYING TO ACCENTUATE THE

POSITIVE. HE ACKNOWLEDGES IT'S DIFFICULT TO CUT 16,500 JOBS. THEY MADE VERY HARD DECISIONS IN THE QUARTER. AT THE SAME TIME, HE IS BEING AS HONEST AS HE COULD ABOUT THE AI OUTLOOK. YOU NEED TO HAVE, IF YOU ARE A CHIPMAKER RIGHT NOW, YOU NEED TO BE ABLE TO SELL AN AI STORY, AND INTEL IS JUST NOT DOING THAT NOW. ED: IAN KING HAS BEEN SENDING HEADLINES ON THE TERMINAL THAT THIS IS DIFFICULT, BUT THEY DEMONSTRATED PROGRESS. TOM GILES, THANK YOU. THIS WAS PART OF A MEGA EARNINGS PERIOD WHEN IT COMES TO MEGA CAPS. INTEL OF EIGHT PERCENTAGE POINTS. APPLE, THE WORLD'S MOST VALUABLE COMPANY, AND AMAZON ALSO REPORTED. BUT MOVEMENT IN THERE AFTER I

WOULD -- AFTER HOURS STOCK WAS MORE MUTED AND DIFFICULT. INTEL OF 8%. IT IS INTERESTING. I DON'T KNOW IF INVESTORS WILL STAY WITH THE MOMENTUM OF THIS STOCK. IF THEY BELIEVE IT I GUESS TOM GILES DIGESTS WHAT PAT GELSINGER TOLD US. TOM: ABSOLUTELY. IT'S URGED A LOT. IT HAS COME BACK A LITTLE BIT. I THINK THE MARKET, AS REALITY SINKS IN THEY HAVE A TOUGH ROW TO HOE AHEAD. THERE JUST WASN'T ENOUGH IN THE STORY TO SAY THAT INTEL IS IN THE CLEAR. HE THOUGHT PAT WAS UPFRONT ABOUT THAT AS MUCH AS HE TRIED TO ACCENTUATE HOW GOOD THINGS ARE GOING. ED: TOM GILES SENIOR EXECUTIVE EDITOR OF BLOOMBERG TECHNOLOGY.

THIS DOES IT FOR THIS SPECIAL EDITION OF BLOOMBERG TECHNOLOGY.

Interview With Intel CEO Pat Gelsinger (Full Special)

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Bloomberg Technology

Intel's Earnings Report and Future Outlook

Intel's CEO Pat Gelsinger will join for a live interview after the company's earnings report, which slightly exceeded fourth-quarter revenue estimates.

The report indicates Intel's efforts to cut costs and retrench, but there is still a lack of momentum in AI chip orders.

Investors are relieved, but Gelsinger has high expectations to meet moving forward.

Intel's Recent Challenges and Strategic Changes

Intel has faced a painful third quarter, with billions in impairment charges and a headcount reduction, as they resize the company for lower expected revenue growth.

Pat Gelsinger plans to run the PC and data center chip divisions as distinct units while managing overall finances.

The company's progress in cost-cutting and outsourcing has been significant, but they still face challenges in executing their manufacturing strategy and improving gross margins.

Intel's Struggle to Regain Leadership in Semiconductors

Intel's stock has risen, but the company is struggling to gain traction in the high-performance chip market, lagging behind NVIDIA and AMD.

The company's historic advantage in manufacturing has reversed, leading to a loss of market share and declining margins.

Intel's plan to outsource production and attract outside investment has raised questions about its timeline for recovery and regaining industry leadership.

Intel's Foundry Business and Customer Assurance

Intel's foundry business faces challenges in assuring potential customers of priority wafer starts and building extensive chip design libraries.

Pat Gelsinger, Intel's CEO, has implemented significant restructuring and achieved better-than-expected results, boosting investor confidence.

The company's product launches, especially in the AI PC category, and quarter-on-quarter growth in the foundry business are driving positive momentum.

Intel is seeing positive results from its advanced packaging customers, including Amazon, and is focused on long-term business growth.

The company is transitioning from cloud training to edge role inferencing for AI, driven by the laws of physics, economics, and data privacy.

Intel's AI accelerator has faced challenges in gaining traction, but the company is ramping up the next generation of the product and working on software optimization and GPU capability for future success.

Intel's Strategy and Importance in the Semiconductor Industry

Intel is restructuring and focusing on sustainable profitability, with a commitment from the team and board support for their laid-out strategy.

The company is seeing growth in its external foundry business, with major design wins from customers like Amazon.

Intel anticipates that meaningful external volumes will ramp up by 2026 and 2027, while expressing disappointment at the slow dispensing of funds from the CHIPS Act.

Intel has invested $30 billion over two years with no chip grants, leading to frustration, but the investment tax credit is now law and expected to provide significant benefits.

The company has made painful decisions, including a 16,500 headcount reduction, and is now focused on a conservative growth outlook with options to scale up.

Despite challenges, Intel's operational results have exceeded market expectations, and the company is confident in its solid position for the future.

Intel is facing ongoing challenges, with job cuts and a lack of a convincing AI story hurting its recovery.

Pat Gelsinger, the CEO, is trying to project confidence and highlight positive aspects, but the company's progress in the AI sector is not sufficient.

The market's reaction to Intel's earnings report has been muted, raising questions about the stock's future momentum.