With an Intel recovery underway, all eyes turn to its foundry business

Intel’s third-quarter earnings beat Wall Street expectations on Thursday. The results were buoyed by a sales increase coupled with deeper cuts and multiple, significant investments over the past two months, as CEO Lip-Bu Tan looks to turn around the struggling semiconductor giant.

Intel’s top line results and net income of $4.1 billion offer a much rosier picture 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 U.S. government.

Intel added $20 billion on the balance sheet during the third quarter, the company announced Thursday during its third-quarter earnings presentation stock increases. This growth was largely due to three major investments in the company in the past three months.

In August, SoftBank invested $2 billion. A few days later, the US government took an unprecedented 10% equity stake in Intel. The company has so far received $5.7 billion of the planned $8.9 billion from the US government. 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 position us well to continue executing our strategy with confidence,” Tan said on the company’s earnings call. “In particular, I am humbled by the confidence that President Trump and his secretary have [Howard] Lutnick placed in me. Their support underlines Intel’s strategic role as the only US-based semiconductor company with advanced logic. [research and development] and production.”

The company also received $5.2 billion from the September 12 sale of its ownership stake in Altera, a hardware company it has owned since 2015. It also sold its stake in Mobileye, an autonomous driving technology company.

Intel grew its third-quarter revenue by $800 million to $13.7 billion, up from $12.9 billion. Intel had a net profit of $4.1 billion in the third quarter, a sharp turnaround from the $16.6 billion loss it reported in the same period a year ago.

The foundry industry

Despite the strong quarter, there weren’t many details about what will happen next with Intel’s foundry business, which makes custom chips for customers. The company has failed from the start and has been a focus of Tan, who initiated significant layoffs in his foundry operations this summer.

The company appears to be a priority of the Trump administration; An important condition for the government’s investments in Intel is the ruling that Intel will be penalized if it divests its foundry activities over the next five years.

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

Tan said Intel believes its foundry business is “uniquely positioned” to benefit from growing chip demand, but he was light on details – other than saying the company is actively engaging with potential foundry customers – and added that growth of the foundry business would remain disciplined.

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