Chip maker Intel exceeded Wall Street projections for its fourth-quarter revenue and margins, citing a robust resurgence in personal computer sales, progress in its data centre division, and an expanding clientele interested in its manufacturing capabilities.

Although Nvidia continues to put intense pressure on Intel in the data centre processor market, the company’s server chip business has stabilised and the PC decline has lessened, allowing it to increase gross margins more quickly than analysts had anticipated. Executives at the corporation had cautioned that a meaningful increase in margins might not occur until far into the following year.

Following the closing bell, the Santa Clara, California-based company’s shares increased by 8%.

Additionally, the company has signed on three clients for its semiconductor contract manufacturing division, and CEO Pat Gelsinger told Reuters that he anticipates closing a deal with a fourth client before the year is up.

After double-digit percentage declines earlier this year, the decrease in global PC shipments shrank to 7% in the third quarter. According to analysts at research firm Canalys, the market is expected to rebound over the eagerly awaited holiday season.

Using LSEG data, the company estimated adjusted current-quarter revenue of between $14.6 billion and $15.6 billion, versus an expectation of $14.35 billion.

Above analysts’ projection of 32 cents, the company anticipates adjusted profit per share for the fourth quarter of roughly 44 cents.

Gelsinger’s significant production investments to support its turnaround efforts have had a negative impact on the company’s gross margin, which decreased from over 60% in 2020 to the mid-30s in the second quarter. LSEG data indicates that the third quarter’s adjusted gross margin was 45.8%, above estimates of 42.7%.

In an interview, Gelsinger said that Intel has a fourth foundry customer for its “18A” advanced manufacturing process. The company intends to begin producing “18A” in late 2024 and will make it available to clients through its Intel Foundry Services division.

“We now have three committed customers on 18A, and we expect that we will successfully conclude at least one more this quarter,” Gelsinger said.

Although he wouldn’t reveal how many chips Intel will produce for those businesses, he did add that the first has paid in advance and is “a very significant customer.”

“The next two are very meaningful, not as large as the first one,” Gelsinger added in an interview. “But now we have engagements with essentially the who’s who of foundry customers.”

During an investor conference call, Gelsinger revealed that Intel is now negotiating with six potential clients for its advanced packaging division.

“These wins are coups against TSMC,” said Glenn O’Donnell, research director at Forrester, referring to Taiwan Semiconductor Manufacturing Co (2330.TW), the world’s largest chipmaker.

LSEG data indicates that Intel’s adjusted profits for the third quarter came in at 41 cents per share, as opposed to a forecast of 22 cents. Sales dropped by 8% to $14.2 billion.

The client segment, which includes Intel’s PC division, had a 3% decline in revenue to $7.9 billion. In response to a query regarding possible Nvidia competition for PC chips—which Reuters revealed this week is expected to debut as early as 2025—Gelsinger stated during the conference call that “we don’t see these as potentially being all that significant overall.”

However, he went on to say that Arm-based PC chips would present “a great opportunity for our foundry” industry.

According to Chief Financial Officer David Zinsner, Intel anticipates a slowdown in programmable chip sales in the fourth quarter and multiple poor quarters in the upcoming year. Intel announced earlier this month that it intended to separate that division through an IPO.

10% less sales, or $3.8 billion, were made in its data centre business, which also houses its AI chip group. But according to Gelsinger, the company has noticed a spike in demand for its “Gaudi” AI processors, with supply currently not keeping up with demand.

During a conference call, Gelsinger stated that despite the crisis, Intel’s factories in Israel—which is at war with Hamas following an incident earlier this month—are “not missing a single commitment.”

(Adapted from USNews.com)