Intel exceeded expectations in the third quarter with revenue boosted by a faster-than-expected recovery in sales of PC chips. However, the weakness in its data center business reveals vulnerability in a market where users are seeking processors capable of handling AI workloads, which are predicted to grow as enterprises adopt generative AI.
Although the overall revenue dropped by 8% year over year to $14.2 billion, it still surpassed the consensus expectations of analysts, who had predicted revenue of $13.6 billion. Intel’s endpoint division, primarily focused on PC chips, generated $7.9 billion in revenue for the quarter, a slight decrease from the $8.1 billion reported in the previous year’s third quarter.
The net income fell by 71% year over year to $310 million due to lower revenue and costs related to expanding manufacturing capabilities. Intel’s investment in manufacturing capacity includes the recent opening of Fab 34 in Leixlip, Ireland, along with planned facilities in Germany and Poland, creating a leading-edge semiconductor manufacturing value chain in Europe.
On the other hand, Intel’s data center and AI division, responsible for CPUs for servers, experienced a 10% decline in revenue from $4.3 billion in the third quarter of 2022 to $3.8 billion this year. Nvidia has emerged as a formidable competitor for Intel in this market, thanks to the demand for its GPU products, which are popular for AI workloads.
Intel’s CEO, Pat Gelsinger, acknowledged the competitive pressures faced by the company. However, Intel’s position in the PC market remains strong, as indicated by the latest results, showing that the company has successfully weathered the sharp downturn experienced in late 2022 and early this year. The decline in CPU sales during that period was primarily attributed to the end of historically strong demand driven by pandemic-related quarantine periods, with laptops experiencing increased sales due to the shift towards remote work. The PC market was also affected by supply chain disruptions caused by the pandemic.
In addition to the competition in the data center market, Nvidia is also targeting Intel’s dominance in the PC CPU marketplace. The company reportedly plans to use Arm designs to create Windows PC chips. Other competitors such as Qualcomm and AMD are also preparing to enter the PC market with Arm-based CPUs.
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