Why Intel CEO Pat Gelsinger Is Upbeat After Chip Maker Posts Historic Loss

Intel CEO Pat Gelsinger
The numbers are in for Intel's first quarter of 2023 and, at a glance, they look brutal (again). Intel's Q1 revenue settled at $11.7 billion, which is down 36 percent from the same quarter a year ago. But what really stands out is the staggering 133 percent year-over-year decline in net earnings. That's the largest loss in the company's storied history.

Even so, Intel CEO Pat Gelsinger shared a positive outlook on what he called a "solid first-quarter results." Looking beyond the numbers, Gelsinger stated Intel's IDM 2.0 strategy is executing like it should and is putting the company in position to continue its "transformation" and turnaround efforts.

"We hit key execution milestones in our data center roadmap and demonstrated the health of the process technology underpinning it. While we remain cautious on the macroeconomic outlook, we are focused on what we can control as we deliver on IDM 2.0: driving consistent execution across process and product roadmaps and advancing our foundry business to best position us to capitalize on the $1 trillion market opportunity ahead," Gelsinger said in a statement.

Gelsinger returned to Intel in early 2021, accepting a role as CEO to replace the outbound Bob Swan and regain process leadership that it had conceded to AMD (and, by extension, TSMC). One of his first orders of business was to implement Intel's IDM 2.0 strategy, which is essentially a three-pronged approach to drive sustained technology and production leadership.

Intel slide outlinging successes in its IDM 2.0 strategy.

That effort is ongoing and a big part of it includes hitting key milestones such as releasing five nodes in four years and remaining on track with its product roadmap. Intel says it is indeed on track to meet those specific goals, and further notes that Intel 7 is in high volume manufacturing. Likewise, Intel's Meteor Lake architecture on Intel 4 is ramping production for its client computing group and is still expected to launch in the second half of this year.

Intel slide on its other businesses performance.

This is where context comes into play when looking at the latest figures. Intel posted losses in almost every category, with Q1 revenue hitting $5.8 billion for its CCG division (down 38 percent YoY), $3.7 billion for its Data Center and AI group (down 39 percent), $1.5 billion for its Network and Edge group (down 30 percent, and $118 million for Intel Foundry Services (down 24 percent). Only its Mobileye division gained year-over-year, going up 16 percent to $458 billion.

Much of this was probably inevitable given the downturn in PC shipments, even as OEMs offer significant discounts at retail. Market research firm IDC recently pinned the slowdown on the work-at-home movement no longer softening after ballooning during the height of the pandemic.

"We exceeded our first-quarter expectations on the top and bottom line, and continued to be disciplined on expense management as part of our commitment to drive efficiencies and cost savings. At the same time, we are prioritizing the investments needed to advance our strategy and establish an internal foundry model, one of the most consequential steps we are taking to deliver on IDM 2.0," Intel CFO David Zinsner said.

Intel also pointed to numerous execution milestones, including...
  • Launched 4th Gen Intel Xeon Scalable processors with Intel vRAN Boost
  • Announced 5th Gen Intel Xeon Scalable processor, Emerald Rapids (expected later this year)
  • Announced Intel's AI hardware accelerators run inference faster than any available GPU
  • Taped in Habana Gaudi 3 AI accelerator
  • Introduced 13th Gen Intel Core mobile processor family, led by the first 24-core laptop processor and world's fastest mobile processor
  • Launched 13th Gen Intel Core vPro platform powered by the full lineup of 13th Gen Intel Core processors
  • Delivered and supplied the first multi-chip package prototypes created under US Depart of Defense's state-of-the-are heterogeneous integrated packaging (SHIP) program BAE systems six quarters ahead of schedule
While the quarter's revenue and profit numbers were rough for sure, Intel's milestones and outlook resonated with investors who share confidence in the company's long-term plans and recovery. Shares of Intel are up nearly 7 percent so far today. Despite the heavy losses, earnings actually came in ahead of expectations.

Looking just down the road, Intel anticipates its Q2 revenue settling somewhere between $11.5 billion to $12.5 billion.