Intel Shrugs Off 'Insignificant' Arm As Q3 Earnings Beat Smokes Expectations
There has been a lot of talk about Arm encroaching onto x86 territory (more so than it already has), especially on the heels of Qualcomm unveiling its Snapdragon X Elite platform, which is perhaps the biggest threat to x86's dominance to date. Don't tell that Intel CEO Pat Gelsinger, though. While addressing Intel's latest earnings, Gelsinger downplayed Arm's threat on the PC ecosystem as "pretty insignificant" while championing Intel's momentum heading into Meteor Lake and beyond.
We'll circle back to the Arm comments in a moment, but first let's discuss how Intel performed during the third quarter. Intel's Q3 revenue tallied $14.2 billion, which is down 8% year-over-year from $15.3 billion. Intel's profit took a bigger year-over-year hit, declining 71% to $297 million ($0.07 per share), compared to $1.02 billion ($0.25 per share) in the same quarter a year ago.
So why is Intel celebrating? Times are tough all around as the global economy continues to recover from the pandemic, and Intel's performance actually came out ahead of expectations. On a non-GAAP basis, Intel posted quarterly earnings of $0.41 per share. That smoked the consensus estimates of $0.21 per share.
"We delivered a standout third quarter, underscored by across-the-board progress on our process and product roadmaps, agreements with new foundry customers, and momentum as we bring AI everywhere," Gelsinger said in a statement. "We continue to make meaningful progress on our IDM 2.0 transformation by relentlessly advancing our strategy, rebuilding our execution engine and delivering on our commitments to our customers."
Intel CFO David Zinsner echoed the sentiment, saying the chip maker's "results exceeded expectations for the third consecutive quarter, with revenue above the high end of our guidance and EPS benefiting from strong operating leverage and expense discipline."
Declines to Intel's Client Computing Group was limited to just 3%, with the segment pulling in $7.9 billion. Intel's Data Center and AI (DCAI) dropped 10% to $3.8 billion, while its Network and Edge (NEX) division fell 32% to $1.5 billion. Meanwhile, its Mobileye and Intel Foundry Services both saw big gains, to the tune of 18% ($530 million) and a whopping 299% ($311 million), respectively.
Of course, Intel never misses an opportunity to trumpet being on track to hit five nodes in four years as it looks to regain transistor and power performance leadership by 2025. In addition, Intel boasted achieving a critical milestone on its Intel 18A node with the release of its 0.9 product design kit (PDK), as well as announcing one of the industry's first glass substrates for next-gen packaging.
"This breakthrough achievement will enable the continued scaling of transistors in a package and advance Moore’s Law to deliver data-centric applications," Intel said.
There is quite a bit going on at Intel—continued investments in chip plant expansions, installing the world's first high-NA EUV tool for commercial use by the end of the year, securing a "major customer" to both Intel 18A and Intel 3 "with a meaningful pre-payment," AI investments, and so forth.
Looking ahead, Intel anticipates revenue of $14.6 to $15.6 billion in the fourth quarter, which would represent an 8% year-over-year increase at the high end. It also anticipates a huge 193% year-over-year gain in earnings per share, to $0.44.
Investors reacted positively to Intel's performance and future outlook, sending shares of the company up by as much as 8% during aftermarket trading hours. So it's fair to say that Intel is not the only showing confidence in its current performance and roadmap.
Intel Unfazed By Arm As Meteor Lake, Arrow Lake, And Lunar Lake Loom
While Intel is in a good spot going forward, there's the looming threat of Arm. It was recently reported that both AMD and NVIDIA are being spurred by Microsoft to develop their own Arm-based CPUs to be used in Windows PCs. Combined with Qualcomm's Snapdragon Elite X announcement, there's the potential for a major shift in the PC ecosystem. However, Gelsinger says history is on Intel's side.
"I think what you're seeing is the industry is excited around the IPC And as I declared this generation of IPC at our innovation conference, you know, a couple of months ago, you know, we're seeing that materialize and you know Customers, competitors seeing excitement around that, you know, Arm and windows client alternatives, you know, generally they've been relegated to pretty insignificant roles in the PC business," Gelsinger said during an earnings call.
"And we take all competition seriously, you know, but think history is our guide here. You know we don't see these as potentially being all that significant overall," Gelsinger added.
He went on to say that Intel has "strong momentum" with its roadmap pegging Meteor Lake for a December launch, followed by Arrow Lake and Lunar Lake next year. He also referenced Panther Lake, as well as the expectation of there being over 100 million x86 AI-enhanced PCs in the marketplace over the next two years.
But what if Arm takes off in a big way and becomes not-so-insignificant? Gelsinger says Intel is in position to benefit from that scenario playing out, too.
"Thinking about other alternative architectures like Arm, We also say wow, what a great opportunity for our foundry business. And you know, given the results I referenced before, we see that as a, you know, a unique opportunity that we have to participate in the full success of the Arm ecosystem," Gelsinger added.
It's going to be fun to watch and see how this all plays out.