Intel earnings: The best is yet to come, analyst says

Intel reporting third quarter earnings moments ago, the company beating revenue estimates coming in at $13.28 billion. Q3 data center and AI revenue also coming in above expectations at $3.35 billion. For more, we're bringing in Patrick Moorhead, founder and CEO and chief analyst at Moor Insights and Strategies. So Patrick, I mean, expectations were certainly low coming into this print, but we're seeing the stock up double digits after hours. What's your biggest takeaway here? Biggest takeaway is solid operational performance with a solid guide. The street is definitely reacting to that $260 million beat on revenue. And while EPS is a little bit harder to get underneath because there were some impairment charges that went into non-gap EPS gross margins, when you adjust for all that as in the forties, and you know, the street was expecting a 3 cent loss on non-gap EPS, which turned into a 15, 17 cent gain depending on how you want to do the calculations. And I think any good news was good news for this stock that is trading well below book value. And I'm reading in the release that those restructuring charges meaningfully impacted Q3 profitability as we took important steps towards our cost reduction goal. So what's the through there? When you think about these restructuring charges, when you think about all the cost cutting that this company has been doing to get this business back on track, how should investors be looking at all of that in totality? Yeah. So the company is still spending a lot on investing in go forward profitable businesses, but they are taking the right steps to reduce overlaps. And, you know, when you're a company that could do no wrong for 20 years, and, you know, you get into a speed bump, you have to make some pretty drastic changes. That's exactly what the company's doing. And for this quarter, right, they took about 15.9 billion in impairments, 3.1 made its way into non-gap EPS. But those who are looking for a long-term opportunity, there literally is no other way than going up. The number one factor that I look at is the five nodes in four years. So that's the ability for the company to manufacture not only its own chips more efficiently, but also to better compete with TSMC. And then the 18A node, which is the turnaround node at a time when TSMC is raising prices and also coming under regulatory scrutiny is all good for Intel. The data center and AI group number was up, thanks to Xeon, not necessarily an AI GPU, which is coming in 25 or 26. But the best is really yet to come for this company and requires some patience and belief. So how does this report set up the next phase of Intel, especially its positioning within the chip space? You mentioned some of those competitors, AMD, another one that I've been hearing about as well, taking some of that market share away from Intel. Right. 2025 and the beginning of a 26 is really going to be the ultimate proving ground for Intel. They're going to be on their latest node with their latest devices. And this latest node should be much higher performance at a much lower cost at scale. And then you're to me, you're truly going to see the capabilities on the CPU side. And then also in 2025, Intel brings out a new data center AI GPU. Intel has a data center accelerator, very similar to the ones that the hyperscalers are producing. But to compare side to side with AMD, we're going to have to wait for again till 2025. In a chip company, these turnarounds, they take five years and we're almost into the fifth year here under Pat Gelsinger's leadership. And even though the stock has been battered and disrespected, it is setting the ground for the ultimate showdown with AMD and Intel in 2025 and the first half of 2026. You mentioned Pat Gelsinger and there's been a lot of talk about this company and really if he's the right man for the job. Do you think this report, does it give you the confidence that he's doing the right things to get this company back on track? It does give me confidence and I think it should give investors confidence. I mean, the company can have no mistakes. The thing that I always get back to is, OK, is it the right strategy or the wrong strategy that Intel's on, which is fundamentally to keep manufacturing and design in the same place. I am absolutely a believer they must be in the same place. We look back to AMD when it split off its manufacturing, which became GlobalFoundries. That was a nightmare for both companies and it was too, too much, too early. And then if you're questioning Pat as the leader, well, who else, right? If you believe in the strategy, then who else coming in? And I think this earnings announcement will pull back any questions or discussions about how Pat is doing right now. Now, he has to continue it quarter after quarter after quarter to keep this going. But I think this quarter and particularly the guide is a very good sign. Patrick Moorhead, thank you so much. Appreciate your insights. And tune in tomorrow morning. Yahoo Finance Executive Editor Brian Sazi will have an interview with Intel CEO Pat Gelsinger in the 9 o'clock hour. You won't want to miss it.