Intel Shares Pop After Foundry Revenue Quadrupled Amid Rising Demand for AI Chips

Intel (INTC) shares jumped over 9% Friday after the tech company’s third-quarter earnings beat estimates, in part driven by gains made by Intel’s foundry business and surging interest in artificial intelligence (AI), as well as signs of a recovery in the PC market.

Intel Foundry Services (IFS), which manufactures chips for corporate and government clients, generated $311 million in revenue, a 299% increase from the same period last year. The substantial revenue growth in the third quarter shows “the meaningful progress” that the company has made with its foundry service, Intel CEO Patrick P. Gelsinger noted in the third-quarter earnings call.

“With the rise of AI and high-performance computing applications, our advanced packaging business is proving to be yet another unique advantage,” Gelsinger said, reporting that the company has seen “a surge of interest in our advanced packaging from most leading AI chip companies.”

Some of Intel’s foundry customers include Boeing (BA), Northrop Grumman (NOC), and the U.S. government, among others. Intel said it added major new clients in the quarter, and anticipates progress in its foundry business will accelerate, in what could represent an important source of growth for the company.

“More important than our standout financial performance were the key operational milestones we achieved in the quarter across process and products, Intel Foundry Services and our strategy to bring AI everywhere,” said Intel CEO Gelsinger.

Bank of America analysts said that the firm “expect[s] sales growth of 8-10% year-over-year on continued PC recovery, AI/inference adoption in servers, and foundry sales ramp.”

While PC sales were still well below their peak seen as many people worked from home during the COVID-19 pandemic, sales were on the incline from the low point in 2023. Intel also reported that earnings benefited from “expense discipline,” as the company trims costs.

“We remain on track to reducing costs by $3 billion in 2023, and we continue to see significant incremental opportunities for operational improvement as we execute on our internal foundry model,” Intel CEO Gelsinger said.