A smartphone with a displayed Intel logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File photo
(Reuters) -Intel forecast fourth-quarter revenue above Wall Street estimates on Thursday, optimistic about a healthy rebound in the personal computer market as it readies new chips to handle artificial intelligence on laptops.
The company also has secured three customers for its chip contract manufacturing business, with Chief Executive Pat Gelsinger telling Reuters he expects to close a deal for a fourth customer before year's end.
Shares of the Santa Clara, California-based company rose as much as 8% after the closing bell.
PC sales and manufacturing contracts are increasing after a post-pandemic slump that pushed Intel's margins to their lowest in decade. While the company still faces a stiff challenge in its data center business from Nvidia , other challenges have seemed to ease.
The decline in global PC shipments narrowed to 7% in the third quarter after double-digit percentage dips earlier this year, and the market is set to return to growth during the highly anticipated holiday season, analysts at research firm Canalys said.
The company forecast adjusted current-quarter revenue of about $14.6 billion to $15.6 billion, compared with an estimate of $14.35 billion according to LSEG data.
The company expects fourth-quarter adjusted profit per share of about 44 cents, above analysts' estimate of 32 cents.
Heavy manufacturing investments to support Gelsinger's turnaround plans have taken a toll on the company's gross margin, which shrank to the mid-30s in the second quarter from over 60% in 2020. The adjusted gross margin came to 45.8% in the third quarter, compared with estimates of 42.7% according to LSEG data.
Gelsinger said in an interview that Intel has a fourth foundry customer for its advanced manufacturing process called "18A," which it plans to offer customers out of its Intel Foundry Services business.
"We now have three committed customers on 18A, and we expect that we will successfully conclude at least one more this quarter," Gelsinger said.
He declined to say how many chips Intel will manufacture for those companies, but said the first has pre-paid and is "a very significant customer."
"The next two are very meaningful, not as large as the first one," Gelsinger added. "But now we have engagements with essentially the who's who of foundry customers."
With new customers lined up, Intel is positioned to become "a credible leading-edge foundry supplier to the top fabless companies," said Kinngai Chan, analyst at Summit Insights Group.
Intel reported adjusted profits of 41 cents per share in the third quarter, compared to an estimate of 22 cents according to LSEG data. Revenue fell 8% to $14.2 billion.
Revenue in the client segment, which houses Intel's PC business, fell 3% to $7.9 billion. Sales at its data center business dropped 10% to $3.8 billion.
Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker, said earlier this month end-user demand for PCs and smartphones had started showing signs of stabilization, adding that inventory controls were "more healthy than we thought."
(Reporting by Chavi Mehta in Bengaluru and Max A. Cherney in San Francisco; Editing by Krishna Chandra Eluri and Richard Chang)
