Key Takeaways:
Intel Corp. is gaining a critical customer for its future manufacturing technology, announcing a partnership with Tesla Inc. just after reporting first-quarter revenue and guidance that significantly surpassed Wall Street estimates. The company also confirmed it is raising chip prices to offset rising costs.
"We are going big time into 14A," Intel CEO Lip-Bu Tan said in a post on X, referencing the company's next-generation manufacturing process that Tesla plans to use for chips powering its vehicles, robots, and future orbital data centers.
The chipmaker's turnaround appears to be gaining traction. Revenue in the first quarter grew 7.2% year-over-year to $13.58 billion, beating the $12.42 billion consensus estimate. Intel projected second-quarter revenue between $13.8 billion and $14.8 billion, well ahead of the $13.07 billion analysts expected.
The Tesla deal provides a much-needed anchor client for Intel's foundry business, a key part of its strategy to compete with Taiwan Semiconductor Manufacturing Company (TSMC). Winning manufacturing deals from major TSMC customers is crucial for Intel to justify the billions being invested in new fabs, including the Terafab complex in Texas where the Tesla chips will be made.
Intel's strategy as an integrated device manufacturer—making its own chips while also producing them for others—is a massive gamble. The foundry business, which aims to compete directly with giants like TSMC, saw revenue climb 16% to $5.4 billion. However, much of this is still from manufacturing Intel's own products.
The company's latest processors are built on its 18A node, which is technologically similar to TSMC's 2-nanometer process. While Google has committed to using Intel CPUs, Intel has yet to secure a major external customer for its 18A manufacturing services. The Tesla partnership leapfrogs to the next generation, 14A, which is planned for 2028 or later. During Tesla's recent earnings call, CEO Elon Musk said that by the time its Texas Terafab scales up, "14A will probably be fairly mature or ready for prime time." This provides a critical, long-term demand signal for Intel's most advanced future technology.
Alongside the strategic win with Tesla, Intel's core business is showing renewed strength. The 7.2% year-over-year revenue growth marks a significant shift after five quarters of decline in the last seven. The data center business was a standout, with revenue climbing 22% to $5.1 billion as demand for CPUs in artificial intelligence workloads expands beyond the GPUs dominated by Nvidia.
The decision to raise prices reflects rising input costs across the semiconductor industry. While this could pressure margins for Intel's customers, the strong forward guidance suggests the company is confident in demand for its new products, including the Core Ultra Series 3 for PCs and the Xeon 6+ for data centers. Despite the positive revenue trends, the company is still in investment mode, with its net loss widening to $4.28 billion for the quarter as it spends heavily on new fabrication plants.
This article is for informational purposes only and does not constitute investment advice.
