Intel’s Q3 results exceed expectations with a 7% share rise while restructuring and AI challenges continue. Learn more about Intel’s fiscal journey.

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Intel Corporation’s shares rose 7% in extended trading on Thursday after the company reported better-than-expected Q3 earnings and provided promising guidance for the next quarter.

The chipmaking giant, amid a massive restructuring effort, showed resilience despite significant market challenges.

Q3 Financial Highlights

Intel’s fiscal third-quarter results, which ended on September 28, outperformed analysts’ expectations set by LSEG:

Although revenue declined by 6% year over year, Intel brought in $13.28 billion, above the $13.02 billion expected by analysts.

The company recorded a net loss of $16.99 billion, or $3.88 per share, compared to net earnings of $310 million, or 7 cents per share, during the same quarter last year.

Intel incurred $2.8 billion in restructuring charges as part of its cost reduction plan and $15.9 billion in impairment charges linked to accelerated depreciation for Intel 7 process node manufacturing assets and goodwill impairment in the Mobileye unit.

Restructuring Efforts and Workforce Reduction

Intel is undertaking one of the most significant restructuring efforts since its founding in 1968.

CEO Pat Gelsinger emphasized the importance of this transformation during a conference call with analysts, citing the company’s goal to position itself for a competitive future.

In a filing, Intel revealed that its board’s audit and finance committee approved a series of cost and capital reduction activities on October 28, including plans to lower the headcount by 16,500 employees and to reduce its real estate footprint.

Initially announced in August, the workforce reduction is part of Intel’s broader plan to streamline operations, which it aims to complete by the fourth quarter of 2025.

Strategic Changes: Foundry Business and AI Struggles

Intel has faced challenges, including market share losses in its core businesses and struggles to gain ground in artificial intelligence (AI).

During the quarter, the company announced plans to make its foundry business an independent subsidiary, allowing it to pursue outside funding options.

This move could help Intel regain its competitive edge in the semiconductor industry.

In addition, it was reported that Intel had engaged advisors to fend off activist investors.

Notably, news emerged in late September that Qualcomm had approached Intel about a potential takeover.

Segment Performance

Client Computing Group: Revenue for the PC chips segment was $7.33 billion, down by 7% from the previous year and slightly below the analyst consensus of $7.39 billion. Intel cited customers drawing down inventories after dealing with previous supply shortages. Intel’s finance chief, Dave Zinsner, said, “We anticipate inventory normalization will continue through the first half of next year.”
Data Center and AI Segment: This segment saw $3.35 billion in revenue, reflecting a 9% increase, which surpassed the $3.17 billion expected by analysts. This growth was a bright spot amid Intel’s ongoing transition.

Looking Ahead: Guidance and Product Launches

Intel issued guidance for the fiscal fourth quarter, calling for adjusted earnings of 12 cents per share and revenue between $13.3 billion and $14.3 billion.

This was notably higher than the 8 cents per share and $13.66 billion in revenue expected by analysts.

During the quarter, Intel launched its Xeon 6 server processors and Gaudi AI accelerators.

However, Gaudi’s uptake has been slower than anticipated, and Intel admitted that it will not meet its $500 million revenue target for 2024.

Intel Shares and Market Context

Despite the optimism surrounding Q3 results, Intel’s shares have had a tough year, down about 57% in 2024.

This contrasts sharply with the S&P 500, which has gained 20% year-to-date. The restructuring efforts and focus on AI are critical elements of Intel’s strategy to turn around its fortunes and regain investor confidence.

The journey ahead is not without its challenges, but Intel’s ability to exceed market expectations in Q3 and its commitment to a comprehensive restructuring show a promising effort to adapt and evolve.

CEO Pat Gelsinger hopes these changes will strengthen Intel’s position in the highly competitive chip market.

Conclusion

Intel’s Q3 performance signals resilience amid ongoing transformation, marked by a substantial restructuring effort and strategic pivots to regain market share.

While there are hurdles to clear, the company’s focus on turning its foundry business into an independent subsidiary and striving to tap into the AI market indicates a forward-thinking approach.

Investors will be closely watching the next few quarters as Intel navigates these significant changes, and the outcome of these efforts will determine its future trajectory in the semiconductor landscape.