After months of punishment by skeptical investors, Intel shares rose in after-hours trading after the company reported better-than-expected earnings on Thursday. But that was against a bleak backdrop as the chipmaker lowered its expectations for full-year results amid tough economic conditions.
Intel reported net income of $1 billion, or 25 cents per share, for the third quarter, down 85% from a year earlier. Adjusting for things like stock compensation and the Chargers restructuring, its 59 cents per share profit was well above analysts’ estimates of 32 cents polled by Yahoo. Its revenue of $15.3 billion was close to the expected $15.2 billion.
Chief executive Pat Gelsinger pointed to “worsening economic conditions” but said the company was cutting costs as a result, saving $3 billion in 2023 and $8-10 billion a year from by 2025. That will include layoffs, he said on a financial results conference call.
The stock rose 6% to $27.85 in after-hours trading.
Intel lowered its full-year revenue estimate to $63 billion from $64 billion. That’s down $2 billion to $4 billion from three months ago, when Intel first reported serious sales issues in a.
Intel is in the midst of a massive transformation under Gelsinger, who hopes to restore the company’s status as a top chipmaker. To do this, Intel is spending heavily on new chip factories, trying to catch up with the manufacturing technology already offered by Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung, and directly compete with these two Asian giants with a new foundry company that will builds processors for customers like Qualcomm.
If successful, Intel should reinvigorate the US chip manufacturing industry and breathe new life into PC hardware that has been languishing for years. Apple ditched Intel for its own M1 and M2 processors, built by TSMC and offering a compelling balance of performance and battery life.
Prior to Gelsigner’s return to Intel in 2021, some observers expected Intel to follow in the footsteps of IBM and AMD, abandoning its chip manufacturing business and relying on other foundries to manufacture its processors. But Gelsinger wants to maintain the company’s chip manufacturing operations, with new technology and higher manufacturing volume from the foundry business.
“There are three types of semiconductor companies: you’re either big, you’re very specialized, or you’re dead,” Gelsinger said earlier this week. It’s aiming big, but the ambitious multi-year effort has not been well received by investors.
Intel suffered major declines in its two biggest chip groups, which make processors for the PCs we buy and the servers that power the data centers of companies like Meta and Google. PC chip group revenue fell 17% to $8.1 billion, while data center group revenue fell 27% to $4.2 billion.