After months of punishment from skeptical investors, Intel shares rose in after-hours trading after the company reported better-than-expected earnings on Thursday. But that was against a gloomy 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, an 85% decline from the previous year. Adjusting for items such as stock compensation and restructuring charges, its 59 cents per share profit was well above estimates of 32 cents from analysts polled by Yahoo. Its $15.3 billion in revenue was close to the $15.2 billion expected.
CEO Pat Gelsinger pointed to “deteriorating economic conditions” but said the company is cutting costs as a result, saving $3 billion in 2023 and $8 billion to $10 billion a year by 2025. That will include layoffs, he said on a conference call the financial results.
Shares rose 6% to $27.85 in after-hours trading.
Intel lowered its full-year revenue estimate to $63 billion to $64 billion. That’s a drop from $2 billion to $4 billion from three months ago, when Intel first reported serious sales problems in.
Intel is in the midst of a massive transformation under Gelsinger, who hopes to restore the company’s status as a leading chip maker. To do this, Intel is spending heavily on new chip factories, trying to catch up with the production technology already offered by Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung, and compete directly against those two Asian giants with a new foundry business that is building. processors for clients like Qualcomm.
If it succeeds, Intel stands to revitalize the US chipmaking industry and breathe new life into computer hardware that has languished 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.
Ahead of Gelsigner’s return to Intel in 2021, some observers expected Intel to follow in the footsteps of IBM and AMD, shedding its manufacturing business and relying on other foundries to make its processors. But Gelsigner wants to keep the company’s chip-making operations, with new technology and higher production volume across the foundry business.
“There are three types of semiconductors: You’re either big, very niche, or dead,” Gelsinger said earlier this week. He’s aiming big, but the years-long, ambitious effort hasn’t sat well with investors.
The company’s two largest chip groups, which make processors for the computers we buy, and the servers that power the data centers of companies like Meta and Google, both saw major declines. Revenue from the PC chip group fell 17% to $8.1 billion, while the data center group fell 27% to $4.2 billion.