Intel, the renowned tech giant, has sent shockwaves through the stock market by delivering impressive third-quarter earnings that exceeded all expectations.
This unexpected victory comes in the face of declining revenue, demonstrating Intel’s resilience and adaptability. In after-hours trading, Intel shares soared by an astounding 7%, leaving investors and analysts pleasantly surprised.
So, what’s behind Intel’s impressive performance, and what can we expect in the coming months?
Beating the Odds: A Closer Look at Intel’s Q3 Earnings
Intel reported earnings per share of 41 cents (adjusted), trouncing the 22 cents expected by LSEG (formerly Refinitiv) consensus. Furthermore, their revenue reached $14.16 billion, exceeding the $13.53 billion expected.
These impressive figures are a testament to Intel’s ability to outperform, even in challenging times.
The Road Ahead: Intel’s Fourth-Quarter Projections
For the upcoming fourth quarter, Intel projects earnings of 23 cents per share (adjusted) and anticipates revenue between $14.6 billion and $15.6 billion.
These forecasts, while slightly below LSEG’s expectations of 32 cents per share and $14.31 billion in sales, indicate that Intel remains confident in its ability to continue its growth trajectory.
A Challenging Past: Declining Revenue and Cost-Cutting Measures
Intel’s Q3 earnings report reveals a decline in revenue, marking the seventh consecutive quarter of diminishing sales. However, there is a silver lining; Intel remains optimistic about a future revenue rebound.
The company’s CEO, Pat Gelsinger, has unveiled a plan to cut costs by a significant $3 billion this year, ensuring efficient and sustainable growth.
Intel’s Chief Financial Officer, David Zinsner, credited the improved earnings per share to prudent cost control, with operating expenses shrinking by 15% compared to the previous year.
Furthermore, Intel has reduced its workforce, with 120,300 employees, down from 131,500 the previous year.
Intel’s Business Units: A Mixed Bag of Results
- Client Computing Group: Sales in this segment, which includes laptop and PC processor shipments, dropped by 3% to $7.9 billion.
- Data Center and AI Division: This division, offering server chips, faced a 10% sales decline, citing competitive pressures and a smaller market for server processors.
- Mobileye: Intel’s subsidiary for self-driving car parts witnessed an 18% growth, reaching $530 million in sales.
- Intel Foundry Services: Although a small part of Intel’s business with $311 million in revenue, it experienced impressive growth of nearly 300% from the previous year, thanks to a major customer commitment and prepayment.
- Network and Edge Division: Sales in this segment, responsible for networking parts, reported a 32% decline to $1.5 billion.
Intel’s Future Direction
Intel has reaffirmed its belief in the value of its chips for artificial intelligence applications, particularly for running AI models on local devices, a shift away from cloud computing.
The company acknowledges competition from the likes of Nvidia, with some server customers moving towards AI-specific chips.
Nvidia and AMD have reportedly been developing Arm-based chips to rival Intel in the PC market, but Intel’s CEO, Pat Gelsinger, downplays their significance, highlighting Intel’s historical dominance in the market.
Nevertheless, Intel recognizes the potential of manufacturing Arm-based PC chips as an opportunity.
The company is determined to catch up with Taiwan Semiconductor Manufacturing Co.’s chipmaking technology by 2025, an ambitious plan known as “five nodes in four years.” Progress has been encouraging, with Intel moving closer to realizing this goal.
In summary, Intel’s remarkable Q3 earnings have defied market expectations, propelling the company forward in the face of declining revenue.
Their strategic cost-cutting measures, diversified business units, and future technological advancements position Intel for a promising future in the ever-evolving tech industry.