Intel (INTC, Financial) released its third-quarter earnings, showing a 6% drop in revenue to $13.3 billion, surpassing analysts' predictions of $13 billion. However, the company reported a loss of $0.46 per share, falling short of the expected $0.30 loss per share. Intel's fourth-quarter revenue guidance slightly exceeded expectations, instilling confidence about reclaiming market share.
CEO Pat Gelsinger noted that this quarter's sales were the lowest for a third quarter in over a decade but still exceeded the company's expectations. Wall Street forecasts a slight growth in total sales for the year compared to 2024, but still more than $20 billion below the peak in 2021.
Intel's gross margin for the quarter was 15%, a stark contrast to its historical peaks often exceeding 60%. Under its new business structure, Intel reported its manufacturing business financials for the third time. Gelsinger emphasized restructuring as essential for operational efficiency and competitiveness. Its foundry sales dropped 8% to $4.4 billion, aligning with expectations.
PC chips brought in $7.3 billion, missing the anticipated $7.46 billion. The data center and AI chip segment grew by 9% to $3.3 billion, surpassing the $3.1 billion forecast. Desktop chip revenue fell by 25% to $2.07 billion, while notebook revenue increased by 8.5% to $4.888 billion.
Intel projected fourth-quarter revenue between $13.3 billion and $14.3 billion, with analysts' average estimate at $13.6 billion. The expected earnings per share stand at $0.12, beating Wall Street's prediction of $0.06 per share. Post-announcement, Intel's shares climbed 15% in after-hours trading, eventually settling at a 6.8% increase, priced at $22.98.
Gelsinger labeled Intel's turnaround efforts as the "boldest restructuring plan" in its history. The company had laid off 16,500 employees, cut expenses, and suspended dividend payments to conserve cash for this initiative. He aims to regain customer orders to counter cash burn.
Despite challenges, Gelsinger remains optimistic, highlighting Intel's strategic significance in the tech sector. Talks with potential investors for their Altera programmable chip division are in progress, expected to conclude early next year. Meanwhile, Intel faces competition from companies like NVIDIA (NVDA) and AMD (AMD) in AI hardware, a sector where Intel hasn't significantly advanced.
Intel plans to regain its leadership by establishing a new factory network catering to both Intel and other chip manufacturers. This comes amidst declining revenue and rising costs, affecting profit margins that were once the envy of the industry.
