Intel shares soared as much as 7 percent in Thursday’s extended trading after the company posted better-than-expected earnings results alongside weak guidance for the full fiscal year. It also added that it will cut costs by up to $10 billion and focus on efficiency improvements.
The company reported adjusted earnings of 59 cents per share, beating the 32 cents estimate of analysts, according to Refinitiv. Revenue for the third quarter came in at $15.34 billion, surpassing the $15.25 billion that analysts had expected, according to Refinitiv.
According to a statement, overall revenue slipped 15 percent year over year in the quarter that ended October 1st. Revenue had slipped 22 percent in the previous quarter. Net income came in at 41.02 billion and was down from $6.82 billion reported in the year-ago quarter.
While on a conference call with analysts, the company’s CEO Pat Gelsinger said that “We are planning for the economic uncertainty to persist into 2023.”, CFO David Zinsner added that a global recession is possible.
The company aims to reduce costs of sales and operating expenses by $3 billion in 2023 and wants these annual savings to reach between $8 billion and $10 billion by the end of 2025. There have been reports of the company’s plans to cut employees as a strategy to reduce costs and CEO Pat Gelsinger subsequently warned employees that the company would be embarking on measures to cut costs. “Inclusive in our efforts will be steps to optimize our headcount. These are difficult decisions affecting our loyal Intel family,” CEO Pat Gelsinger said on Thursday’s call.
Intel’s Client Computing Group segment which houses PC chips generated revenue of $8.12 billion. This was down 17 percent but surpassed analysts’ estimate of $7.58, according to a StreetAccount poll. The demand for PC declined in the third quarter, and Intel noted that this demand declined mainly in consumer and education markets while device makers cut down on their inventories.
Intel’s Datacenter and AI segment which houses server chips, memory, and field-programmable gate array, generated revenue of $4.21 billion. It was down 27 percent and below analysts’ expectation of $4.67 billion, according to a StreetAccount poll.
“The data center TAM is holding up better, although enterprise in China continued to show signs of weakness, as do some, but not all, cloud customers,” Pat Gelsinger said adding that intel grew share slower than the rest of the market.
The company’s Network and Edge segment generated revenue of $2.27 billion. It was up 14 percent and below the expectation of $2.40 billion, according to StreetAccount. This segment houses networking products.
The company cut down on its forecast for the full fiscal year. It now expects $1.95 in adjusted earnings per share and $63 billion to $64 billion in revenue, compared with a previous expectation of $2.30 in adjusted earnings per share and $65 billion and $68 billion in revenue posted three months ago. This would mean a decline in revenue of almost 20%. Analysts had expected $2.15 in adjusted earnings per share and $65.26 billion in revenue, according to Refinitiv.