Intel stock rises on earnings, layoff plans, billions in planned cost cuts

Intel stock rises on earnings, layoff plans, billions in planned cost cuts

Shares of Intel Corp. rose after hours on Thursday after the chipmaker beat Wall Street’s profit estimates for the quarter and PC chip sales rose slightly than expected, while the company again cut its outlook for the full year and said it plans to cut costs. $3 billion in 2023, including layoffs.

Intel INTC,
-3.45%
shares soared as much as 7% in after-hours trading and last rose 5.5% after ending the day down 3.5% in the regular session to close at $26.27.

“Despite deteriorating economic conditions, we delivered strong results and made meaningful progress in executing our products and processes during the quarter,” Intel chief executive Pat Gelsinger said in a statement. “To position ourselves for this economic cycle, we are aggressively addressing costs and optimizing efficiencies across the business to accelerate our IDM 2.0 flywheel for the digital future.”

Intel recorded $664 million in restructuring charges in the third quarter and expects $3 billion in cost reductions in 2023, “achieving $8 billion to $10 billion in annualized cost reductions and efficiencies.” ‘by the end of 2025,’ the company said.

“Our efforts will include measures to optimize our workforce,” Gelsinger said on the call with analysts. “These are tough decisions affecting our loyal Intel family, but we must balance increased investment in areas such as leadership, products and capabilities in Ohio and Germany with efficiency measures elsewhere as we we strive to have best-in-class structures.”

Intel also said it has created the IDM 2.0 Acceleration Office, which will be led by Stuart Pann, the company’s Chief Transformation Officer. The office will be responsible for “fully implementing Intel’s IDM 2.0 model and developing and implementing systems and processes to support internal business requirements and external foundry customer engagements” .

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Although specific job cuts weren’t mentioned, Intel is expected to make an announcement around Nov. 1, according to a video from Gelsinger to workers recently. The last time Intel, based in Santa Clara, Calif., announced a major round of layoffs was in 2016, when the company cut 12,000 jobs, or 11% of its workforce, on the same day it published its quarterly results.

Intel reported third-quarter net income of $1.01 billion, or 25 cents per share, compared with $6.82 billion, or $1.67 per share, a year ago. After adjusting for restructuring charges and other items, Intel reported earnings of 59 cents per share, compared with $1.45 per share a year ago.

Revenue fell to $15.39 billion from $19.19 billion in the year-ago quarter, the ninth straight quarter of a year-over-year decline. Excluding the company’s divested memory business, the company had revenue of $18.1 billion in the prior year period. Gross margins fell to 45.9% from 58.3% a year ago.

Analysts polled by FactSet estimated earnings of 34 cents per share on revenue of $15.31 billion, based on Intel’s forecast of 35 cents per share on about $15 billion to $16 billion.

Division Breakdown: Client Computing sales fell 17% to $8.1 billion from a year ago, while Data Center and Artificial Intelligence Group sales fell 27% to $4.2 billion, network and edge sales increased 14% to $2.3 billion, and Mobileye sales increased 38% to $450 million. On Wednesday, Mobileye Global Inc. MBLY,
-5.42%
the shares began trading on the Nasdaq after the self-driving tech company went public.

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Analysts polled by FactSet expected client computing revenue to be $7.58 billion; data center and AI group revenue of $4.67 billion; network and edge revenue of $2.4 billion; and Mobileye revenue of $472.2 million.

For the fourth quarter, Intel expects earnings of about 20 cents per share on revenue of about $14 billion to $15 billion and adjusted gross margins of about 45 percent. Analysts polled by FactSet had estimated fourth-quarter adjusted earnings at 70 cents a share on revenue of $16.32 billion.

Intel once again cut its outlook for the year, to earnings of about $1.95 per share on revenue of about $63 billion to $64 billion on gross margins of 47.5 %. For the year, Wall Street estimates earnings of $2.20 a share on revenue of $65.3 billion.

Chief Financial Officer David Zinsner said on the call that Intel is not releasing a capital spending outlook at this time and the company remains committed to the long-term strategy and financial model communicated at the investor meeting. from February.

Last quarter, Intel cut its outlook for the year to about $2.30 a share on revenue-adjusted earnings of about $65 billion to $68 billion with gross margins of 49 percent. As recently as late April, Zinsner said he was comfortable with a gross margin forecast between 51% and 53%; Last year, Gelsinger promised margins would remain “comfortably above 50%”.

Two quarters ago, Intel doubled its optimistic outlook to around $3.60 per share on revenue of around $76 billion with gross margins of 52%, and exerted enormous pressure to deliver in the second semester.

Last quarter, Zinsner said the company hoped to return to its 51% to 53% range by the fourth quarter.

Year-to-date, Intel stock has fallen 49%. Over the same period, the Dow Jones Industrial Average DJIA,
+0.61%
— which counts Intel as a component — fell 12%, the PHLX Semiconductor Index SOX,
-1.50%
fell 40%, the S&P 500 SPX index,
-0.61%
fell 20%, and the tech-heavy Nasdaq COMP composite index,
+1.86%
fell 31%.

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