Intel CEO Pat Gelsinger speaks during Mobileye Global Inc.’s IPO. at the Nasdaq MarketSite in New York on October 26, 2022. Mobileye Global Inc., the self-driving technology company owned by Intel Corp., priced one of the largest initial public offerings in the U.S. of the year above its range traded for raised $861 million.
Michael Nagle | Bloomberg | Getty Images
Intel Shares moved as much as 7% higher in extended trading Thursday after the chipmaker reported lower-than-expected profit guidance for the full fiscal year but said it will deliver up to $10 billion in cost cuts and efficiency improvements.
Here’s how the company did it:
- Earnings: 59 cents per share, adjusted, versus 32 cents per share as expected by analysts, according to Refinitiv.
- Income: $15.34 billion, versus the $15.25 billion expected by analysts, according to Refinitiv.
Overall revenue fell 15% year over year in the quarter that ended Oct. 1, according to a statement. In the last quarter, revenue fell by 22%. The company’s net income, at $1.02 billion, fell from $6.82 billion in the year-ago quarter.
“We are planning for economic uncertainty to continue through 2023,” CEO Pat Gelsinger said on a conference call with analysts. A global recession is possible, Intel chief financial officer David Zinsner said.
Intel said it aims for $3 billion in cost-of-sales and operating expense reductions by 2023, and the amount of annual savings will reach $8 billion to $10 billion by the end of 2025. Bloomberg reported earlier this month that Intel was planning to lay off employees. perhaps in the thousands, in an effort to cut costs. Days later the Oregonian reported that Gelsinger warned employees that the company would take cost-cutting measures.
“Inclusive in our efforts will be steps to optimize our headcount. These are difficult decisions that affect our loyal Intel family,” Gelsinger said on Thursday’s call.
The company’s Client Computing Group, which includes PC chips, generated $8.12 billion in revenue, down 17% but above the consensus of $7.58 billion among analysts polled by StreetAccount. Technology industry researcher Gartner said third-quarter PC shipments fell almost 20%, after two years of consumers buying computers to work, study and play games from home during the pandemic.
Intel said PC demand softened in the quarter mainly in the consumer and education markets, as hardware makers reduced their inventories.
The company’s Datacenter and AI segment, including server chips, memory and field programmable gate arrays, posted $4.21 billion in revenue, down 27% and short of the StreetAccount consensus of $4.67 billion.
“The TAM data center is holding up better, although enterprises in China continued to show signs of weakness, as do some but not all cloud customers,” Gelsinger said. In the data center category, Intel grew more slowly than the rest of the market, he said.
The Network and Edge segment, which contains network products, posted revenue of $2.27 billion, which was 14% higher and less than the StreetAccount consensus of $2.40 billion.
During the quarter Intel said MediaTek would rely on Intel Foundry Services for chip production, and the company broke ground on a manufacturing facility in Ohio in a planned investment exceeding $20 billion.
And on Wednesday, Intel-backed autonomous driving technology company Mobileye began trading on the Nasdaq. Intel bought it in 2017 and retains control of the company.
Management cut its forecast for the full fiscal year. The company now sees $1.95 in adjusted earnings per share and $63 billion to $64 billion in revenue, compared with $2.30 in adjusted earnings per share and $65 billion to $68 billion in revenue three months ago. This means a drop in revenue of almost 20%. Analysts polled by Refinitiv had expected $2.15 in adjusted earnings per share and $65.26 billion in revenue.
Despite the after-hours move, Intel shares are down nearly 49% so far in 2022, while the S&P 500 is down about 20% over the same period.
WATCH: Cramer breaks down what Intel’s Mobileye spinoff means for the market
