Intel Posts Earnings Beat Despite Record Loss, Shares Rise

Shares of Intel surged in after-hours trading last night and continued to climb in early morning, gaining over 5.5%. Investors appear to be looking past the staggering $16.6 billion loss Intel recorded for the third quarter of 2024, which marks the company's largest quarterly loss to date. This outcome was largely anticipated as Intel has focused on substantial investments in fab expansions.

For the third quarter, Intel reported revenue of $13.3 billion, reflecting a 6% decrease from the previous year but exceeding analyst expectations. The company benefited from its Data Center and AI (DCAI) division, which reported revenue of $3.3 billion, representing a 9% year-over-year increase. Additionally, the Network and Edge (NEX) division saw a growth of 4% year-over-year, reaching $1.5 billion. However, the Client Computing Group (CCG) experienced a decline of 7%, generating $7.3 billion.

Intel's CEO, Pat Gelsinger, emphasized the positive aspects of the quarterly performance, stating, "Our Q3 results underscore the solid progress we are making against the plan we outlined last quarter to reduce costs, simplify our portfolio, and improve organizational efficiency. We delivered revenue above the midpoint of our guidance and are acting with urgency to position the business for sustainable value creation moving forward." He also highlighted the company’s growing momentum across its product lines and the strong interest in Intel's 18A technology from foundry customers.

In a further analysis of the losses, Intel's CFO, David Zinsner, explained that significant restructuring charges had a substantial impact on Q3 profits, as they take critical steps toward meeting their cost reduction goals.

Intel has initiated a $10 billion cost-reduction plan to transform into a more efficient and agile company, a strategy launched last August due to decreasing profits. Gelsinger took over a company that was facing challenges, and this transformation is expected to take time. However, there is optimism surrounding Intel's upcoming 18A production node, which could spearhead revenue growth next year.

According to Intel, the development of the 18A node, which is the fifth update within five years, is proceeding well, with both Panther Lake (for clients) and Clearwater Forest (for servers) meeting significant benchmarks ahead of their scheduled launches in 2025.

Intel's Q3 results included $2.8 billion in restructuring costs, along with $3.1 billion due to cost of sales and asset depreciation, $2.9 billion in non-cash impairment charges concerning goodwill (particularly in its Mobileye segment), and $9.9 billion attributed to the establishment of a valuation allowance against U.S. deferred tax assets.

This restructuring is an ongoing process and is projected to extend into the next year. Despite advances made, substantial losses may still be expected in the near future. Zinsner remarked that the Foundry division reported a $5.8 billion operating loss, which was driven significantly by $3 billion in impairment charges.

Looking towards the fourth quarter, Intel forecasts revenue will land between $13.3 billion and $14.3 billion.

Intel, Earnings, Loss